Author: Mike McLaughlin

How Do You Want Advisors to Follow-Up?

Posted by Mike McLaughlin on Apr 06, 2011, in Thoughts , tagged with , , , ,

I spent an hour last week monitoring an asset manager’s quarterly conference call with advisors. As the call wrapped, the executive moderating the call invited advisors to follow up via the firm’s:

  • Web site
  • Twitter feed
  • Sales team

What was interesting to me is that is the exact order in which these outlets were introduced. Web, then Twitter, and finally the wholesalers. Besides the order, the voiceover did even more to reinforce the primacy of the Web and Twitter relative to the sales team.

Obviously this a minor, tactical part of the call. But I’m intrigued by the order. I would not claim that online outlets provide more effective follow-up than a wholesaler in this case. And the call did not have enough advisors to raise concerns about an overwhelming volume of inbound calls/e-mails.

So was this a conscious decision? Is there a reason why the Web and Twitter were prioritized? I can think of a few good explanations, and will follow up here when I get a concrete answer.

If You Want the Meeting, YOU Set the Meeting

Posted by Mike McLaughlin on Mar 28, 2011, in Thoughts , tagged with , ,

A recent Your Q&A on Ignites (subscription) focuses on ensuring accountability within a sales team, in part by having clear role expectations. As an illustration, the piece says, “For example, some teams require the internal wholesaler to call the advisor in advance of a meeting with the field wholesaler.”

The example leapt off the page for me. Why? Because I believe the external wholesaler should always be the point-person when it comes to initiating, confirming, and communicating an agenda for his/her own appointments.

The reason is perception. By having an internal wholesaler handle these tasks, the importance of the client is undermined. A signal is sent that the external’s time is too valuable to be successfully setting the table for an important prospect/client conversation.

Recently I was in an advisor’s office when a hot-selling fund family came up in conversation. The advisor said he’d never met with the wholesaler from the firm:

He’s always having his assistant call and try to schedule time with me. I don’t work that way. I want to deal direct.

The advisor felt slighted by the lack of genuine interest shown by the wholesaler. He views the wholesaler’s approach as saying “my time is more important than yours.” A harsh interpretation? Sure. An uncommon one? I don’t think so.

Salespeople, of course, want to send the exact opposite message. It’s the nature of being a product/service provider.  The wholesaler who wants the meeting (and the client), should make sure his commitment is clear to the client. Direct communication is a simple and important way to do that.

Advisors are Less Willing to Compromise with Alternatives

Posted by Mike McLaughlin on Mar 10, 2011, in Thoughts , tagged with , ,

Scott Welch of Fortigent recently wrote an interesting article (FundFire, subscription required) about how the mentality of high-net worth individuals has changed toward alternative investments.  The big takeaway is his belief that retail-oriented, liquid alternative products will take significant market share from traditional hedge funds and fund-of-funds.

Turning toward advisors’ dealings with clients, Scott says:

An important question advisors can ask high-net-worth clients is, What is an acceptable trade-off between performance, liquidity, leverage and transparency?

A good question, but I don’t think this is the precise question to ask for two reasons:

  1. Performance isn’t part of the tradeoff equation anymore.  Hedge funds underperformed the broader markets in 2010 and had a slow start to 2011.  The time of assumed outperformance of limited partnerships compared to more liquid vehicles is passing.

  2. Without home-run performance, the other variables become non-negotiables.  Lousy liquidity terms?  Poor transparency?  Advisors will just take a pass.

These points reinforce what Scott is getting at – alternative products in retail packaging have huge potential.  Advisors are not going to want to choose among performance, liquidity, leverage, and transparency.  They’re going to want it all.

Does Everyone Really Understand the Complexity of Index Investments?

Posted by Mike McLaughlin on Feb 18, 2011, in Thoughts , tagged with , , , , ,

Third in a series of posts on the sales and marketing implications of the ongoing debate between active and passive management.  Read the first and second posts.

Back the spring of 2009, David Swensen, who oversees Yale’s endowment, gave an interview about his investment principles.  A frequently-repeated quote from the interview is:

With all assets, I recommend that people invest in index funds because they’re transparent, understandable, and low-cost.

The word that jumps out to me is understandable.  I think most investors and financial advisors would reflexively agree that index vehicles are exactly that – a tribute to the way they have been described and marketed.

But there is a variable involved in index investing that makes me wonder if everyone understands index products as well as they believe they do:  the underlying indices.  We spent some time digging into a variety of investment indices, leading us to two conclusions:

  1. Indices are Complex: An index is an easy concept in the abstract, but not so in practice.  For example, to fully digest the methodology behind the creation/maintenance of MSCI indices, you’re going to need to read 119 pages of information.  And consider how different theories have emerged on how indices can be best constructed.

  2. Indices can be Volatile: The components of indices vary regularly, and sometimes significantly.  For example, almost 700 securities were added / removed from the MSCI Small Cap indices at the end of last year.  Even the US Large Cap 300 index had 5% turnover in November 2010.

In addition, index updates sometimes occur as infrequently as every six months.  2008 did a lot to remind everyone how much can change in six months.

In the marketing of investment vehicles, index investments are presented as the simplest, most straightforward option.  As Mr. Swensen stated, they’re understandable.  But as we talk with advisors, they typically get indices conceptually but not in great detail. Data like that presented above catches many by surprise.

For firms positioning themselves and their products against index investments, this represents a way for marketing and sales teams to potentially change the conversation.

Asset Managers as Content Aggregators?

Posted by Mike McLaughlin on Jan 27, 2011, in Thoughts , tagged with , , , ,

Many of our asset management clients face a common issue – they don’t generate as much high-quality content as they’d like.  It’s a frustrating issue for marketing teams and most often chalked up to a lack of resources.

As I read about some recent developments at Seeking Alpha, a thought came to mind – should asset managers invest more effort in content aggregation and less in content creation?

Seeking Alpha is among the better known and regarded financial blogs out there.  The site publishes 250+ articles daily, drawn from a pool of 3,000 (non-proprietary) contributors.  Some of the authors, who include financial advisors, and individual articles get quite a bit of attention (upwards of 50k followers and 30k page views, respectively).

What’s interesting is that Seeking Alpha has accomplished this having paid exactly $0 for content.  $0.  For 250+ articles per day.  My takeaway is that being a content aggregator has advantages over being a content creator.  Three broad reasons why:

  1. Relevant third-party magazines, newspapers, and blogs produce much more content than individual organizations.
  2. All things being equal, more content should mean more traffic/attention for aggregators.
  3. There may be economic efficiencies in pooling strong external content versus creating proprietary material.

Given the challenges in producing proprietary content, should asset managers consider content aggregation as a strategy?  I think yes.  Would researching, licensing, and packaging 30 top-notch articles from external sources be more fiscally efficient and valuable to clients than producing 30 internal pieces?  I think maybe.

That’s enough for asset managers to at least investigate aggregation as a part of their content strategies.