Published inFUNDfire – An Information Service of Money-Media, a Financial Times Company
Written by Andy Klausner, CIMA, CIS , the founder of AK Advisory Partners LLC., a strategic consultancy serving
the wealth management industry.
In an environment where many money managers are seeing their distribution resources cut, I believe it’s important to look at the following key areas:
- Sponsor firms that managers have existing relationships with and multiple products with
- Distributors with unified managed account platforms
- Breakaway advisors and independent RIA firms, including custodians such as Charles Schwab, LPL, Pershing, TD Ameritrade and Fidelity
Remember that now is a good time to re-evaluate sponsor relationships. The ideal model is to work with fewer sponsors, but to have more products with these sponsors. This places a premium on large existing relationships where a sponsor’s advisors use a manager’s separately managed accounts, mutual funds or exchange-traded funds. Years ago, it used to be that money manager would attempt to be on as many platforms as they could. But in the current climate, having to service multiple relationships across multiple market segments can be seen as cost burden for sales and marketing teams. Increases in sponsor-related service costs also makes unified managed account programs more attractive to managers. Keep in mind that UMA programs call on the sponsor to take control over SMA operations, driving down the manager’s costs in that area. This is particularly beneficial for new managers who have not yet spent money on back-office functions.
In engaging the RIA/breakaway advisor, it can be wise for managers to allocate some resources away from the broker-dealer segment and toward the independent channel. At best, it’s wise to spread resources more evenly between the two. Remember that the quality of the RIAs going independent has increased in conjunction with the problems many large financial firms are having this year. This is another reason why RIAs should be targeted, particularly since these higher quality advisors are more likely to do fee-based business. For smaller managers who find the RIA space to be too fragmented, focusing on the custodian platforms (i.e., Schwab, LPL) is a smart move. Passing muster with the due diligence gatekeepers at these sponsors should be a top priority.
