the asset manager search guru

Retention bonuses a big deal on Wall Street

2010-01-18T20:57:00.004-05:00

I got a nice note today from Janet Levaux, an editor at Research Magazine. My most recent column on the hefty retention bonuses that wirehouses are offering f.a.s is No. 1 on the website. Pretty cool. Here's a link if you'd like to read about this important trend.

Earthquake in Haiti puts everything in perspective

2010-01-14T14:15:00.004-05:00

So much happening on Wall Street. The public is so angry at the bankers and everyday the news brings new ways to flog 'em. But I have to say that the devastating news from Haiti really puts everything into perspective. A lot of the issues that people get worked up over -- is my signing bonus big enough -- are minor in comparison. We are really blessed.

Wall Street: Slash and burn

2010-01-14T14:11:00.003-05:00

The worst may be behind us for the economy but Wall Street continues to slash and burn support staff in the retail industry. I find this pretty ironic. On the one hand, Wall Street is offering huge compensation packages to recruit top talent or enticing financial advisors to stay home with handsome retention payments. On the other hand, they are squeezing costs in home office support, especially for marketers of the firm's various fee-based offerings.

Look for my next newsletter on this topic the old-fashioned way -- in your mailbox. Or drop me a line and I'll email it to you.

Bear market roars but opportunities abound

2008-07-15T12:20:00.006-04:00

I've never seen a market like this. Who could imagine that the government would be making a contingency bailout plan for Fannie Mae and Freddie Mac? I can remember people talking about that 20 years ago. But we thought they were Chicken Little's crying: "The sky is falling!" Let's hope it is just a scare that will pass, but until then there's plenty that you can do to avoid a clawing from the bear -- like staying in touch with clients and providing good information.

I've been through many market cycles and I've been contributing to quite a few publications recently to share my experience with those who have net gone through as many ups and downs on Wall Street. Some of my recent Fundfire interviews focus on recruiting in a tough market and handling defections.

This month Research Magazine published a wonderful profile of my career on Wall Street. It emphasizes my years dealing with high-end financial advisors. But as you all know, I work closely with the entire investment management community, both on the buyside and the sellside.

Here are the links to the Fundfire interviews. Enjoy:

How do you make sales teams work?

Recruiting in a rough market

Will economy cause wirehouse defections?

UMA distribution system makes low fees palatable

2008-02-18T21:57:00.006-05:00

There's something new and counter-intuitive happening in managed money: The lowest fee sector is the fastest growing because -- surprise! -- it's pretty profitable.

Unified Managed Accounts (UMAs)growth is outpacing the granddaddy of managed account formats -- the Separately Managed Account (SMA). Wirehouse distributors have figured out how to make the UMA, which appeals to investors and advisors for its one-stop shopping qualities, more economical for managers. Wirehouse distributors are simply taking over the UMA models and performing all the trading and operation functions for the managers. That eliminates a big slice of overhead.

The five major wirehouses control approximately 75% of assets in retail separately managed accounts. They've used that leverage for many years to reduce fees to outside managers with whom their retail salesforces place client money. SMA fees to managers have declined from 45-50bps down to 36-38bps (depending on the style). UMA fees are even lower, about 25bps.

Institutional managers who lack the infrastructure for retail distribution on a massive scale can now participate in the UMA business. They no longer need to ante up for back office costs. Some of the large money managers that have expensive legacy operational systems are now at a disadvantage.

These changes are enabling new institutional players to enter the business. Most advisors that I know want to offer clients unusual boutique managers that other wirehouse competitors can't offer. They've complained to us about the commoditization of the SMA business in recent years. From wirehouse to wirehouse, it's same-o, same-o: the same 20-30 managers no matter where you go.

Now some new blood is starting to come into the business. Some wirehouses are starting to actively compete for new entrants or new portfolios from existing players by trying to streamline their due diligence processes or, in at least one case, by allowing managers flexibility in setting fees. Increased competition is a positive in my view. It usually makes things better.

Oldsters just want to feel smart

2007-02-14T22:02:00.000-05:00

We just got back from a Boston meeting on retirement -- and we just beat out the snowstorm, too. For anyone thinking about the retirement scene this was the place to be. Francois Gadene put together a really terrific group of thinkers -- not all of whom agreed on what to expect as boomers enter their senior years. Take John Ameriks from Vanguard. He stopped a lot of people in their tracks with his message of cautious optimism: Based on what he has seen so far, retirees are not going to draw down their assets so quickly. So don't go calling the 9-1-1 retirement police. At least not yet.

Not everyone saw it that way at the Managing Retirement Income Conference: The Retirement Income Industry Association survey shows that retirees will need to slash spending by more than half to make their savings last through the golden years. Consultant Matthew Greenwald worried that spending in retirement years needs to go up. Health care is a big culprit in that one. And also, in the early years of retirement many people have more time to spend money. So they do.

Here's a tidbit that made us sit up: Connie Williams of Synectics Inc. (can you say that fast, three times?) described a complex marketing study she conducted of aging boomers. And you know what she found: They don't want the details on Medicare Part D, or how your financial thing-a-ma-jig works. They just want to feel smart. So if you want to attract these boomers, don't try to educate them. Make them feel smart.

Got it?

SMA marketer survey gets big play in Fundfire

2007-02-08T10:34:00.000-05:00

We've had a very busy few weeks in the press: We've been in Barron's and Investment News. Today you'll find us in Fundfire.

The online must-read pub gave us big play on our newly released survey of separately managed account marketers. We've been doing this survey for a few years now, and all I can say is it hasn't been easy. For those who survived the carnage of the tech bust, things are looking a bit up. Compensation is rising for the typical marketer by about $25,000 to $300,000. Top earners can broach $500,000.

To be honest, though, it's hard to be too optimistic about the outlook for SMA marketers: Investment managers are earning less and less on these programs. And many sponsors are scrapping SMA specialty salesforces in favor of generalists. You can read all the dirty details on our website: 2006 SMA Survey.

Baby boomer delusions; Key retirement meeting

2007-02-07T15:16:00.000-05:00

I hope you didn't miss my colleague's wonderful column in Barron's on retirement. Nancy really punctured a lot of myths about what everyone is assuming will happen with baby boomers when they hit their golden years. For example, did you know that boomers weren't the first group to plan on "cycling" from work to leisure in their later years? Guess what: It usually didn't work out.

Here's a link to the piece, called Delusions of Retirement Solvency.

Like many on Wall Street we are tracking closely the implications of the demographic bubble created after all those GI Joes came home from WWII and economic prosperity set into this nation. Next week, Nancy & I will be attending IIR's 3d Annual Managing Retirement Income conference in Boston. Let us know if you'll be there. We'd love to say hello.

Firms get serious about replacing deferred comp to lure big brokers

2006-09-20T22:23:00.000-04:00

Wall Street brokerages are finally getting serious about replacing deferred compensation packages to lure top producers away from competitors. You've probably noticed that in the past year an unusually large number of senior financial advisors and teams have switched allegiances. As I told The Wall Street Journal: "The real catalyst that has made that happen is that firms are getting serious about replacing deferred compensation."

We are currently working with brokers who stand to lose several hundred thousand dollars to in excess of a million dollars in deferred compensation if they jump ship. For the first time ever, brokerage firms aren't backing away from the financial commitment needed to convince these top advisors to leave their current firms. Wall Street has created not just transition programs to help lure these advisors but also is writing checks to make up for lost deferred comp.

Over the past 10 years, Wall Street firms created golden handcuffs designed to keep brokers, now known as financial advisors (FAs), in house. It was also part of a move to build and keep retail client assets in-house with new fee-based products that offer investment solutions to the needs of Mom and Pop.

In the past year, Wall Street's willingness to replace deferred comp has been the secret catalyst that has enabled big brokers to change firms.

By the way, the free link to the Wall Street Journal article is good only to Sep 27. After that, the paper will ask you to pay to read it. But you can always blog or e-mail me for more information on this trend.

Sub-Advisory Conference Sep 18-19

2006-09-11T11:43:00.000-04:00

Today's Wall Street Journal highlights a business most people don't think about all that much: financial printing. It turns our that printing costs are one of the biggest expenses for corporate America, behind banker and lawyer fees. Who would have known?

I'd like to highlight for you an area on Wall Street that doesn't draw all that much attention: sub-advisors. Sub-advisors basically are contractors who provide money management services to mutual fund companies, insurance companies, and large investment firms. As I've mentioned previously, good money management is very hard to come by. Even firms that employ hundreds of portfolio managers are hungry for managers with that special touch. Enter the sub-advisor who may provide a sought-after specialty, say, in healthcare or micro-cap companies.

Next week, Financial Research Associates is holding its 6th Annual Sub-Advised Fund Forum . The conference promises to take a look at how firms that contract out to sub-advisors as well as sub-advisors themselves can boost profitability through this relationship.

Sub-advisors are rising in importance, especially now that fee-based money management is becoming more and more common for retail investors. That market has the potential to explode as baby boomers start heading into retirement, a topic we have written about a great deal. Money managers love their roles as sub-advisors because they get free distribution of their products through some very big channels. The sponsors love the advisors as well: They get money management services plus they often gain access to the managers' customers as well. What's not to like?

So if you are thinking about launching new sub-advisory relationships or seeking new ways to expand the current ones, you may want to spend sometime in Boston next week learning about the nitty-gritty of sub-advisory.

New ways to add clients

2006-08-15T21:36:00.000-04:00

In the past year or so we've received more and more requests to conduct searches for relationship managers, also known on Wall Street as key account managers. Obviously, firms are trying to distinguish themselves by providing superior service to critical customers. But the key account position is no longer simply a glorified hand holder, a source of freebies like tickets to the US Open or the Super Bowl. The successful key account manager these days has considerable gravitas -- with specialized training in the technical side of money management as well as marketing.

Why is this? Relations between money managers and Wall Street firms who sponsor their products are growing more complicated, especially when it comes to the retail side of the business. Now all the big firms -- Smith Barney, Merrill Lynch, Citigroup, etc. -- are offering individual investors access to money management services once available only to institutions through a vast array of fee-based programs.

In recent years the relationships with the money managers who offer their services through the fee-based programs has deepened. Many big firms are contracting out retail portfolio management roles to small but highly skilled money managers. Believe it or not, there just aren't enough good money managers relative to demand. The big firms can't hire enough or buy enough managers so now they sub-contract out to managers who can fill a void, say, in Mexican small cap or healthcare.

Those "sub-advisors" may be invisible to the investing public: That Merrill Lynch or MetLife annuities product you invest in may in fact be under the care of a little known money manager. But the sub-advisors are gaining in importance and power on Wall Street. They don't just add needed expertise to the world of retail money management. They also potentially can supply firms with a new supply of customers.

That's where the key account manager comes in. The key account manager is the go-to person for money managers who want to be sure their products are on the right platforms at each brokerage firm or insurance company. The sponsor's key account manager seeks stellar money managers to bring them into the firm's family through sub-advisory agreements. Sometimes the key account manager sets up reciprocal agreements that essentially say: If we market your money management products with our brand name to our customers, you must let us market our products to your customers.

What comes around, goes around.
(For more information on the key account manager, you can read our Investment News column on the topic.)

2006-08-15T10:22:00.000-04:00

Welcome to the asset manager search guru blog. I plan to use this forum to post my thoughts informally on trends in the asset management business. I've been conducting executive searches on Wall Street for investment, marketing, and a variety senior executives over the past 20 years. Change has always been part of the business. But thanks to heightened competition the rate of change has gone from arithmetic to exponential. Once, my quarterly newsletters on retail and institutional investing were sufficient to cover what I needed to say. I find now that clients and friends and journalists need more frequent updates to stay on top of the business. The asset manager search guru is my small contribution to helping readers keep their fingers on the pulse of the financial industry. Enjoy!