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Alternatives: Think Before You Educate

By Hari Krishnaswami

Alternatives as an asset class are becoming more mainstream as advisors continue to seek performance from strategies outside the traditional style box. However, just because advisors use them does not mean they all have a strong grasp of the benefits. Why is this important? Because better understanding of these products leads to more business.

We recently completed our survey on alternatives exploring several questions - do advisors use alternatives? If so, which types of alternatives are they using? What is their level of understanding? What are the perceived benefits? What are their allocation plans over the next 12 months?

Breadth vs. Depth: RIAs allocate more but Independents have broader adoption.

Yes, a greater percentage of independents utilize alternatives in their portfolio than other channels - 26.5% of independent advisors use alternatives - however, when it comes to adoption, RIAs have the highest average allocation of 16.2%.

Not All Alternatives Are Created Equal

While REITs have the strongest level of understanding amongst alternatives, that isn't the case for others. When asked about currency funds, only about a quarter have a high understanding; even more have a low understanding. Hedge Funds are another type of product with a significant amount of advisors who have a low understanding. Although there are already many alternatives products, there is still a lot of work that needs to be done to get advisors to understand the benefits.

Lack of Understanding Means Lack of Clarity on Benefits

When we looked at the perceived benefits of alternatives against an advisor's level of understanding of that product, we found that those that had a low understanding typically had a different perception of the benefits. For instance, with Hedge Funds, nearly half of advisors who had a low understanding of them indicated that they have "no added value in my client portfolios". Conversely, a little over half of advisors who had a high understanding noted the primary benefit as "returns uncorrelated with major equity indexes".

Low Understanding Drives Advisors to Choose Products Differently

Advisors' anticipated allocations to alternatives were related to their understanding of the products. Two thirds of advisors had a high level of understanding of REITs and over a quarter planned to allocate more in the next 12 months. Conversely, only a quarter had a high level of understanding of Currency Funds, with less planning to allocate more in the next 12 months.

Key Takeaway: Think Before You Educate

Asset managers spend a lot of time and resources developing education for advisors. Are they focused on the right topics? Advisors are clearly hungry for more education with over 60% indicating they want education from asset managers - but consider whether they walk away with a better understanding of your products benefits, not just what's on the fact sheet.

How Much Do Advisors Love You?

By Hari Krishnaswami

As Valentine's Day approaches, it's interesting to think about the relationship between financial intermediaries and asset managers. From Gatekeepers who are seeking higher fees for product placement on platforms, to the role of home office models and recommendation lists in driving product selection, to the question of whether advisors are moving away from fund families, to "best of breed" as they consider their allocations, asset Managers today face a number of challenges that continue to challenge their assets and profitability.

What's the recurring theme that we've seen? Keep your clients. The longer an advisor stays with you the more assets they will bring to you, the more products they will purchase from you and the more they will recommend your firm to someone else. We know this because we've just completed another broad survey of financial intermediaries which we released earlier this year. In the latest release of kasina's FA Vision 4Q 2011 Benchmarking Survey, over 2,500 advisors across all channels were surveyed about their investment preferences and specific loyalties as it pertained to firms with whom they do business.

The Longer An Advisor Stays With You, The More Assets They Have With You

The longer the relationship, the more assets you will have from clients. Within our survey, advisors under 3 years tenure had an average of 12% of their assets with a firm. Those over 7 years had 17% of their assets with a firm, or a 41% lift. Franklin Templeton had among the highest tenure with advisors - the average tenure being over 12 years. Advisors who did business Franklin Templeton had an average of 24% of their assets with them. Having nearly a quarter of client's assets within one firm gives that firm a strong chance of success as it is likely these assets are amongst a number of products, not just one.

The Longer an Advisor Stays With You, The More Likely They Will Recommend You

Turns out the longer you do business with someone, the more likely they are to recommend you to a friend or colleague (e.g. be an advocate). When we looked at the level of advocacy by tenure, it turns out that advisors with 7 years or more tenure have a advocacy score that is at least 10% higher than those that are under 3 years.

What Are Ways to Improving This Relationship?

Looking past product characteristics, it is clear that marketing and distribution can each strengthen an advisor's loyalty to that firm.

Consider wholesaling. Advisors tell us the #1 thing they want from their wholesaler is to know their own products. The leader in this category? Putnam Investments, ranking #1 among advisors that do business with them. Yet despite some product challenges, they rank 3rd for the number of years advisors do business with them.

Marketing has an equal role in strengthening an advisor's relationship with a firm. American Funds came in 2nd when advisors with whom they do business were asked how likely they were to recommend their website to a friend or colleague. Over a third (37.9%) scored them "highly likely" (9 or 10 on a 0-10 scale). The average tenure of their advisor? 13.4 years. The highest among firms surveyed.

A Bird in the Hand

As firms today continue to focus on how to engage and reach more prospects, they need to be mindful of those clients already with them. The good news is that now more than ever, technology and better data can enable firms to sustain and grow relationships without having to triple the size of their wholesaling teams to do so. Advisors can "feel the love" and you don't need to seek more headcount to do so. A strong website offering materials that advisors want and engaging them through LinkedIn or other social media sites, can create relationships that do not rely exclusively upon your wholesaling team. And while this works in the world of mutual funds, I'm not recommending this in your romantic life. We're not at the point where a Valentine's Day dinner can be replaced with a Facebook posting or tweet. Not yet at least.

Making Market Commentary Valuable

By Lee Kowarski

According to a kasina FA Vision survey on financial intermediaries' usage of marketing materials from asset management and insurance companies, 90.8% of advisors read firms' market commentary/outlook and 67.4% of advisors think that such information is important (rated 7-10 out of a possible 10). And while most firms offer market commentaries and outlooks, not all firms do so as effectively as others.

As firms look to develop market commentaries and outlooks, they should:

• Be Timely: 32.5% of advisors check market commentaries and outlooks from asset management and insurance companies on a weekly basis (including 5.2% that read them daily), making them the most regularly accessed materials. It is critical that any commentary posts promptly as advisors (and their clients) are looking for insights that relate to the latest news. Unfortunately, too many firms struggle to produce content, have it approved by compliance, and have it posted to the website in a prompt fashion. JPMorgan Asset Management, however, is consistently a leader in this area - its renowned "Guide to the Markets", for example, was updated through year-end by the first business day of 2012.
• Be Digital: 53.9% of advisors prefer to access market commentaries and outlooks online as opposed to 36.9% that prefer hard copy versions, according to the kasina FA Vision survey. Rather than simply posting a link to a PDF file, firms such as BlackRock and PIMCO recognize that it is important to provide multiple options, including HTML, PDF, audio, and video formats that make the content more engaging and easier for advisors and others to consume.
• Be Substantive: When asked what differentiates one firm's commentary/outlook from another, the most common response was "content quality" (cited by 45.9% of advisors). While timeliness and ease of comprehension are both important, it is most critical to have something meaningful to say. Too many firms' commentaries lack true insights and simply provide a backwards-looking view of what happened in the markets - information that advisors already receive from industry news sources, such as the Wall Street Journal, CNBC, or Yahoo! Finance. Valuable commentaries provide the asset managers' views on what has happened and, ideally, what the firms' investment experts expect to happen in the future and the impact of those activities on the investments.
• Be Social: Given that nearly a third of advisors share market commentaries and outlooks with their clients, it is important to make it easy for advisors to pass along the material (either via e-mail, hard copy, or social media). Similarly, as social media continues, firms need to incorporate the ability for advisors to provide feedback, as Pioneer has done with its new blog.

How Asset Managers Should Segment Their Clients

By Steven Miyao

Asset managers cannot actively sell to the entire U.S. advisor base of about 300,000. It is simply impossible for scale and small players alike. According to kasina and Horsesmouth's FA Vision research, while 25% of advisors' assets are in model portfolios, influenced primarily by National Accounts teams, the remaining 75% of assets are up for grabs among the advisor population. If firms are only able to reach out to a small percentage of the advisor base, they need the metrics to know with absolute certainty that these are the right advisors. Segmentation is the key to targeting the right advisors at the right firms.

Even a team of 80 external wholesalers can only cover about 200 advisors each (and do it well), or 16,000 total advisors. Adding in 80 internal wholesalers (in a typical 1:1 model) who cover 400 additional advisors and prospects, and 40 hybrid wholesalers (for those firms who employ them) covering 400 each brings the total coverage to 64,000, barely 20% of all advisors.

Segment Clients Based on Potential Profitability

With too few resources to cover all advisors, firms need to focus on companies and advisors with the best likelihood of providing long run profit. To do this, we suggest mapping advisors on two primary dimensions:

• Future Value Potential
• Existing Assets Under Management (AUM) with the firm

Future Value Potential represents the net present value of the future cash flows an advisor is expected to generate over the lifetime of the relationship. Various models exist to estimate future value potential, and key inputs include:

• Acquisition cost
• Ongoing servicing cost
• Advisor revenue
• Time horizon
• Discount rate

The model above maps existing importance of the advisor to the firm (x-axis) versus potential importance (y-axis). The model yields four distinct quadrants that require different strategies from the firm.

Segment Relationships Based on Target Profile and Behavior

Not all relationships are alike. Within each quadrant, firms should use data to fine-tune how they interact with and communicate with individual advisors. kasina and Horsesmouth's FA Vision surveys and kasina's report The Six Segments: A Comprehensive New Look at Intermediary Behavior, show clear differences among advisors based on interaction preferences, products, and needs across distribution channels. Firms should utilize key sets of data garnered from their Web usage, CRM system, and third-party databases to segment advisors. This will help firms identify demographic characteristics and behavioral trends such as:

• Product sales and asset trends
• Website usage
• Contact preferences
• Conference attendance

This information enables firms to tailor specific service strategies and target sub-segments of the advisor population. For example, a sub-segment of the Most Valued Advisors (high potential and with significant asset with the asset manager) may show a preference for e-mail and be analytical in nature. This cadre will be candidates for regular, proactive outreach with a tailored e-mail campaign focused on product analytics.

Behavioral segmentation allows firms to sell products that specific advisors are likely to be interested in. Moving away from a traditional "product push" strategy towards more targeted marketing will insure firms retain advisor interest and avoid information fatigue. In addition, capturing and acting upon advisor communication preferences fosters trust and loyalty among clients who feel the firm understands their needs and desires.

Profitability-based segmentation (the quadrants above) tells firms who to target while behavioral segmentation yields insights for firms on how to target. Maximizing profitability means maximizing output (sales) per input (cost). Intelligent distribution hinges on the ability to segment clients and prospects in order to identify what activities will yield the highest return on investment.

Are Wholesalers Spending Time With the Right Advisors?

By Steven Miyao

Asset managers cannot actively sell to the approximately 300,000 individuals who make up the entire U.S. advisor base; it is simply an impossible task for scale and small players alike. They can, however, segment advisors so wholesalers spend most of their time with advisors who have high AUM with the firm and offer the largest upside.

Per kasina's FA Vision data, wholesalers seem to mostly segment by advisors' AUM with their firms. A wholesaler meets four times or more with advisors who have, on average, $17.4 million in assets with the firm. Advisors with $9.58 million are only met with once each year and, surprisingly, advisors with $12 million are not met with at all.

Segmenting on just the AUM that an advisor has with the firm doesn't take into account the overall potential of the advisor. When we look at the assets the advisor has outside the firm (overall potential), a different picture emerges. Wholesalers meet four or more times a year with advisors who have an average of $151 million in outlying assets. They meet only once per year with advisors who have $175 million in outlying assets. As such, advisors are meeting three more times a year with advisors who have $24 million less in potential assets than the advisors with whom they have only met once.

With too few resources to cover all advisors, firms need to focus on the highest likelihood of providing a long term profit. To do this, we suggest mapping advisors by two primary dimensions:

• Future Value Potential
• Existing Assets Under Management (AUM) with the firm

Future Value Potential represents the net present value of the future cash flows an advisor is expected to generate over the lifetime of the relationship. External wholesalers are a firm's most expensive and effective resource. Make sure your wholesaling team spends the most time with the advisors that have the biggest future value to the firm.

Wholesaler Loyalty - Greatness is Not Just About Size

By Hari Krishnaswami

The BlackRock Storm

A recent Ignites article commenting on the sizeable investment BlackRock is making into their wholesaling efforts, has made other clients think "do we need to do the same? After all, their wholesalers get such strong marks from advisors...". Indeed they do, in the latest FA Vision report, BlackRock's Externals are rated highest for advocacy. Simply put, clients of BlackRock, more than any other firm in our survey, would recommend their wholesaler to a friend or colleague.

But before you storm into your COO's office to demand additional headcount, consider this, the firm with the second highest wholesaler advocacy was Putnam. Wait - Putnam - you think, that's the firm that was doing really well, then had some big problems and now is in the midst of a multi-year turnaround by CEO Bob Reynolds. The success of Putnam's wholesalers to create such strong loyalty reflects the commitment of Reynolds to turn Putnam around. But even more, it sends a signal to the rest of the industry that you can create loyalty from your advisors without having to have the largest wholesaling force.

So What Creates That Loyalty?

We surveyed advisors in our FA Vision study about what they consider to be the most important attributes of a wholesaler. The results are interesting and may surprise some. Those in the industry recognize the importance of wholesaling, and that for intermediary sold businesses, field sales are critical to firm success. However, the business of wholesaling is changing. Advisors are placing a premium on wholesalers who come prepared to discuss their products, do the best job of being available to their advisors and follow up effectively. Interestingly enough, advisors rate the connection with their wholesaler on a personal level near the bottom, with ability to conduct client meetings scoring the lowest of all attributes.

How Do You Create Loyalty Without A Large Wholesaling Force?

So if being available and effective follow-up are among the most critical attributes that advisors seek in their wholesalers, some may wonder how firms like Putnam are able to achieve such high loyalty. The answer is that in today's age, availability and follow-up are not defined by physical presence. In fact, firms can support advisors effectively through the phone and with a strong Web site. Not only can they do that, but they should, as advisors tell us most forms of interaction that are not about physical meetings are more important to them.

When asked to rank the importance of various communication modes with asset managers, telephone support scored highest, followed by Web site, email and then in-person. Advisors are demanding strong follow-up but prefer NOT to meet their wholesaler to achieve that follow-up.

Why Loyalty?

Loyalty is a critical focus of our advisor research because our data shows that loyal advisors are critical to driving flows. Putnam realized while turning around products can take time, focusing on an effective wholesaling force (supported by a best in class Web presence) can create an immediate impact on turning around the Putnam brand. It will take time for the Putnam story to play out, however, what is clear is that creating loyal advisors can be done fairly quickly and does not require the kind of investment that BlackRock has made. 2 years ago, only 22% of Putnam clients were advocates of their wholesalers, now that number has risen to 51.7% - an improvement of over 200%. Who wouldn't sign up for that?

In Turbulent Times, Home Office Models Test Advisor Loyalty

By Hari Krishnaswami

The recent swings in the market bring uncertainty to investors, and put advisors in the spotlight. Investors will look at their portfolio and gauge whether their fee based advisor is worth their salt. And for the majority of advisors, proving their worth is deeply connected to the models that their home offices are encouraging them to use. And use they do- with over 61.6% of advisors putting client assets in these models, and placing nearly a quarter of their client's assets in them, the success of their gatekeeper models to protect their client's assets during periods of instability will be a factor in determining whether the home offices can convince advisors to increase their allocations.

Advisors Trust Lacking in Home Offices

There is work to do. Advisor trust in the home office is not strong, with only 26% of advisors saying they have "strong trust" in the home office. Like teenagers who think they know more than their parents, advisors seem eager to show their clients that they are a step ahead. However eager advisors are to distance themselves from their home offices, they also realize that sticking with the home office model provides a layer of protection in turbulent or down markets - protection against legal action in an industry where the regulations are likely to increase.

Home Offices Think They Will Turn The Tide

Executives at home offices also realize the exposure they face is lessened when they have a greater hand in selecting the investments available to their clients. In fact, interviews with executives at all of the major broker/dealer firms highlight that distributors are looking to improve usage of models - expecting nearly a third (31.1%) of asset flows to come from these portfolios in the next 12 months.

Aside from risk, the other major reason home offices are encouraging model usage is simple - asset retention. If an advisor chooses to leave, assets in models stay with the gatekeeper. This is why some advisors will replicate the home office model except for a single sleeve - to run their own version of the model. This gives the benefits of the home office thinking, and ability to retain those assets should they choose to leave.

The Proof Will Be In The Pudding

So where does this leave us? We think in this environment the home office will have an impact since our FA Vision data highlights that advisors place a premium on risk over performance. This tells us the potential downside protection of these models is a greater draw than the upside potential of "going it alone", which is why this period of time is so crucial. Our upcoming gatekeeper report focusing on these home offices, as well as our fourth quarter FA Vision advisor surveys, will be critical in measuring these efforts. Stay tuned.

How Advisors Select Investments

By Andrew Maniglia

When it comes to selecting new mutual funds for clients, financial advisors consider a variety of both quantitative and qualitative factors. FA Vision data on advisor selection processes has consistently ranked the top three criteria of overall highest importance as:

Risk/Volatility Characteristics
Correlations & Fit with Other Investments
Performance

Following just behind this power trio, advisors look to a Manager's Investment Process and Manager Tenure.

These selection criteria have remained at the top of the advisor screening process over the past two years of FA Vision surveys.

While it is comforting that advisors are doing research before selecting investments for clients, the unfortunate and inevitable predicament arises - three of these five selection criteria are 100% retrospective in nature. First of all, characteristics like Risk/Volatility as measured by the likes of Sharpe Ratios, Standard Deviations, and Relative Risk ratios, depend upon returns in previous time periods. The same obviously applies for Performance, and any investment decisions based upon these measurements assumes some projection of past performance that is in no way guaranteed. Furthermore, Correlation & Fit with Other Investments hinges upon the historic variability of a security's returns in relation to other securities.

A friend who works in the hedge fund industry recently mentioned that many of the conventional correlations between securities had "deteriorated" in August 2011. It seems to me that the correlations had only existed insofar as investors had believed them to and therefore enforced them through their investment decisions. We often hear jargon concerning the tandem movements of securities, but even if these correlations are well established historically, there is no rule of law upholding them. So this is also a somewhat unsound basis for a portfolio decision.

Now we come to Manager Tenure. This refers to the number of years a fund's investment manager has worked on the fund, and advisors have consistently scored this factor within the top five most important in their investment processes. Furthermore, looking within individual firm scores in FA Vision, there is a significant and positive linkage between the score an advisor gives a firm for its "Manager Tenure" and the advisor's score for "Likelihood of Recommending the Firm to a Friend or Colleague" (measurement of client loyalty). The average Pearson correlation between these two measures for the 23 peer firms in the Q2 2011 Benchmarking survey was 0.56, and several of the firms had correlations as high as 0.80, indicating very strong and positive linear relationships. In addition, the simple linear regression coefficient between "Manager Tenure" scores and "Likelihood of Recommending" scores of 0.59, indicates that for each 1-point increase in a firm's "Manager Tenure" score, the firm's "Likelihood of Recommending" score should increase by 0.59 points (over half of a point). This suggests that an advisor's perspective of a firm's "Manager Tenure" plays a role in determining his/her loyalty to that firm.

There is no doubt that "Manager Tenure" is a major concern for advisors, but the question is -why? I examined 3,000 Share Class A mutual funds in search of the explanation, but for the three year period ending January 1st, 2011, there was a correlation of just 0.06 between a fund's "Manager Tenure" and its excess return (three year return in excess/deficient of its stated benchmark). Advisors basing investment decisions upon "Manager Tenure" would have anticipated a strong, positive correlation, implying that a more tenured manager could produce more favorable results. That hypothesis lacks an empirical foundation.

When we examine the factors driving advisor investment decisions, and therefore the reasoning behind fund flows into asset managers, it appears that much of the decision process is irrational. While asset managers may benefit from these decisions in the short run, in the long run, advisors as well as asset managers will face some negative consequences. It is time for asset managers to consider new ways to explain their value propositions above and beyond the traditional measurements I have briefly touched upon here. What is your firm doing to secure advisor assets in volatile markets? This is where Manager Investment Process, the fourth most important advisor selection criteria, must come into the forefront.

Why are Some Firms More Profitable than Others?

By Jesse Mark

Advocacy isn't just a predictor of flows, it drives the bottom line. That's the result of our latest analysis based on data from FA Vision and analysis from financial data of publicly-traded asset managers.

As part of kasina's FA Vision service (done in partnership with Horsesmouth), we ask over 3,000 advisors to indicate how likely they would be to recommend an asset manager to a friend or colleague. "Advocates" are advisors that do business with a firm and would strongly recommend the company to others. Here at kasina we often use advocacy to analyze trends in advisor perception and glean insights and recommendations for how to improve distribution practices. A snapshot of the analysis is below:

How should you interpret the results? Based on the five publicly traded firms that were included in FA Vision, there is a clear positive relationship between advocacy and profitability. In fact, regression analysis indicates that a 2% increase in advocacy increases firm operating margins by almost 1%. These conclusions apply to not only publicly traded firms, but to the dozens of other firms included in FA Vision that are privately held.

While advocacy may be a strong corollary with operating margins (if you increase advocacy, you should see higher margins) it fails to provide actionable insights. So how do you increase your firm's advocacy rate? This is where firms can utilize FA Vision to discover how advisor perceptions of brand and product attributes fare against reality. Firms can then focus their marketing and sales efforts on specific firm attributes to drive their advocacy rate higher.

Explaining Alternatives or Explaining Them Away

By Lee Kowarski

Alternative investments cannot be ignored, but they require better education - by firms that offer them and those that do not.

Our most recent FA Vision Benchmarking Survey found that alternative investments continue to gain traction amongst financial intermediaries. While alternatives still only make up 3.4% of advisors' AUM (as compared to 42.6% for mutual funds), they are increasingly being utilized. 35% of advisors now use listed REITs, 25% use structured products, and 24% use non-listed REITs. Hedge funds (used by 18% of advisors), private equity (12%), and direct investments in currency, commodities, or options (10%) are also being adopted. And usage varies by channel - 36% of wirehouse reps, for example, use hedge funds in client portfolios.

Large scale players are likely to be getting into the alternative game (if they haven't already), as we wrote about in Intelligent Distribution. But the growth of alternatives will impact all firms, even if they do not offer alternative investments. Asset managers and insurance companies will increasingly be required to position their products against, or in combination with, alternative investments. For most firms, this will require additional training for wholesalers.

For firms in the alternative space, greater education is needed to accelerate the growth of alts. This will not only help push more advisors to embrace alternative investments, but will also address regulatory pressures. A recent SEC sweep uncovered numerous problems with broker/dealers' sales practices associated with structured products, particularly reverse convertibles. Among their recommendations, the SEC is pushing for greater education of reps who sell these and other alternative investments. Most firms in the alternative space do a poor job of marketing their products and rely on institutional relationships and/or wholesalers to get the word out. There are, however, some firms leading the way, including Rydex/SGI (which has a Web site, www.getalts.com, dedicated to explaining alternatives and how they fit into a portfolio) and Cole Capital (which has a video on its Web site to make the complicated world of non-traded REITs more accessible)

We are still in the relatively early days of alternatives in the retail space, but like ETFs, growth is occurring quickly and only expected to accelerate. Whether your firm joins in or not, greater education is a must.

Innovation is Not Just Good in Theory, It's Good for Business

By Hari Krishnaswami

If you ask most people about innovative companies, you'll probably hear about companies like Apple, Google, or even our resurgent auto industry. But Mutual Funds? Hardly. And most people in the asset management industry know that this industry does not move at leading edge speed. And that is by design. Ever since the invention of the mutual fund in the 1950's, it has certain regulations in place to protect the investor; from transparency on fees, to clear and complete descriptions of the investment strategy. From this, industry ratings firms Lipper and Morningstar provide additional perspective to investors, rewarding firms that have achieved results over time. Track records and consistency are things that bring higher ratings. Manager changes and strategy changes create turbulence.

So Can Asset Managers Innovate? And What Does Innovation Mean?

The answer is yes - asset managers can and should innovate. And product innovation is required to continually meet the challenges of investors today - from building towards retirement, to having income at retirement. However, innovation does not mean products alone. Asset managers that are not direct sold are also distributors, and there are rewards for firms that can innovate how they interact with advisors and with whom they are dependent for their flows. This is not just what we think. This is what advisors think as well. How do we know this? We just completed our FA Vision bi-annual survey on advisor perceptions for brand, marketing, distribution and loyalty. What we learned from nearly 3,000 advisors, on who they think is innovative, is telling about the diversity of their opinions and the definition of innovation itself.

Why Go To the Advisor When They Can Come to You?

Dimensional Fund Advisors (D.F.A) has over $200 billion in assets, and has created a unique model of working with advisors. To sell their products, an advisor needs to attend a training session with them. In fact, with over 300,000 advisors, there are relatively few, comparatively, who have received the designation to sell DFA funds. Yet, when we asked advisors to identify the best firms for innovation, DFA was among the Top 10. In fact, it ranked in the Top 10 for all other attributes surveyed (Consistency, Trustworthy, Inexpensive, Global Expertise). Clearly this firm has created an innovative model that is known beyond the advisors with whom they work.

Go Beyond Your Wholesaler to Deliver Value to Your Advisor

Asset Managers know that wholesaling is still the primary source of gross sales. Relationships do matter. However, firms also know that wholesalers typically do not get a lot of time with advisors. With only a 15 minute meeting to make the right pitch, an innovative online Web site can be the difference. Firms like Fidelity use sophisticated personalization capabilities to deliver content and tools that advisors want. Or Franklin Templeton, which goes beyond just publishing a whitepaper, but delivers thought leadership with video, whitepapers that can be accessed in thematic portions, and other tools to not only educate, but help advisors educate their clients.

Challenge the Style Box

While marketing and distribution innovation can sometimes make the difference when a firm is competing for flows against similar products, innovation in asset management is still primarily product driven. Consider the rise of alternatives. In the past, there were types of investments that were sought out by institutions and managers like Yale's David Swensen, now, firms have sought out methods to bring alternatives to the retail investor. Consider a firm such as Rydex/SGI, who in 2010 launched over 20 products all in the alternative sector alone. Or consider firms that challenge the style box, and loosen the restrictions on their managers to follow a narrowly defined investment mandate. BlackRock has delivered a number of funds where the investment mandate is broad enough to swing between equities and fixed income depending on the market shifts. Sometimes innovation can just be about taking a good thing and offering up in a different flavor. PIMCO has been extremely successful with their Total Return Fund and so what do they do? They take it and wrap it in an ETF.

So... Does it Pay to Be Innovative?

While it's interesting to discuss the topic of innovation, many will say "so what?". Does innovation lead to more flows? In fact, being innovative can also help your bottom line. Our FA Vision research noted that innovation was positively correlated to loyalty. In other words, if an advisor sees you as innovative, they are more likely to be loyal to your firm. And advisors who are loyal to a firm are more than twice as likely to do business with that firm.

And the Innovators Are?

So how do you stack up in innovation? Here's the FA Vision Innovation* Index for Q2 2011:

Want to learn about what advisors say about you?
Contact me, hkrishnaswami@kasina.com, if you'd like to know more about advisor feedback on loyalty, brand, product and distribution specific to your firm with FA Vision.

ETF Providers: If You Can't Be The Cheapest, Win With Support

By Hari Krishnaswami

Our last ETF topical survey confirmed that iShares is still very popular among advisors. Surprised? I don't think anyone is surprised as they have been the market leaders for many years running. But look more closely at the results, and you find that there's a silver lining if you're not iShares. There are still opportunities to win market share. How? Well, if you're Vanguard, you're able to give advisors what they have said is the #1 strength of ETFs - low costs. Vanguard has seen its market share in two years grow 73%. But most firms may not have the ability to meet Vanguard from a cost perspective. They either realize they can't compete cost-wise, or choose to NOT compete on costs. The good news is, that by focusing on serving advisors, through your wholesaling, with educational programs and with the web, you can still win market share from your competitors.

Wholesaling Does Matter But It Needs to Be Done Differently

Advisors have told us some interesting things about their working with wholesalers. First, for companies that already distribute mutual funds, advisors tell us that they prefer to meet with ONE wholesaler representing both products versus a wholesaler for each. Furthermore, whereas advisors prefer in-person contact with their mutual fund wholesalers, for ETFs, they prefer online support. Different rules, but if played well, can bring some interesting results. One of the firms that took our notice was First Trust. First Trust is not in the top 10 of ETF providers by assets under management. Yet they are mentioned third from advisors in ranking who has best wholesalers, higher than firms such as Vanguard and PIMCO. This is an incredible achievement and perhaps no coincidence that their market share has nearly tripled since 2008.

You Can't Underestimate Education

Advisors value educational programs. They have indicated in a majority of circumstances that they use them for both conservative and aggressive clients, for growth and for income portfolios. The good news is that this demonstrates that advisors will use ETFs in a broad number of portfolios. The challenge, then, is making sure they understand where to best use your product. Take State Street. State Street created a real focus with education with their SPDR University. Their investment has paid off - they are ranked second behind iShares for Educational Programs/Support.

Marketing Works

Advisors continue to want help from providers so they can help their clients. Advisors tell us they want better information and support for both existing clients as well as prospects. Things like greater transparency on product holdings and fact sheets, better market research and even financial support and reimbursement for prospect marketing events. As ETFs still only represent approximately 15.6% of client assets, there are still opportunities for strong marketing support to make the difference in client allocations. It's also interesting to note that even Vanguard, known primarily for cost effectiveness, is mentioned in the rankings for marketing support; even they recognize the value of doing this well.

Don't Forget The Web

The web is still a critical tool that advisors look towards to help them with their clients. Advisors tell us that there are still many things that they want from ETF providers - things such as tools enabling them to better see how using ETFs work in their overall portfolio allocations, more information available online, as well as practice management tools.

The Market is Still taking Shape

Advisors have told us a lot about ETFs and the providers they work with. Providers realize that winning and keeping business means finding ways to differentiate themselves beyond their product set. Advisors tell us they value good service from providers. They want the help, and providers can still do more to give them the tools they need to serve their clients. Based on the current adoption rates of ETFs, it is clear that the dust has yet to settle on how much of client assets will be allocated. There's a window now for providers to retain and win more advisor business. Not just the big ones either. Coming back to First Trust, are they a top 10 provider today? Not yet. But if you look at where they were two years ago, who would have predicted their success?

ETF Holding Periods: Important to Look at the Mean AND Median

By Andrew Maniglia

According to data from the recent FA Vision ETF Study, advisors hold mutual funds for an average period of 3 years. In terms of advisor channels, Regional Broker/Dealers have longer average holding periods of 43 months, whereas Independent RIAs hold for an average 31 months. The median mutual fund holding period is also 3 years, or 36 months. Because the mean and median mutual fund holding periods are equal, the underlying distribution is symmetrically distributed. The distributions of many natural phenomena, such as average heights and weights, fit into symmetrical distributions; however, ETF holding periods are one of many things that do not.

The average advisor holding period for ETFs is 22 months, with Independent RIAs holding a bit longer (27 months) and Traditional Wirehouse advisors a bit shorter (20 months). But the median holding period for ETFs is substantially below the average. The median ETF holding period is only 12 months. When the mean stretches out beyond the median, as it does in the case of ETF holding periods, we know that some extreme values must be pulling out the center of mass. To illustrate the disparities in holding periods, 8.8% of advisors are holding ETFs for 5 years or longer, versus 4%of advisors who are holding ETFs for a maximum of 1 month. As we see from the below pie chart, there is wide range of ETF holding periods.

Based on the above breakdown, there are distinct groups of advisors using ETFs. Different product needs and preferences emerge as a result of holding a product for a longer (or shorter) period. For example, when selecting ETFs, advisors with longer ETF holding periods care significantly more about the ETFs' Correlation/Fit with other investments, its Expense Ratio, and its Provider's Brand/Reputation than do those advisors who hold for shorter periods. Furthermore, 63% of the advisors who hold ETFs for periods over 25 months consider Transparency a Major Strength of ETFs, whereas more advisors with holding periods under 8 months rank Transparency as a Minor Strength or Not a Strength, and only 45% consider it a Major Strength. Asset managers offering or considering offering ETFs should take note of the skewed spectrum of ETF holding periods, as they reflect a range of product needs, preferences, and perspectives among advisors that must be taken into consideration on the sales and marketing fronts.

Hari Krishnaswami to Oversee the Continued Growth of FA Vision

By Steven Miyao

I'm thrilled to announce that we have hired Hari Krishnaswami as Product Manager for our FA Vision service. This hire comes in response to the growing demand for industry-specific metrics among asset management and insurance companies. FA Vision, which we offer in conjunction with Horsesmouth, provides a data-driven strategic analysis of financial intermediaries' behaviors, preferences, and opinions. Asset managers and insurers subscribe to this service to receive actionable recommendations to improve their distribution strategy and overall firm profitability. Since we launched FA Vision in 2009, our clients have come to rely on the insights that the service provides.

Hari's extensive background in asset management, combined with his experience in management consulting, will enable him to continue to grow the FA Vision service offering. I am extremely excited about the greater impact that we'll be able to have for our clients. Hari will also bring added depth to our consulting practice, which has continued to grow as firms look to maximize the profitability of their distribution efforts.

Hari joins us with nearly 20 years of experience working in management consulting, asset management and e-business. He comes to kasina from DWS Investments, where he held roles in Product Development and Business Management. Prior to DWS, he worked with Deloitte Consulting in their Strategy & Operations practice.

We are thrilled to add Hari to the kasina family.

Analyzing the Effects of Asset Management Distribution

By Andrew Maniglia

The weather in New York is transitioning from winter to spring, and with warmer temperatures will come a demand for lighter fabrics. Just about every clothing store will have something to offer shoppers as they update their wardrobes, but some stores will receive a disproportionately large share of revenues generated from spring and summer clothing purchases.

The same goes for asset managers. As the economy shifts, so do fund flows, and certain Morningstar categories can expect favoritism depending upon a variety of macroeconomic factors and international trends. If the category in which an asset manager has a higher concentration of assets is in vogue, then the firm can expect to benefit from the trend. Let's say that, for whatever reason, the Short-Term Bond category grows 5% in a year (flows into the category divided by beginning assets in the category), then an asset manager with 100% of assets in the Short-Term Bond category can expect 5% inflows. The same idea applies when the Short-Term Bond category experiences significant outflows. It is important for a fund company to achieve a strategic balance of products accounting for a variety of economic scenarios so advisors feel comfortable placing client assets with a manager in all economic outlooks.

When analyzing the historic flows into or out of a fund family, it is important to do so with respect to the firm's asset weighted categories, thus taking into consideration the overarching macroeconomic trends that influenced the flows of advisor assets beyond the distribution team's control. Once we have controlled for the performance and flows of the manager's categories, we can begin to assess the distribution team's contribution.

In a recent analysis I conducted, some fund families received flows 300% above their asset weighted Morningstar categories for the three year period. In such cases, the distribution team played a considerable role in attracting advisor assets above and beyond what the general macroeconomic trends would have predicted.

My work on FA Vision strives to uncover the tools and techniques that allow asset managers to reel in a disproportionately large share of flows relative to their Morningstar categories (or to retain a disproportionately large share of funds in the case of category outflows). Gauging how advisors view your brand, products, wholesaling, and value-added programs is the first step towards developing a strategy. Once you understand your advisors' perceptions, the next step is to plan and monitor touch points with advisors and effectively communicate your firm's value proposition. There are some firms, with disproportionately large inflows and performance just marginally above the Morningstar benchmarks that have done this successfully. In FA Vision, advisors communicate the qualities of these firms' brands, products, and wholesalers that they find to be favorable. These touch points and perceptions are tangible when advisors have to decide which manager to entrust client assets with, regardless of the economic climate.

The FA Vision Brand Index

By Lee Kowarski

As you may have seen in Ignites, InvestmentNews, or MFWire, kasina announced the FA Vision Brand Index this week. The Index identifies those firms that have the most positive perception amongst financial intermediaries according to findings that were part of the latest FA Vision benchmarking survey: 3,007 responses gathered between October 13th and December 7th, 2010.

American Funds received a FA Vision Brand Index score of 25.06, nearly three times higher than the second place firm, The Vanguard Group. The FA Vision Brand Index represents a firm's perception amongst financial intermediaries and is based on intermediaries' selections of the firms that they most associate with the following brand attributes: Consistent, Dedicated to Advisors, Global Expertise, Ethical, Inexpensive, Innovative, and Trustworthy. For each attribute, advisors selected from the top 100 asset management companies by assets under management and the Index is a weighted score of these seven attributes.

It is critical for asset managers to establish a strong brand, especially in this environment where advisors are concentrating 64.8% of their assets under management with their top three providers. This is particularly true because we have observed that a firm's score on the FA Vision Brand Index is positively correlated with customer advocacy (the likelihood that a customer will recommend the firm), which is a key predictor of flows.

It is notable that the top brands on the FA Vision Brand Index are not only the traditional powerhouse brands in the advisor marketplace like American, BlackRock, and Franklin Templeton, but also firms such as DFA, iShares, Ivy, and Vanguard which would not have shown up on this list only a handful of years ago. This shows that advisors are open to new offerings and underscores the importance of maintaining a powerful brand for established players.

The firms that scored the highest on the FA Vision Brand Index for Q4 2010 were as follows:

1. American Funds 25.06
2. The Vanguard Group 8.58
3. Franklin Templeton Investments 8.46
4. BlackRock (not including iShares) 6.37
5. PIMCO Funds 4.99
6. iShares 4.73
7. Fidelity Investments 3.31
8. Dimensional Fund Advisors 2.69
9. Ivy Funds 2.63
10. OppenheimerFunds 2.02

To learn more about the FA Vision or to discuss these findings, shoot me an e-mail at favision@kasina.com.

Innovative and Dedicated to Advisors: Two Crucial Brand Attributes

By Drew Maniglia

In the FA Vision Benchmarking surveys, we gauge each advisor's perspectives on two firms: one firm of which he is a client and another of which he is a prospect. The surveys have uncovered many interesting and strategic insights, but I'd like to focus in on the relationships between the amount of business advisors anticipate doing with a firm, and their corresponding perceptions of that firm's brand.

Advisors who plan to increase the amount of business they do with a firm perceive that firm more positively across the gambit of brand attributes than those advisors looking to scale back their business. Differences in brand perceptions between advisors looking to increase versus decrease their business are most pronounced for "Innovation." The advisors planning to do more business score a firm's brand, on average, 54% higher for "Innovation" than those advisors planning to reduce their business.

The second largest difference in brand perception between advisors anticipating an increase versus a decrease in business is for the firm's "Dedication to Advisors," for which advisors planning more business score the firm 50% higher on average. Furthermore, among advisors responding to questions about a firm that they do not currently do business with, the most significant gap in brand perception is for "Dedication to Advisors," for which the average difference in score is an outstanding 177% between those advisors anticipating significant business and those who anticipate doing no business with the firm. Prospective clients planning to do a significant amount of business with a firm also view that firm to be considerably more "Innovative," scoring this criterion an average 140% higher than their bearish counterparts. Clients and prospects planning to increase their business with a firm perceive the brand more favorably across all attributes, but there is an especially wide and statistically significant gap in perception for "Dedication to Advisors" and "Innovation."

Like all causal relationships, the chicken-egg problem never ceases to present itself, and we are left to put forth assumptions as to why clients and prospects have decided to do more or less business with a firm. The FA Vision data suggests a multitude of potential causes, highlighting innumerable dependent variables, from wholesaler contact to the quality of various firm attributes, to assets under management and much more. Also, starting in Q4 2010, FA Vision will be collecting information on which particular funds advisors use so that we can better understand how fund performance influences brand perception. But, putting potential causes aside, we know from the above information that certain attributes, namely "Innovative" and "Dedication to Advisors," are especially important and must be emphatically pronounced if firms hope to acquire new flows from advisors. This is not to dismiss any other attributes, but the statistically significant differences between the perceptions of these two attributes between advisors planning more versus less or no business with a firm indicates that firms should incorporate these characteristics into communications with clients, prospects, and into marketing campaigns. A firm failing to communicate its strengths in these areas could be compromising new flows.

Align value-added programs with your brand!

By Steven Miyao

Advisors not only find value-added programs helpful, but more than 66% of advisors agree that participating in a value-added program makes them more likely to keep client assets with the firm that provides the program. The danger for marketers is that these programs are expensive and often only the financial advisor benefits and not the product provider. Firms need to align their value-added programs with their brand to benefit equally.

Our research, and Horsesmouth's latest FA Vision Value-Added Programs Survey, shows that value-added programs should lead to increased business with the firm. Two-thirds of advisors agree with that assertion. As indicated by the charts below, the survey further showed that advisors get the most value out of third party speakers who are engaged by the product provider and the least value from internal wholesalers who provide these programs.

So why do many product providers not get a good return on their value-added program investment?

Advisors like third party speakers, but often these speakers are not able to tie their messages to the brand of the firm. That is specifically true when the speakers' topics are generic and not linked to the firm's brand. Imagine, for example, a third party speaker doing a seminar on "opportunities with business owners". This seems to be an important topic and advisors value a good third-party speaker, but how do you ensure that six months later the advisor will remember that your organization influenced her success in this area?

Firms should focus their value-added programs on elements that align with their brands. iShares is seen synonymous with ETFs, Vanguard with low cost investing, and Calvert with sustainable and responsible investing. If one of these firms provides a program to an advisor which aligns with its key brand attribute, the advisor is far more likely to remember that connection and drop a ticket.

Communicating your Risk Management Strategy

By Sujatha Sivakumaran

Risk management has become the new buzz-word within the financial services industry. While the recession officially ended in June 2009, the economic climate is still one of caution. The crisis caused many firms to re-evaluate their existing processes and systems and retool where necessary. Within the asset management industry, clients and investors are still cautious and the environment is one where firms are starting to take a second look at their products and their risk-monitoring processes.

kasina's FA Vision survey shows that risk/volatility characteristics are most important to advisors of all selection factors evaluated, when they make product-related decisions.

In addition, clients are now demanding more information on the investment process and risk statistics for products. Given the strategic importance of the risk management function, the following are some of the ways firms can communicate their practices to advisors and clients alike:

Communicate Product Risk Statistics through Literature: Include all the product risk characteristics for the products on the profiles so advisors and clients get a snapshot of the details. As an example, for mutual funds, product profiles should mention the beta, standard deviation, Sharpe ratio and bond duration for a fixed income fund.

Highlight Unique Risk Monitoring Processes: Use product sales literature to communicate any aspects that highlight a superior investment process or improved risk management details. For instance, BlackRock includes details on its internal credit research team, their independent research and assessment process for all Municipal Fixed Income pieces (see image below).

Highlight Relevant Research and Tools on the Website: One other technique firms can use is to have research and tools on the site so clients and advisors can learn more about products and strategies and learn which one fits their profile and portfolio the best. Fidelity has a section that highlights the firm's independent research and includes tools for product selection (see graphic below).

All in all, the focus on evaluating and learning more about a firm's risk management practices is here to stay. With investors' fingers recently burned, many will be cautious about the products they have as part of their portfolio. Educating investors and advisors about a firm's risk management processes will only help the overall perception of the firm.

Making the Most of Customer Intelligence

By Steven Miyao

In the last five years, a number industry leaders have started to heavily invest in understanding their advisors better. These firms are now starting to reap the early benefits and are creating a long term competitive advantage that firms who have not made this investment will find difficult to overcome. This advantage translates to significantly more asset flows.

There are three important steps that firms must take:

1. Capture relevant advisor data
2. Analyze the data
3. Use the data to interact with their advisors

Capture the data
In our segmentation consulting work, clients ask us to analyze advisors to help the firm differentiate among various customer types (advisors, distributors, channels). The problem is most firms only have data on their own interactions with advisors, which doesn't always give insight into the entirety of what the advisor wants, needs and does. The first step is to identify key data points that will assist in differentiating the advisors into groupings of like needs or behaviors. Firms use multiple touch points, such as the advisor Web site, social media, literature fulfillment, internal and external wholesale interactions, to capture this data.

Analyze the data
Successful firms analyze the differentiated advisor data they capture to drive specific interactions with advisors. The analysis is usually based on multi-variable data points and can provide important insights into what products, value added programs, and interaction preferences are most relevant to an advisor.

Use the data
A few firms are currently capable of using this kind of analysis to drive specific advisor interactions. In these instances, advisors are given personalized views of the Web site, including the products that are positioned for them, appropriate marketing campaigns, and targeted wholesaler interactions. This personalization yields a radically different feel for the advisor-user. He interacts with a Web site that feels like home and provides relevance and topics of interest to him, instead of what feels like a generic site developed for the masses.

What's the Value?
kasina's FA Vision research has shown that an advisor whose preferences are understood and acted upon not only tends to purchase more, but also becomes an advocate who refers peers and investors to the firms' products. The result is increased asset flows and reduced distribution expenses due to higher yielding distribution efforts. Firms who are not investing in segmentation will find it exponentially harder to catch up with their proactive competitors.

Differentiating Your Firm With Advisors

By Rubesh Jacobs

Our Q2 2010 FA Vision study indicates that, on average, an advisor works with 8.33 firms. With at least 7 other firms to compete with, how does a firm attract advisors, and more importantly, grow the amount of business with them?

We have recommended our clients go through a disciplined process to craft a comprehensive program that offers various levels of services to targeted advisor segments.

Here are the three important steps to creating and managing such a program.

1. Segmenting advisors
2. Designing appropriate programs for each segment
3. Managing the programs

Segmenting Advisors

In a regulated environment such as ours, throwing money at differentiation is unrealistic. So, we recommend that asset managers:

1. Really execute on the basic "blocking and tackling" of sales and marketing. This is the primary and easiest place to differentiate. For instance, is your story clear and consistent across all mediums? Is your brand story consistent with your actions? Are your wholesalers aligned and "singing from the same sheet of music?" Are the wholesalers able to clearly articulate your products' value proposition while comparing and contrasting those of your competitors? Are your internals satisfying advisors needs when they call? Fail on these, and nothing else matters.

2. Segment advisors based on the following (or similar) criteria:

• Current AUM with your firm


• Revenue to your firm in the last 24 months


• Size (or rank) of their book of business with your firm


• Potential annual growth of their book of business with your firm


• Profitability of the relationship


• Advisors affinity (or interest) to your brand and value proposition


• Feedback from the wholesaler(s)

Using data on the above criteria, categorize advisors into as few segments as possible. The larger the number the tougher it is to discern amongst them and the more complex (and expensive) it becomes to administer.

For example, start with Diamonds, Rubies, and Pearls. Diamonds should be your top producers, Rubies have a high potential of becoming Diamonds, and Pearls require your help to grow the relationship. As the program grows and matures, you can add more segments.

Designing Appropriate Programs

Programs (a.k.a service programs, asset retention programs, advisor acquisition programs, etc) are important tools in the differentiation game.

But, the key to differentiation in these programs is to see the world from the eyes of the advisor.

What do the advisors need to be successful? Remember, the needs of each segment of producers will vary significantly. Here are a few advisor sentiments from our FA Vision service that provides some insight into their perspectives:

• (Firm's) wholesalers know their competitors products better than their own
• I don't understand (their) products
• (They) have too much marketing material - when do I use what?
• (Their) internals never follow up with me
• The market has moved on by the time (their) commentary is in my inbox

Based on the above, it makes sense to design programs for each segment, focused on the following key areas:

1. Advisor Education - Consider various levels of content and media, including in-person, education and training programs.

2. Sales and marketing support - Consider models with dedicated sales support, customized marketing materials, or exclusive content.

3. Level of firm interactions with the advisor - The number and type of wholesaler meetings notwithstanding, consider a broader set of "interactions" such as exclusive Web sites/apps, meet-and-greets, Webinars, symposiums and the like.

Managing the Program

This is the toughest part of managing Loyalty programs. Our experience with clients yields the following guidance:

1. Make sure the goal of the program is clear and there are metrics to monitor progress against the goals.
2. Develop a scorecard for every advisor in the program and review it regularly.
3. The scorecard should be reviewed by a group that at least consists of some wholesalers, the head of distribution, head of services, and the head of marketing.
4. Use the program to entice advisors to do more business with your firm. However, set up a process to help those lagging stay in the program or civilly remove non-performers.
5. Be patient. Be steadfast. Be focused. The best programs often need time to iron out their kinks. Give your firm time to learn, adjust, and build a program that makes sense to advisors.

Clearly, this is not rocket science. The success/failure of all these programs dwell in the execution. The key to executing well, is to keep your finger on the advisor's pulse. If the program helps them do their jobs better, you succeed.

Advisors Discuss What They Want

By Lee Kowarski

In our most recent FA Vision benchmarking survey, one of the 100+ data points we gathered from 3,162 financial intermediaries were their opinions on the types of support they want from product manufacturers they are not currently receiving. While the answers ran the gamut from "lower fees" to "golf balls", a number of valuable themes emerged that should inform asset managers' distribution efforts, including a desire for the following:

• Clear and Concise Marketing Materials - Many advisors commented on the fact that literature is often too complicated for their clients to understand, and on many occasions it is too confusing for the advisor as well.
• More Detailed Data/Analysis - Advisors requested better attribution analysis, analytics on how funds fit into portfolios, competitive analysis, etc.
• Ideas & Insights - Advisors desire not only insights into what is going on in the markets, but also how other advisors are gaining and retaining business, marketing their services, and building portfolios.
• Financial Support for Client Events - While advisors recognize the tight budgets most wholesalers have to work with, many continue to express a desire for additional financial support for client events.
• Personal Support without Significant Business - A number of advisors feel that while they are not a top producer for a given asset manager, they still want and deserve personal support from that firm (whether it be in person or over the phone).

If you are interested in learning more about advisors behaviors and preferences, as well as getting specific feedback on your company's efforts, let me know at favision@kasina.com.

Dealing with Teams of Advisors

by Lee Kowarski

According to our most recent FA Vision Benchmarking Survey, the average advisor now works on a team with three other investment professionals and two support staff. With over half (53.3%) of advisors working on a team with at least one other advisor, asset managers must adjust how they track and support financial intermediaries.

Most asset managers are not currently set up to be able to effectively support teams:

• Most firms' systems track individual advisors separately from their team, leading to duplicate and inaccurate entries for customer relationship management and sales reporting
• Most firms' Web sites do not allow an advisor to easily share content with another advisor on their team
• Most firms' metrics for wholesalers do not take teams into consideration (e.g. wholesalers are asked to identify their "Top 200" advisors and incented to build business with those individuals)
• Most firms' Web sites do not easily allow a sales assistant to access information about a team's book of business or specific materials for specific advisors on a team

The trend towards teams has only accelerated over the past decade and all asset management firms should look at how they market, sell, and service advisors to see how this can be improved to better support teams. This will require changes to CRM and sales reporting systems, enhancements to Web sites, additional training for wholesalers, and more.

Ivy, JPMorgan, & MFS Lead Critical Categories in the Q2 FA Vision Benchmarking Survey

by Lee Kowarski

While I always caution asset management firms not to simply copy what they see competitors doing, it is always important to understand best practices. Managers can certainly learn from efforts that resonate in the minds of advisors. To that end, kasina's 2nd Quarter FA Vision benchmarking survey gathered responses from 3,162 financial intermediaries between April 29th and June 11th, 2010. As we do twice per year, we asked intermediaries about their investment behavior and asset allocation, as well as firm-specific topics, such as wholesaler effectiveness and brand perception.

Among many other findings, some of the firms that scored the highest in the Q2 survey were:

• Most Advocates for the Firm (highest % of intermediaries that would strongly recommend the firm to a colleague): Ivy Funds
• Most Advocates for the Firm's External Wholesalers (highest % of intermediaries that would strongly recommend the firm's externals to a colleague): MFS Investment Management
• Most Advocates for the Firm's Internal Wholesalers (highest % of intermediaries that would strongly recommend the firm's internals to a colleague): JPMorgan Asset Management
• Best Sales Literature: American Funds
• Best Sales/Building-Building Ideas: MainStay Funds

If you think that your firm belongs among the leaders, send me an email to discuss being included in the next survey. And if you haven't already, you should subscribe to the FA Vision "Nugget of the Week" newsletter, to receive weekly insights on what advisors think about your competitors and the asset management industry as a whole.