In Practice August 14, 2007

Value-Added Programs Need Better Link to Adviser Brand

A new report calls for asset managers to create initiatives that are more effectively tied to a firm’s brand and market position as understood by the adviser, providing a logical connection to a specified family of investment products.
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A study by kasina, a consultant to the financial services industry, found that look-alike value-added programs often fail to link financial advisers to a specific family of investment products, so ideas and materials from one fund group are used to support sales from competitors. The consultant defines value-added programs as information and tools used to grow an adviser’s book of business, educate the adviser in a meaningful way, or to facilitate the adviser’s ability to meet client needs, according to a company press release.

“We see asset managers investing anywhere from $100,000 to $1 million annually in designing and disseminating value-added programs for advisers with little or no impact on assets under management,” said Anu Heda, manager at kasina, in the release. “In many cases, advisers simply take the concept from one asset manager and use it to support the sale of someone else’s product. Not only are they not helping their own sales, they are in effect underwriting the efforts of their competitors.”

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The study found 67% of industry marketing executives are unsure of the value of these initiatives as they are presently constituted, and kasina notes that part of the challenge stems from too many asset management firms thinking alike in developing value-added programs, targeting IRA rollovers, college savings plans, and the boomer retirement income market.


Kasina suggests that once asset managers identify logical areas of opportunity, they:
• Improve their ability to segment the targeted advisor population – delivering programs only to those advisers with a relevant need. This segmentation should be based on adviser preferences and behaviors, not on the distribution channel,
• Fine tune the overall outreach process with an emphasis on better communications between marketing and sales and stronger wholesaler programs, and
• Put in place the tools required to measure the effectiveness of every value-added program launched by the firm, with new asset flows as the single most important metric.

More information is at www.kasina.com.

In Practice August 14, 2007

Pershing Study Reports Rapid Growth in RIA Market

The registered investment adviser (RIA) market will continue to experience rapid growth in the next five years says a new study from the Pershing Advisor Solutions LLC unit of The Bank of New York Mellon and Moss Adams LLP.
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The study estimates the number of retail-focused advisory firms will grow to over 19,000 from the current 15,500 in the next five years, according to a press release.

The study report, “Uncharted Waters: Navigating the Forces Shaping the Advisory Industry,” indicates that advisory firms will need to educate consumers, take new steps to frame the public’s understanding of advisory services, and clearly define the industry’s quality standards.

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The top three challenges that RIAs will face over the next five years, according to the report, include:

  • Dramatic growth of the RIA market is expected to fuel increased competition: Demand for comprehensive and objective financial advice is growing rapidly. The study predicts that the average independent registered investment adviser will exceed $1 billion of assets under management by 2012.
  • Growing demand for advice will come from increasingly sophisticated clients: RIAs have enjoyed a strategic advantage for the last five years as consumers sought objective advice and a departure from commission-based compensation models. However, as competitors converge and consumers’ needs change, to be successful, RIAs will need to distinguish themselves from new competitors, explore opportunities to be more specialized and identify meaningful market niches where they can lend expertise;
  • Competition among RIAs is for top talent: Moss Adams forecasts that by 2012, there will be close to 52,000 independent registered investment advisers practicing inside RIA firms. According to the study, 37% of advisory firms are actively recruiting RIAs.

“As the business landscape and RIA market both continue to rapidly evolve, especially in light of changes driven by the Pension Protection Act and the recent ruling surrounding fee-based brokerage accounts, independent registered investment advisors will continue to face unique challenges to service their clients and grow their businesses,” said John Iachello, chief operating officer of Pershing Advisor Solutions LLC, in the release.

For a copy of the executive summary and full report, e-mail Pershing Advisor Solutions at pasinformation@pershing.com.

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