Advisor Managed Portfolios Underperform?

Investment News reported on a study by Cerulli Associates that indicates that portfolios managed by advisors underperform alternative management arrangements.  Cerulli studied the 2010 to 2011 period and determined that advisor managed portfolios returned 4.3%, while programs packaged by broker-dealers had a return of 9.9% and a fixed 60% domestic equity, 10% international equity, and 30% bonds returned 15.9%.  On the face of it, very damning evidence.

However, the article does not mention how the advisor and b-d portfolios compare to the passive portfolio in terms of construction or risk exposure.  Indeed, no risk measure is given.  Nor does the article mention whether the returns are measured before or after management and administrative costs.  Sometimes, advisors take advantage of opportunities to reduce total costs to clients by taking management internal.  Besides which, two years is an awfully short tie period on which to be making judgements on out- or underperfomance.

Also missed is the customization that can take place when the client has direct access to the portfolio manager.  Tax sensitive trading can be executed, liquidity needs addressed   Even short term market risk can be addressed through a dollar cast averaging-like strategy.

Is there any value to e gleaned for the article?  A passive strategy still provides great value for many investors.  Even advisors managing money for the clients.