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Client Quotes: The Pace of Digital Change

Posted by Mike McLaughlin on Jun 07, 2012, in Thoughts , tagged with , , , ,

In almost every client meeting I hear something memorable. It’s usually something funny, because my brain retains that stuff better. But it’s also always something that reinforces an important idea for me.

Still a dominant force, and a reminder that digital change happens slowly.

This week I heard two things that reminded me just how far our industry has to go when it comes to digital strategy and execution. Every day we hear about a new cutting-edge mobile initiative, or another firm expanding its social media presence, or a unique piece of content.

We hear less on the reality that in many ways the digital evolution is a slow one. Here are two client quotes from last week that hammer that home:

1. “When terrorists send a threat, they don’t do it via PDF.”

This got a big laugh from me. It was a moment of stand-up comedy in an otherwise serious discussion. In this case, the client was lamenting his firm’s struggle to produce compelling output in light of video’s immense impact on how people communicate memorable messages.

The fact is that the industry has gotten markedly better in using video, specifically by:

  • Mixing multimedia content in alongside traditional printed material
  • Keeping videos short, given viewers’ attention spans are at all-time lows
  • Finding the sweet spot among production quality, production speed, and cost

Even so, there’s an entrenched printed material legacy, and clients still prefer the printed option to multimedia in many cases. Video may have killed the radio star, but it hasn’t yet done major damage to the asset management PDF.

2. “I just received the regulatory ‘OK’ for two Tweets I posted in December.”

/re-checks calendar

Ouch.

We recently wrote a piece about the barriers to social media implementation (subscription) for Ignites. We didn’t delve into the issue of regulation if only because it’s so well-established as THE major contingency in many firms’ social media strategies.

That said, we have two active social media projects right now, and this client hammered home the potential negative impact of regulation. Not only do the rules need to be better crystallized, but the processes do as well.

Six-month waits for approval of 140 characters will put the brakes on some firms’ continued adoption of social media.

Best Blogs of the Week

Posted by Anu Heda on Jun 04, 2012, in Best Blogs of the Week , tagged with , ,

This week’s best of blogs started with a single criteria: no more Europe. I imagine many FAs are fatigued by the constant stream of European danger signs. So, here are three, non-European blog posts.

  • AllianceBernstein – A practical post for any FA with entrepreneurial clients considering selling part or all of their business.
  • BlackRock – Dividend investing is having its day. It’s dividends morning, noon, and night. Well, this post does an excellent job of looking at the strategy for reasons beyond yield.
  • Franklin Templeton – Select firms spent a lot of time in advance of 5/29 promoting the date as college saving day. This post summarizes the benefits of 529 plans well and includes a high-impact graphic.

Best Blogs of the Week

Posted by Anu Heda on May 29, 2012, in Best Blogs of the Week , tagged with ,

Happy Memorial Day. Hopefully nobody was stuck in this position. Last week we found two interesting posts to share.

  • BlackRock – This post covers the familiar territory related to US government entitlement programs. The author adds three investor considerations based on that territory.
  • Wells Fargo – This post explains high-conviction investing in very practical terms. The description is something an FA can easily incorporate into his/her client discussions and supports the value of long-term investing.

Best Blogs of the Week

Posted by Anu Heda on May 21, 2012, in Best Blogs of the Week , tagged with , ,

Diversification and beyond! This week’s best considers diversification, preferred funds, and Greece.

  • BlackRock -In our recent marketing and product work, there’s been a recent uptick in discussing preferred stock as an attractive position in the capital structure. I imagine FAs are hearing a bit about it and this post provides some of the counter-argument.
  • Columbia – This post explains the cause of and effect of a diversifying asset class and significant inflows (to said asset class). This is great fodder for an FA to consider when re-balancing clients’ portfolios.
  • MFS – Greece? Don’t worry, but worry about precedent re: Italy, Spain, & Portugal. That’s a helpful nugget for FAs getting anxious client phone calls.

 

100% Alternatives in Your Portfolio. Why Not?

Posted by Mike McLaughlin on May 14, 2012, in Thoughts , tagged with , , , , , ,

Third in a series of posts about marketing alternative investment vehicles to financial advisors. Click to read Part I and Part II.

What’s a reasonable allocation to alternative investments within a portfolio? Most everyone agrees “more than 0%” is true. After that? Things get foggy.

For an asset manager marketing alternative vehicles, the allocation issue is important. Not only do many advisors struggle to understand alternatives in the first place, but they also have a lot of uncertainty when it comes to implementation.

I started with a simple review of the allocations firms use in materials that introduce alternatives:

  • BlackRock’s Investing for a New World sets the initial bar at 15%.
  • A Guggeheim (Rydex | SGI) tool implies that the answer is somewhere up to 30%.
  • A similar Altegris tool goes further, showing that a 50% alts allocation may improve results.
  • Raymond James highlights endowments’ 40% allocation to alts, then quickly notes that this is “too high for the majority of individual investors”.

From Raymond James overview of alternative investments.

To complicate things, consider yet another tool offered by Hatteras Funds, and what happens if you select a portfolio that is 100% alternatives (the Model Portfolio below):

In this tool from Hatteras, a 100%-alternative portfolio provides the best results.

Now an appropriate answer for allocating to alternative strategies is not just 15%, 30%, or even 50%. Here, a portfolio of 100% alts is the right choice. Confronted with this, advisors or investors are asking: what should I do?

Clearly there’s a lack of consensus. By itself, this lack of consensus is no big deal. After all, the goal isn’t for all firms to have the same perspective on alternative allocations.

The real problem is that firms only provide allocation guidelines implicitly. In the examples above, no rationale or explanation accompanies the percentages of assets that can (or should be) invested in alts. The data does the talking, and it gives a pretty vague (“more than 0%”) message.

I see two paths for firms in resolving this issue:

  • Punt on allocation, making it clear that alts have a role and the advisor is in the best position to decide what exposure is best for clients.
  • Build a concrete case for a baseline allocation, including the necessary caveats that one-size-does-NOT-fit-all.

Either approach can work, with the key being that the messaging is explicit. Not only will this close a confusing gap in alternatives marketing, but it will help make it clear that providers have a strong grasp on how their products should be deployed.