Aligning Your Organization to Meet Changing Client Needs

As new product solutions, distribution strategies, and technologies transform the asset management industry, organizations must evolve to keep pace.

“We are facing a lot of industry transformation on an ongoing basis,” Moderator Scott Smith, Director, Cerulli Associates, told attendees during a breakout session on the topic at NICSA’s Strategic Leadership Forum in Miami this month. Smith outlined four key trends in the area:

• A convergence between institutional and retail. “On the retail side of the business we see broker-dealer firms increasingly adding these gatekeeping units with concerns about fiduciary duties, making sure they have the best product mix out there for their advisors and making sure their advisors are sticking to it,” Smith said.

• A focus on client experience. “On the other side of the equation, we have the institutional market asking asset managers to become more client-facing — to speak to their clients, to get more involved in the Defined Contribution Investment Only (DCIO) client experience and make their portfolios better in the long term,” he said.

• Significant movement of advisors from employee-based firms toward independence. “This is a challenge for our distribution associates, because they’re working with a more dispersed advisor base,” Smith said.

• The impact of digital advice platforms. “It’s not a full-fledged disruption, but more of a complement to an advisory practice,” he said.

“Things have changed dramatically from a distribution standpoint over the last few decades,” said Dan Cwenar, President, Data and Analytics at Access Data Corp., a Broadridge Company. “One aspect you consistently hear about is the challenge induced by the focus on fees — and consequentially, you’ve seen the advisor community move toward low-cost product, whether they be passive investments, ETFs or the use of institutional shares in a retail context.”

The combination of increased revenue pressure, the expenses inherent in the current regulatory environment, and an influx of data is placing many firms in a bind. “Firms are drowning in data upon which they’re trying to analyze to make smart decisions, and yet few firms have the capital they had 20 years ago to throw at this particular problem,” Cwenar said.

According to Access Data, that’s where human-computer symbiosis can help. “AI is our friend, not our enemy,” Cwenar said. “It will make us smarter. Our investments over the last few years have been in a unified platform to bring together the institutional and retail perspective; the U.S. picture and the global picture. The ability to take data and create answers is what it’s all about.”

Katie Firth, Head of Distribution Operations & Business Intelligence at John Hancock Investments, said her firm redesigned its wholesaler territories. “It was a massive undertaking,” she said. “It wasn’t a cost-cutting exercise; we actually ended up adding more bodies. We wanted to cover our advisors in the right way.”

The exercise allowed John Hancock to determine an optimal mix of territories as well as understand their advisors and broker-dealers on a deeper level. “Making sure you follow their rules and how they would like to work with you is really important,” Firth said. “We have locations now where advisors will end up getting more wholesaler visits, because there’s a lot more opportunity in that particular area once you cover all channels.”

Kamal Bhatia, CEO & Co-Head of OC Private Capital, LLC, OppenheimerFunds, said his company came to an epiphany: “As an industry, we have overburdened our clients with information, and have given them quality with junk,” he said. “We have come to the realization that the value-add is to provide information that your client can’t readily get through a Google search.”

Bhatia said we have to completely rethink what we’re providing our clients. “The industry needs to move away from the McDonald’s model to the Chipotle model, where your clients feel empowered that they are creating what they will consume,” he said. “Business curation leads to relevancy.”

Whitfield Athey, Chief Executive Officer, Delta Data, focused on the relationship between asset managers and dealers. “How do we as a group come together to re-set the model whereby we make it easy for asset managers and dealers to work together to provide both of their strengths to the end client?” he asked. “The barriers to entry we have created for ourselves are the big things that we’re working on as a firm with our clients to slowly either dismantle, circumvent or hardwire.”

Note: Although the observations contained in this work represent the best thoughts of the individuals comprising the NICSA event panel, they do not necessarily reflect the views of NICSA or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.

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