Archive for the ‘Press’ Category

AK In The News: Active Management Down, But Not Out

Thursday, January 26th, 2012

Active management has unquestionably been under fire lately, especially since the vast majority of actively managed funds have underperformed the market the past few years. So is active management down and out, or just down? Ignites, a Financial Times Service, conducted a poll of its readers last week and roughly 83% of respondents felt that active management will come back; almost 800 people responded to the survey.

I was quoted in the article – and I agree – active management may be down but it is not out. My quote:

“It has unquestionably been a tough time for active management. Witness the outflows at American Funds and some other mutual fund complexes. I do agree that stockpickers will be back and some have actually done quite well despite the overall trend. At the end of the day, it is important to remember that it is a market of stocks. Some will do better than others based on company-specific characteristics and industry specifics.” I added “The rise of indexing and exchange-traded funds will continue, but portfolios still will be composed of both actively and passively managed funds.”

I also want to add that in the case of American Funds, which has been hit hard in the press, it’s also an issue of size. As any fund gets bigger it gets harder to outperform as they are forced to invest new cash regardless of their current outlook on the market. As they become larger, they become more like the market – and thus outperformance becomes more difficult.

So let’s be careful not to confuse size and underformance with the death of active management. This isn’t the first time that this discussion has taken place in down times, and it probably won’t be the last!

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AK In The News: 2012 Will Be Year of ….

Friday, December 30th, 2011

Readers were asked in a year-end poll by Ignites (a Financial Times Service) what they thought the main market trends of 2012 would be (they were given a list of items to choose from). The two top trends that they identified were 1) the return of individual investors into equities; and 2) the growth of exchange-traded funds (ETFs) and other passive investment strategies at the expense of mutual funds. I agree with them on the latter but not the former.

Investors continue to be fee-sensitive, and given the relatively poor performance of the equity markets for awhile now, the popularity of ETFs should continue to grow. After all, to many investors, if returns are going to be low, why reduce them further with higher cost mutual funds?

I am surprised that the number one answer  (28% v. 26%), however, was that individual investors would return to the market. I personally think that this is wishful thinking on the part of financial services professionals. As I state in the article, ” I think that the combination of global uncertainty (especially in Europe) and the election are going to make investors hesitant to get back into the markets. I think that the market will be flat for the year and then we might get a year-end rally after the election.”

What do you think? Click here to read the entire article.

Have a great New Year’s weekend. 2012 should be an interesting year.

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AK In The News: RIA Growth To Continue

Thursday, December 8th, 2011

Today’s FundFire (an on-line service of the Financial Times) contains an article on the growth prospects for RIAs; click here to read the entire piece. While the article focuses on Focus Financial Partners, no pun intended, the comments are germane for other industry participants as well.

My comments center on a few primary themes, one related to the overall growth prospects for RIAs, and the other on how these firms are maintaining and in some cases increasing their competitiveness.

While there may have been some slowdown in the trend toward advisors going independent this year (depending on who you talk to and which studies you look at), this slowdown is more a symptom of the current financial uncertainty then a sign that the trend toward independence has reversed. What we learned in 2008 is that economic and market uncertainty, rather than signaling large moves in assets, leads to a period of inaction – many advisors don’t want to rock the boat and make decisions until the future becomes clearer.

This is the case for clients as well as advisors. The attractiveness of leaving a wirehouse for an RIA remains for advisors that either want an equity stake, as some of these firms are offering, are looking for more independence in the decision-making process and/or perhaps a chance to escape the reputational risk that hampers many of the wirehouses today. Now, I am not saying that the wirehouses are going away. Some advisors like the safety of the wirehouses, and the fact that they don’t have to make management and/or other far-reaching decisions. They are willing to put up with the increasing amounts of compliance and red tape.

The second point – competitiveness. Larger RIAs and aggregators, as the article points out, are increasing their product offerings – specifically in the areas of SMAs, UMAs and alternative investments. In many case, they are teaming with product providers. My comments here are that in many cases, it is easier for these RIAs to buy the product platforms as opposed to building them.

Their particular area of expertise is probably not in product development – so why force the issue? In my mind this situation is similar to many bank brokerage platforms, where the quickest way to grow and compete is to utilize existing products. The amount of money, time, and organization that it takes to build competitive investment products is daunting for firms that have never done it before.

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AK In The Press: Social Media Important in Financial Services

Wednesday, November 30th, 2011

Perhaps the financial services industry is finally getting it – a majority of respondents to an Ignites (a Financial Times Service) survey indicated that it is important for fund companies to be involved in social media. The complete article can be found by clicking here.

I was asked two questions by the reporter – whether it was important for fund companies to be involved in social media and if so, should they be interactive with the general public. The answer to both questions was a resounding yes.

As I have commented before, the old days of fund companies, or anyone else in the industry for that matter, simply pushing out their message the way they want to – via advertising for example – is no longer effective as a stand alone strategy; although advertising is still a way to promote brand recognition. In today’s 24/7 viral news world, clients and prospects want what they want, when they want it and how they want it.

Social media is an effective way to pull people into your website and to generate interest in your company and your services.

On the second question, the more respondents see that you are listening to them, and in fact taking the time to respond to their comments, the more engaged they will feel. One of the attractive features of social media is that it is a two-way street – it allows you to engage with people – to have lively discussions and even debates. Make people part of the conversation and they will be more inclined to remain interested.

It is good to see that the financial services world is starting to get the advantages of social media – and this is even without mentioning one of my favorite uses of social media – the ability to proactively communicate with and assist in client servicing – back to giving people what they want, when they want it and how they want it.

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AK In The Press: Managers Challenged To Stand Apart From Rivals

Thursday, November 17th, 2011

Last week I gave a presentation at the IMI Consultants Congress entitled “Top 10 List – Winning  A Finals Presentation.” (See last week’s blog for a recap of the presentation and a link to the full list, which can also be found on the Resources page of my website.)

The following article – Managers Challenged to Stand Apart from Rivals – highlights two of the discussion points my fellow presenter and I spoke about and was printed in today’s FundFire.

Differentiation – One of the audience members mentioned that it was difficult for managers to know who their true peer groups are for comparison sake, and that she felt it was important for the consultant to give the manager this information. In reality, however, it’s almost impossible to do, this since managers are all different, and the goal is not to only put “identical” managers up against each other. Consultants will select managers who they feel would all be equally capable of fulfilling the mandate. Rather than try to compete against the other managers, and highlight differences, it is better to stress why you are different and what your own competitive advantages are.

Often times, if you are perceived as competing against someone as opposed to advocating for yourself, you will lose credibility with the prospect. Manager search and selection is an art more than a science. It is not perfect. So concentrate on what you do well, and you will be successful.

The other topic mentioned in the article is who should attend the presentation. I took somewhat of a contrary view, in that while portfolio managers have always be considered important presenters, in today’s volatile world I feel that it is as important to have continuity – that the person the prospect meets at the finals presentation doesn’t go away but services the account on an on-going basis and is available to the client.

We had a lively discussion, and I think the bottom line conclusion was that each situation must be evaluated on its own merits. I will concede that it is more important that a manager who is a stock picker bring a portfolio manager to the presentation, but a top quality client servicing person should also be there to provide consistency and highlight client service.

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AK In The Press: Opinion Piece – Why The Bank/Brokerage Marriage Has Failed

Thursday, October 6th, 2011

My piece “Why the Bank/Brokerage Marriage Has Failed” appeared in today’s FundFire. To summarize – the bank/brokerage marriage experiment is a failure that has harmed reputations.

It’s hard enough to be an advisor these days, with the market just finishing its worst quarter since 2008; trying to manage your own business and reassure clients about their financial situation is difficult enough. But advisors at firms such as UBS and Bank of America/Merrill Lynch now have to answer questions about their parent as well.

In the wake of trading scandals at UBS and increased debit card fees at Bank of America, advisors have become “guilty by association,” suffering repetitional risk for things that have nothing to do with them.

But the strains in these relationships go deeper than today’s bad press. Cultural differences are another key reason for the disconnect that exists. The idea of cross-selling synergies created by the addition of a bank’s product lines seems appealing at first blush; the reality, however, is that most advisors will only sell these products on their own terms – they don’t want to be told what to do or coerced into selling anything.

These culture differences extend to compensation issues as well. Advisors are used to “eating what they kill.” This mentality has never really meshed with the more conservative mindset of bank management. While banks have for the most part been smart enough not to alter compensation structures significantly, the cultural disconnect and tension continue.

In fairness, some bank/brokerage marriages seem to be working somewhat better – such as at Wells Fargo Advisors – but in this case, the marriage is based on more of a quasi-independent advisor model. You still have to wonder, however, if the name itself will become a liability sometime in the future here, as it has elsewhere.

One could rightly argue that mismanagement and lack of oversight caused many of the problems that necessitated brokerage firms to seek capital to survive and resulted in these hook-ups. But differences between the cultures are often too great, and in retrospect, attempts to merge the two outfits probably should have been avoided. Perhaps the brokerage arms should have been allowed to remain operating as totally independent units from the start. This would have saved everyone involved a lot of grief.

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AK in the Press: Quoted in Article on Breakaway from Lockwood / BNY Mellon

Thursday, September 8th, 2011

A number of former top executives at Lockwood Advisors ( a unit of BNY Mellon’s Pershing Division) left to start their own firm called Palladiem Partners. They are making available a group of full-porfolio strategies targeting RIAs, advisors, independents and family offices. They will directly compete with their old firm.

The gist  of my comments were that:

1. Unlike most start-ups, given the experience of this team, they should be able to attract clients from their old firm and thus they have a greater chance of success than many other start-ups.

2. The market for fully constructed turn-key portfolios is a growing one and should continue to grow into the future.

You can read the entire article by clicking here.

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AK in the News – Joining Forbes.com as Contributor to Advisor Network

Wednesday, August 31st, 2011

I have joined Forbes.com as a contributing blogger in its Advisor Network. Please click to read today’s post: Is Your Client Cheating On You With Another Financial Advisor?.

Please take a look at my profile and sign-up to follow me and some of the other great professionals that contribute great articles of interest. I will be posting on a regular basis – let me know if there are specific areas of interest that you would like to see me write about.

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The Value of a Consultant

Thursday, 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!

 

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AK in the Press: Why New Morningstar Ratings Are No Sea Change

Thursday, 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?

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