Unlocking Real Value Blog

It’s Hard to Stay Out of the Political Fray…… - July 28th, 2011

It’s hard not to shake your head and say WTF? Regardless of your political affiliation, we should all be embarrassed by way that our elected officials are behaving. I don’t usually do politics here, and I’m not going to take sides. I just wanted to get this off my chest:

To some extent, the damage has already been done – at least to our country’s reputation. I have no idea if a deal will be done by Tuesday, but even if one is, our international standing has been diminished – hopefully only temporarily, but tarnished nonetheless. Can you hear the Chinese laughing? While they will be hurt in the short-run by the loss in value of their U.S. bonds, they win long-term.
Even if there is an agreement, the odds of a ratings downgrade remain very high – the process has shown Washington to once again be dysfunctional and unable to compromise.
A downgrade, or even the continued threat of one, hurts our economic prospects and increases the odds of another recession. This fight over the debt ceiling and our government’s inability to devise a plan to significantly reduce the deficit – which must eventually happen – has in the short-run significantly increased the odds that interest rates will rise, economic growth will slow and the deficit will actually get worse as the carrying costs of our debt increase . Almost wants to make you cry, doesn’t it? Talk about unintended consequences.
Even under the best scenario of a last-minute deal that is sizable enough to prevent a downgrade, businesses have already lost confidence in the government, and as uncertainty continues to grow, businesses will continue to be reluctant to invest. New jobs will be scarce. In fact, many companies have been increasing layoffs over the past few weeks. Unemployment will remain high for the foreseeable future.

If I seem kind of down on this whole thing, I am. I hope that I’m missing the silver lining – but I don’t think that I am. The situation is bad. But it is the reality that we all have to live in and run our businesses and daily lives in. Sometimes, reality sucks. Now is one of those times.

The leadership of our country has failed us. The vocal ones as well as the silent ones.

We all know that the deficit must be reduced, that our entitlement system must eventually be reformed because there is not enough money to pay the benefits indefinitely, that spending must be brought under control and that the arcane tax code needs to be rewritten. Everyone should pay their fair sure. But class warfare, name calling and rhetoric are not the answer.

This does not have to be a zero sum game.

If any one of us ran our businesses the way that our elected officials are running are government, we would have been fired long ago – probably by the Board of Directors at the insistence of the shareholders. Guess what – we are the shareholders.

Hmmm…..

Posted in Advisors, General Interest, Investment Managers, Press Releases | 2,467 views | Email This Post | Print This Post
1 Comment »

The Value of a Consultant - July 21st, 2011

Why do some people believe that consultants can help them, while others do not? The non-believers have probably had experiences with consultants that only assess their weaknesses; the believers, on the other hand, know that for a consultant to truly add value, he or she must be able to make recommendations and then assist with the implementation of the solutions.

Case in point was a recent prospect meeting. The CEO stated that they had a list of 16 recommendations for improvement from their last consultant, but that they had not had the time to address these recommendations, and further he didn’t feel that they had the knowledge to devise solutions themselves.

If a consultant can only come in and tell you what is wrong, yet not offer solutions to help you improve, then I would have to agree that the usefulness of that consultant is limited. After all, we all know that we can always find ways to do things better. The trick is being able to actually do something about it.

One way to evaluate a consultant is to consider who their strategic partners are – who helps them implement improvement plans for clients. In most cases, solutions will encompass hiring others to complement the strengths of the consultant. The article Consultants Sell Success with Strategic Thinking & Teamwork was recently featured in allBusiness.

The article discusses how my partner Petey Parker and I work in our Consult P³ business partnership (Consult P³ complements the work that I do for financial services firms with firms from other industries). Our philosophy is based on assessment and solutions. Petey and I do the assessments and then work with our faculty of highly-qualifed partners who we recommend as appropriate to help clients improve their three Ps – People, Planning and Processes.

Next time you think of hiring a consultant, be sure to inquire about their implementation strategies. Oh yea, the answer for the prospect above. Step one would be an action plan to address the 16 points already identified and provide an implementable solutions roadmap. That would be something worth paying for!

Posted in Advisors, General Interest, Investment Managers, Press, Sponsors | 1,999 views | Email This Post | Print This Post
No Comments »

On-Line and On-Point: A Guide to Social Media Success - July 12th, 2011

Our newest White Paper – On-Line and On-point: A Guide to Social Media Success – has been posted on the Resources page of our website and included in our 3rd quarter newsletter. Click here to read the White Paper and click here to see the entire quarterly newsletter.

The White Paper specifically deals with how financial services practitioners and companies can develop a social media strategy. The benefits of a successful social media are two-fold – to stay top of mind with existing clients while developing and building new relationships.

Enjoy the White Paper – and start building your own social media strategy.

Posted in Advisors, Announcements, General Interest, Investment Managers, Sponsors | 1,903 views | Email This Post | Print This Post
No Comments »

The Sad Story of Morgan Keegan - July 6th, 2011

I spent almost eight years at Morgan Keegan and still have many friends who work there. So it saddens me to see what’s happening to the firm. Many will say that the sale to Regions Bank was the beginning of the end. While to some extent this may be true, what has led the firm to where it is today is greed – turning the other way and ignoring the unsustainable returns of the mutual funds that have now caused the firm so much trouble. If something seem to be good to be true…..

Now what happens? Probably one of two outcomes. Either the firm will be sold to a private equity firm or to another broker/dealer; insiders speculate that talks have been under way for awhile, and now that the “for sale” announcement has been made by Regions, it better happen fast or the advisors will start running for the doors.

The two inevitable losers from any sale – the home office staff and the City of Memphis. If a private equity firm buys the firm, you can bet that belts will be tightened and staff levels reduced. The same goes if the firm is bought by another broker/dealer – the odds of the home being in Memphis are pretty slim, and no one at Regions has the same loyalty to Memphis as Allen Morgan and his mostly long-retired gang.

For advisors, a sale to a private equity firm would be better; a sale to a wirehouse would result in a mass exodus, retention bonuses not withstanding. But even if Morgan Keegan remains quasi-independent, and is not melded into another broker/dealer, you have to wonder how far the firm is behind the competition now – certainly from a technology point of view – given the amount of money and time it has had to dedicate to the many lawsuits it has faced.

Yes, unfortunately, there are many losers. The dedicated home office that appears to be a loser under any scenario. The many advisors who didn’t sell a lot of the funds in question, have not been sued by clients, yet nonetheless have suffered from the reputational damage that has been done to the firm.

It saddens me that this is happening to this once great firm. Hopefully I will be proved wrong, and the end-result will not be a negative one for my friends at the firm.

Posted in Advisors, General Interest, Investment Managers, Sponsors | 2,250 views | Email This Post | Print This Post
No Comments »

Give ‘Em What They Want – Not What You Want - June 28th, 2011

Over the past few weeks there have a number of reports and studies released about the types of communications advisors want from managers. The results are similar and not surprising – less is more (fewer e-mails) and performance isn’t everything. Duh!

It never ceases to amaze me that so many people fail to understand that communications have changed. Whether you embrace social media or not, it has changed the way that people interact. In order to be successful and develop long-term relationships, you have to deliver to people the content that they want, and you need to deliver when they want it and how they want it – period. If you don’t, someone else will.

How do you know what to deliver, how to deliver it and with what frequency? Ask the question. We all get too many emails. We all get tired of self-promotion. So why do so many people in our industry not get that? While these studies looked at managers and advisors, the message is germane for all industry participants. While you may not get it – the person you are trying to reach certainly does. And the fact that you don’t hurts your chances of success.

Even if you have a long-standing relationship with someone, it’s always helpful to periodically ask if they want any change to the types of information that you provide them, how frequently you provide it and how you provide it. If nothing else, they will appreciate that you asked.

Communications 101 in today’s world – give ’em what they want – not what you want – embrace it or be left behind.

Posted in Advisors, General Interest, Investment Managers, Sponsors | 2,640 views | Email This Post | Print This Post
1 Comment »

AK in the Press: Why New Morningstar Ratings Are No Sea Change - June 23rd, 2011

My new opinion piece “Why Morningstar Ratings Are No Sea Change” was published in today’s Ignites; Click here to read the complete piece.

In essence, it’s my belief that the introduction of Morningstar’s new predictive rating program, to supplement its star rating system, will not have a significant impact on the mutual fund industry. In effect, there is not much new in the announcement. Morningstar is essentially trying to emphasize its other research capabilities because they, like most in the industry, know that the stars, while popular, are too often used incorrectly as a gauge of a fund’s future performance.

In reality, the stars are much more about a fund’s past performance, and should only be one of the criteria used in making future fund-buying decisions. A lot of this “new” qualitative information has for a long time been in the fine print of Morningstar’s research reports.

Morningstar is not going away from the system that has helped it build its reputation; it’s merely trying to protect it and extend its life.

I also find the timing of the announcement interesting. The growth of ETFs has put a lot of pressure on the mutual fund industry, as in many cases the flows into ETFs come directly from mutual funds. So perhaps more than shaking up the industry, Morningstar’s announcement is an offensive PR move by the firm to help protect the mutual fund industry.

Just a thought … What do you think?

Posted in Advisors, General Interest, Press | 1,836 views | Email This Post | Print This Post
No Comments »

Not So Fast – Predicted Movement Among Wirehouse Advisors Overstated - June 22nd, 2011

There has undoubtedly been a lot of movement of advisors over the past few years. And there is no question that the wirehouses have been among the losers. But a recent prediction by Aite Group that 4,500 advisors at the four largest brokerage firms will strike out on their own seems way overblown.

The number of advisors surveyed? 151 – their prediction is quite an extrapolation! Now, I agree that as the lock-in effect of current contracts expire, as do some of the benefits of retention packages offered in the wake of the financial crisis, there is sure to be movement. But striking out on your own is not an easy proposition. It takes years of planning and a willingness on the part of the advisor to become a business owner – to work harder and longer for the promise of a larger payout at the end.

So there will be movement – but a great deal of it will be advisors switching from one B/D to another – and perhaps jumping between a regional and a wirehouse or vice verse. But all to the independent channel? Not likely. In addition, a number of the wirehouses have announced plans to reduce the overall number of advisors and to raise minimum production requirements. Being the largest is not viewed as being as important as it was in the past. So there will be movement, and advisors will leave the business. But not everyone who moves will go independent.

Another interesting fact from the survey is that most wirehouse advisors are either “satisfied” or “very satisfied” with their current employer, and the number of advisors who plan to stick to their current employer has doubled since a 2000 survey by Aite.

So beyond the headline is the reality that there will always be movement among advisors – and yes, money and retention bonuses and lock-ins matter – but advisors who are contemplating moves must do so keeping in mind where they will be mostly likely to succeed. And for many traditional B/D advisors, that model works just fine.

Posted in Advisors, General Interest, Sponsors | 1,863 views | Email This Post | Print This Post
No Comments »

Do Your Clients Understand Their Fees? - June 13th, 2011

If you’re an advisor, you should quickly determine if your clients understand the fees that they are paying. Why do I say this? Because a recent survey by Cerulli & Associates indicated that 33% of investors do not understand how they pay for the investment advice that they receive. And those who did not understand how they were being charged were more than likely to be unhappy with their advisors – and given recent market volatility and uncertainty, why take the chance?

Almost 8,000 households were interviewed for this survey. Another interesting result of the survey was that 47% of those surveyed said that they preferred paying commissions, while only 27% indicated that they preferred paying a fee based on assets under management. Pretty interesting results considering the overall move in the industry toward fee-based compensation.

Now, we don’t know how good or accurate this survey is. But Cerulli has a good reputation and there was a large sampling size. The results really caught my attention because the survey highlights the issues of fees at a time when clients are apt to be a little testy when their next statements come and their account valuations are down.

While explaining fees is one of the first things that you should do in a new client presentation, now presents a great time to revisit the issue of fees with clients. They should appreciate your taking the time to ask. Even when you are confident that clients understand the fees that they are paying, its always good to periodically review how you get paid and how you add value.

Take the initiative – because you don’t want to get that phone call from a client that just got approached by another advisor and is now questioning you and the fees that you charge.

For a primer on fees, click here to read our White Paper entitled “The Truth About Fees.”

Posted in Advisors, General Interest, Sponsors | 1,649 views | Email This Post | Print This Post
No Comments »

AK Press – Can Regional B/Ds Maintain Their Momentum? - June 7th, 2011

Regional B/Ds, along with independents, have been the winners of the past few years, certainly as compared to the wirehouses. There has been a lot of press lately about whether or not this momentum can continue. My answer is that yes the regionals B/Ds can maintain this momentum, but they have to be careful not to be undone by some of their traditional weaknesses.

I wrote an article on this topic which was published in today’s FundFire. Click here to read the full article, entitled “What Slows Managed Acct Growth at Regionals? In the short- and medium-term, there is no reason that this momentum will not continue. Many long-standing advisors at regional B/Ds are not going to go independent for many of the reasons that they traditionally haven’t – namely it takes a lot to run a business. They are also unlikely to go to the wirehouses in large numbers.

And the recruits that have just joined the regionals are under contract for a number of years. To me, the danger to regionals will appear as these contracts expire. Regionals have often lagged in the fee-based area not because their recruits don’t do the business – but rather that the advisors that have been at a regional firm for the majority of their careers don’t tend to do as much of this business.

While strives have been made in the quality of the fee-based platforms at the regionals, many still lag. They have time to rectify this situation – especially on the training side, where significant investments are not necessary. The successful regionals will use the growth in their fee-based revenues generated by recent recruits to invest back into their businesses and to broaden the reach of the programs to advisors who have traditionally not done the business. This should make their platforms extremely competitive and provide the newest recruits little reason to jump ship again when their contracts expire.

Regionals have the time to do this – the only question is whether or not they will. My guess is that some will and some will not. But overall, I think the momentum will continue.

Posted in Advisors, General Interest, Investment Managers, Press, Sponsors | 1,732 views | Email This Post | Print This Post
No Comments »

Manager Turnover Slows – A Double-Edged Sword? - June 3rd, 2011

A newly released study by Mellon Transition Management (a branch of BNY Mellon Asset Management) shows that manager turnover in the institutional marketplace is slowing back to historical, pre-financial crisis levels. (Click here to read the Fundfire article about the study.) On the surface, great news, right? Maybe – maybe not.

On the bright side, this trend could be an indicator that now that the dust has settled, and the market has been on an uptrend , committees are taking more time in evaluating their managers before deciding to make any switches. It could also be reflective, as the article points out, of the fact that changing managers can be costly and time-consuming. There could also be compliance reasons for this slowing of manager changes.

In addition, even if managers are underperforming their peers, there is less of a “rush to judgement” in up markets.

On the flip side, the negative here for the investment management industry is that whatever the reason – time, cost, compliance, performance or some combination – its going to be harder to grow your AUM and get new clients. In a zero sum game like manager changes, one manager typically wins at another managers expense, a slowing trend is good for protecting what you have but not so good for growing your business.

The upshot is that if indeed manager transitions are slowing and taking longer when they do happen, then the importance of your marketing message and value-added proposition becomes more important than ever. In addition, client service takes on an increasingly important role in client retention.

To me at least, this slowdown in manager turnover is a net negative for most managers. What do you think?

Posted in Advisors, General Interest, Investment Managers, Sponsors | 1,813 views | Email This Post | Print This Post
No Comments »

Blog Search

Categories

Recently Posted

Archives