Archive for the ‘Sponsors’ Category

AK In The News: Ameriprise Casts Wider Net With Client Call Centers

Tuesday, September 24th, 2013

I was asked to comment about an article in today’s GatekeeperIQ (A Financial Times Service) about Ameriprise’s strategy to set-up call centers to broaden the firm’s mass market reach as well as to help advisors focus on their most profitable clients. I think it’s a great idea.

On the first point, despite its advertising, Ameriprise clearly tails others such as Schwab and Fidelity in name recognition. Therefore, if the goal is to proactively broaden this reach, then call centers are a good strategy to do so.

On the second point, many of us in the industry have advocated for a long time the theory that advisors can only serve a finite number of clients effectively. While this number varies by the size of the support staff, technology, etc., it holds for all advisors. The answer for many to limit the size of their businesses has been to set account and/or relationship minimum account sizes higher.

But what about existing clients? While we all know there are sometimes reasons for having smaller relationships – family or friends or future potential – the more successful advisors find ways to minimize this number. Therein lies, in my opinion, the great positive of what Ameriprise is doing. As an advisor, saying that you are going to “fire” clients is an easy thing to say – but actually doing so is a lot harder.

To quote from the article: “For advisors, it provides a graceful option to offer to smaller, less profitable clients. But to “fire” those clients “is probably harder psychologically to do without having a place to send them,” says Andy Klausner, founder of AK Advisory Partners, a consulting firm. “In this case, Ameriprise is offering its advisors a way to leverage their businesses while having an almost-turnkey solution to recommend to these smaller clients.””

I would expect other firms to follow suit.

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Advisors – Are You Social Yet?

Thursday, September 19th, 2013

Compliance concerns aside, many advisors continue to take a wait and see attitude about utilizing social media in their businesses and client servicing efforts. While more advisors are taking the plunge than before, the financial services industry remains a laggard. I have been advocating the use of social media for a long time, because it’s more important than ever to give clients what they want, when they want it and delivered how they want it.

A number of studies recently released by some reputable organizations reinforces the case for social media:

1) Forrester Research released a study in July which showed a high correlation between the number of times affluent investors interact with financial advisors in social networks and the investors’ payments for advisors’ services. This correlation was almost twice as much as the relationship between the number of interactions in person or by telephone.

Now, correlation does not necessarily indicate causation, but the large margin here does indicate that social media does have a significant benefit. One reason is perhaps the fact that social media allows investors to leverage their time by communicating with multiple clients at one time, while the other media mentioned above can only be done with one client at a time.

2) Accenture recently surveyed 400 advisors:

  • 77% affirmed that social media helps them with retention
  • 74% agree that social media helps them increase AUM
  • 73% say that social media serves to increase client interaction
  • 40% indicate that they have gotten new clients through Facebook, 25% through LinkedIn and 21% through Twitter

3) Cogent research surveyed 4,000 investors with more than $100,000 in investible assets, and found that a growing number use social media to help keep informed about personal finance and help them make investment decisions. In fact, seven out of ten investors who use social media for investment research (24% of the total) have changed their relationship with their investment provider because of something that they have read on social media.

If you haven’t embraced social media yet, it’s time to start kicking the tires – or  you will be left behind.

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AK In The News: American Funds Should Launch More Products

Wednesday, September 18th, 2013

I was asked to comment on a poll of Ignites (a Financial Times Service) readers on whether or nor they supported American Funds’ decision to launch a number of new funds, primarily focusing on non-core areas. More than 77% of respondents agree that the firm should launch new products,as this shows that the firm is evolving and meeting advisor demand for new products.

Only about 14% of respondents disagree with the move, arguing that it will cause the firm to loose focus and may hurt the management of their current funds. Historically, the firm has been known for having a relatively small, conservative lineup of mostly domestic equity funds. The firm did, however, launch eight new funds last May, including an emerging markets fund.

I agree with the move, in part given the size and strength of the research staff at the company; I don’t think they will loose focus on what got them where they are today. My only concern is if they stray too far into the alternatives space. I have been worried for awhile about the proliferation of alternative funds at the retail level, mostly because I don’t feel that a lot of investors understand what they are investing in; this could lead to large outflows and hurt performance.

To quote from the article:  “After suffering $200 billion in net outflows over the past three years, the new rollouts make sense, says Andrew Klausner, founder and partner of AK Advisory Partners. Furthermore, he is not surprised that advisors would support the shift in strategy as long as the products deliver on performance.

“American Funds has had considerable outflows and quite a bit of negative press over the past couple of years, but advisors have a short memory, and if they want something they’re going to go to whoever can provide it,” Klausner says.

“I think the market is forcing them to look at other things,” Klausner says. Domestic equity “active management has taken a hit in the press and a lot of organizations have looked at ways to expand what they do,” he adds.”

Do you agree?

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Advisor Tidbits – A Roundup Of Industry Thinking

Friday, August 23rd, 2013

I’ve read a number of interesting articles/reports lately that merit a mention – and could help lead to business-building ideas.

1) Referrals – a recent study by Prudential about referrals indicates that while clients think it takes 4.8 years on average to build up enough trust to make referrals, most advisors think that such trust is built in half of the time – just over two years. Perhaps advisors need to be a little more patient! The good news, however, is that while clients believe that referrals have a lot of social risk, more than half of the people surveyed have made referrals, and another third said that they would.

2) Fee-based compensation – According to Cogent Research LLC, two-thirds of industrywide compensation will come from asset-based fees by 2015, up from 59% today. The study included 1,700 financial advisors with an average of just over $100 million under management. The likely biggest loser from this continuing and growing trend – actively managed mutual funds.

3) Advisors too focused on baby boomers – a recent Cerulli Associates report (conducted in conjunction with Phoenix Marketing International) warned that advisors are focusing too much of their time on baby boomers, just at the time when these investors are going to be retiring and entering the spend-down phase of their lives. Simultaneously, fewer than 20% of investors under the age of 40 feel that they are getting enough attention. Advisors, by ignoring these younger investors, could miss out not only from the growth in assets of these investors as they become more successful, bus also from the more than $2,3 trillion in investible assets estimated to be transferred via inheritance between 2026 and 2030.

4) Wirehouses face continued threat from RIAs – the Aite Group, in a new report, indicates that independent shops and discount brokers should continue to benefit from their ability to tailor customer experiences more easily than wirehouse advisors. While there is no denying the continued growth in market share of wirehouse competitors, I for one still believe that a wirehouse advisor can be successful and create a very good client experience – they just have to work a little harder at it! (According to the story, RIAs boosted assets last year by 18.2%, discount brokers by 12% and the wirehouses by 8.2%.)

 

 

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Merrill’s Fee Debacle

Monday, August 5th, 2013

Your near the top of your industry and a cash cow for your parent (Bank of America). The future looks bright as the financial crisis of 2008 fades. So, what do you do? You announce a complicated new fee structure that on the surface looks like it may increase fees for many of your top clients in a fast growing (fee-based) business. Then you explain it in murky terms. Not, in my opinion, too smart!

These fee changes are part of a platform restructuring that merges five separate managed account platforms on to a new one called Merrill Lynch One (set to rollout in September). While currently, minimum fees are based on the amount a client has in a particular account, the new system will see a unified fee based on all of the assets a client has with Merrill. Great if you have multiple accounts, not so great if you don’t,and your account happens to be in one of the programs whose current fee structure is less than the new one.

It appears that the greatest change will be seen for clients with accounts in the Merrill Lynch Personal Advisor (MLPA) platform – currently about 1/3 of the total of all fee-based assets at the company. According to the Wall Street Journals, fees on some accounts might rise by as much as 60% by the end of 2015 (advisors have until that time to adjust/negotiate client fees).

Now the catch – according to Merrill spokeswoman, the changes will not be automatic. Clients can choose to use the new single platform and will pay “an agreed-upon fee” reflecting the value the client “places on the overall advice and services delivered by the advisor and the firm.” (As quoted in FundFire, a Financial Times Service, on August 2, 2013.) So, what exactly does that mean?

I have been doing this a long time, and I don’t really understand that statement! It seems that perhaps current clients will be exempt from fee increases; or will they? Grumbling among financial advisors has already begun, as has some negative press in some of the industry on-line publications. I’m all for transparency, and maybe this makes the system more transparent. But “making” your financial advisor negotiate fees with current clients now, when many people are still leery of the industry?

The debacle is not necessarily the new fee schedule or the new platform, which should make Merrill more efficient (and good at least for Bank of America shareholders). The debacle is the confusing the way in which the firm has handled this announcement and is potentially disrupting client relationships at just the wrong time.

Great way to destroy all of your positive momentum guys!

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AK In The News: RIA Trends / Bullying In The Workplace

Wednesday, July 31st, 2013

I was quoted in two articles this week – one on the trends in the RIA space and the other on bullying in the mutual fund industry.

The first story, published in yesterday’s GatekeeperIQ (A Financial Times Service), had to do with the announcement by Securities America that they were unveiling a new hybrid platform geared toward smaller RIAs. The platform allows for the use of multiple custodians and can accommodate fee-based as well as commission business.

I was asked to comment on whether this was part of a greater trend in the industry and if asset managers would be able to benefit from new platforms such as this. To quote from the article: “The custodian-agnostic platform is an attractive proposition for small advisors who want to make the switch to a fee-based practice, say Andrew Klausner founder and principal advisor of AK Advisory Partners. “This is kind of a stepping stone into that, because they don’t necessarily have to change who their custodian is and therefore move client accounts,” he says. While reaching small dually registered advisors might not be a top priority for managers, they shouldn’t ignore this space. Still, he says, such advisors require support and attention. “You’ve got a larger number of smaller producers, so to have an impact is a greater effort,” Klausner says.”

The second articles was published in today’s Ignites (A Financial Times Service) and dealt with the results of a survey about bullying in the mutual fund industry. In the survey, nearly two-thirds of respondents said that bullying was prevalent in the mutual fund industry (30% actually said “very prevalent.”) This compares to 50% in the U.S. overall.

To quote from the article: “”Bullying should never be allowed or tolerated,” says Andy Klausner, founder and principal of AK Advisory Partners. “It should be specifically defined in the employee manual, including what bullying is [as] defined by the company … and what the penalties are.””

I was also asked about the different between bullying and competition. Again, to quote from the article: “Moreover, firms should not confuse fostering competition among employees, which can be healthy for a firm, with allowing bullying to occur, experts note. As Klausner says, bullying is “completely different” from competition. He defines competition as “setting goals and rewarding appropriately” and bullying as “forcing someone to behave in a manner that you want them to.””

Any thoughts?

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Product Missteps That Can Hurt Relationships

Thursday, July 25th, 2013

I was asked to write an opinion piece for FinancialAdvisorIQ (A Financial Times Service) about the types of mistakes advisors make when presenting products to clients. Mistakes can result in lost opportunities for clients and a loss of revenues for advisors. Advisors should always be upfront about fees and discuss the potential for underperformance.

Top mistakes include:

Too much jargon. Advisors sometimes use too much industry jargon when explaining how products work, rather than stressing their benefits to the client. Clients don’t care about the name of the program they are investing in. They want results. Advisors should “sell” the concept and its benefits through the consultative process and bring in the specific product names only when they have to.

Whether the strategy is a mutual fund or individually managed accounts, advisors need to explain how these products will help the client reach his or her goals. It helps to ask clients about how much detail they want. Advisors should never oversell products, because the goal in the case of underperformance should be to replace the investment, not the advisor who pushed it.

Lack of transparency. Another cardinal sin in this realm is failing to explain fees clearly and openly. Costs should be discussed up front. If the client has to ask about them, it is probably too late. Advisors should describe the types and frequency of fees and be sure to distinguish between different types of investments — a no-load mutual fund versus A shares, for example. Further, advisors should ensure that clients are able to conduct apples-to-apples comparisons between different product types when needed.

Failure to understand the product. While advisors don’t want to inundate clients with too much product information and detail, they also want to avoid getting stuck with unanswerable questions. Presentations should be customized for each client; engineers will probably want to know more of the nitty-gritty of a product, whereas doctors might be more curious about what other doctors are invested in.

Jumping on “hot dot” products. While advisors are well served by researching new products and incorporating them into their business as appropriate, running to sell the new hot product is rarely the right strategy. The product needs to be the most suitable investment at this point in the client’s investment life. The client’s larger investment goals, their unique needs and the state of their existing portfolio should play the most important role in a product recommendation.

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AK In The News: Even Fund Pros Have Personal Retirement Fears

Wednesday, July 17th, 2013

I was asked to comment on the results of an Ignites (A Financial Times Service) poll of financial services employees and their thoughts on retirement. About 84% of respondents say that they are saving enough for retirement, although 52% said that while there current savings rates are sufficient, they still feel that they should be putting more money aside.

This contrasts to a recent Gallop poll which found that 46% of non-retireed Americans do not feel that they will have enough money to retire comfortably.

First, why are we in the financial services industry so much more comfortable with our outlooks for retirement? To quote from the article:  “As Andy Klausner, founder and principal of AK Advisory Partners says, “You would expect fund industry employees to be more tuned in to retirement and saving for retirement than the average person simply through their day-to-day exposure to the issues.

“Even if they aren’t directly involved in the products, for example, they are certainly more aware of the advertising and marketing that their firms do. This goes for all [fund industry] employees,” he writes in an e-mail response.

Additionally, fund firms themselves are taking an active role in helping their employees prepare for retirement. One way that firms, such as Invesco and Vanguard. accomplish this is by making their employees eligible to participate in their 401(k) plans from the day they start employment, rather than requiring a waiting period.”

Secondly, however, why do we feel that we should still put away more? I think there are a number of reasons: 1) people are living longer than ever before, so the fear of outliving your savings, no matter how large it may be, is great; and 2)  to quote from the article again: “A number of factors can hinder professionals from saving enough, Klausner acknowledges. For example, living costs usually are higher in the large cities where financial services firms tend to be located, such as New York. Plus these professionals may not be seeing their compensation rise as quickly as it did before the 2008 financial crisis, he says.”

Any thoughts to add?

 

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Creating A Successful Marketing Strategy

Tuesday, July 16th, 2013

Our latest White Paper, Creating A Successful Marketing Strategy, is now available!

While referrals are great, and will always be part of growing a business, many who have relied on referrals exclusively in the past have more recently needed to supplement these referrals with a more active marketing approach. And the world has changed – competition has increased, clients have become more discerning and social media has had a dramatic impact on the types of marketing activities that are the most effective.

In order for a marketing strategy to be successful, it must be multi-faceted, realistic and implemented consistently over time. The messaging should be focused on developing awareness of your brand and on building trust around that brand.

  • Detail specific activities you intend to undertake;
  • Identify the audience each activity is targeted to;
  • Specify how you’re going to measure success;
  • Be flexible enough to allow adjustments as necessary; and
  • Stipulate who on your team is responsible for each activity.

 Click here to download the entire White Paper.

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Retail’s Dangerous Shift Toward Alternative Investments

Monday, July 8th, 2013

I’ve been warning about the trend toward retail alternative investments for a long time. With yields so low, many investors have been looking for ways to increase return; and the financial services industry has been more than happy to introduce many new products for retail investors. (The alternatives market has been historically an institutional one, with high net worth and income requirements.)

Now FINRA – the Financial Industry Regulatory Authority – has woken up ,and is warning investors of the risk of alternative investment mutual funds. These warnings are good for investors, and can be good for advisors who heed the warning and ensure that they only employ alternatives for clients that truly understand the risk/reward trade off.

(As an example, Morningstar’ alternative funds category includes the following types of funds: bear-market, multi-currency, long/short equity, managed futures, market neutral, multi-alternative, nontraditional bond, trading-inverse commodities, trading-inverse debt and trading-miscellaneous.)

To quote Gerri Walsh from FINRA: “Investors should fully understand the strategies and risks of any alternative mutual funds they are considering. FINRA is warning investors to carefully consider not only how an alt fund works, but how it might fit into their overall portfolio before investing.” Other warnings include the fact that many of these funds are new, and thus don’t have long track records, and many have higher fees than traditional mutual funds.

I agree with these warnings, and in fact, the reality is that most individual investors don’t have the capability to analyze these investments on their own and make informed decisions.

Advisors do have an opportunity to fill the knowledge/information gap and provide advice and education. Advisors would be well served to talk to their clients about alternatives, especially given the publicity they are now getting. Even if such investments are not appropriate for a client, given their risk profiles, clients should appreciate the fact that the advisor has taken the time to explain why such investments should not be purchased; this will also probably dissuade them from doing it themselves, outside of their accounts with the advisors.

While alternative investments might be appropriate for some retail investors, advisors should address the issue head on with their clients and prospects and take the lead role as educator and counselor. Use this FINRA warning as an opportunity to proactively contact clients and help them through the haze of information. You are potentially helping them avert large investment mistakes.

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