Data & Research October 14, 2013

Asset Managers’ Online Presence Is Essential

Beyond the company website, an asset manager’s digital presence is critical, and three in five advisers judge asset managers by their Internet activity.
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“What Advisors Do Online,” an annual study kasina has conducted for more than a decade, examines the online preferences and behavior of financial advisers. This year’s study reveals where advisers go to research asset managers, their use of financial planning tools, what content they access via mobile devices, and how they use social media to build and support their business. The report also recommends actionable strategies asset managers can use to more effectively engage advisers online.

Today, managers must realize that “online presence” goes far beyond the bounds of the company website. While advisers increasingly expect managers to deliver relevant, timely and personalized information via their websites and emails, they also consider the bigger online picture—including the manager’s presence on industry and news sites they frequent, social media networks and mobile access.

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Digital engagement has become such a critical component of the asset manager-adviser relationship that the manager’s online capabilities influence the overall perception of its firm for a majority of financial advisers, according to kasina’s report.

In fact, “What Advisors Do Online” reveals that one in five advisers already uses a smartphone or tablet as his primary tool for accessing online information. “One of the most important qualities for advisers when evaluating asset managers is how easy they are to do business with,” said Julia Binder, director of e-business research at kasina. The ability to access information via a mobile device, whether by email or a website, is fast becoming a crucial differentiator, since one in five advisers already uses a mobile device for business content.

For example, managers may be able to funnel more funds to mobile development by foregoing development of financial planning tools. The study found that few advisers use tools offered on asset manager websites—preferring to use those on their firm’s intranet or on third-party sites instead.

The importance of building relationships with advisers outside managers’ online properties was also underscored. Asset managers have tremendous opportunity to reach financial advisers through LinkedIn—by far the most popular social site for personal branding—participating in professional groups, and researching and finding new clients, according to Binder.   

“What Advisors Do Online” used results from kasina’s Advisor Insights survey in July, based on responses from 566 U.S. financial advisers representing 118 firms.

More about the report can be found on kasina’s website.

The Markets October 14, 2013

ICI ‘Deeply Concerned’ Over Default Prospects

The hundreds of investment management firms with membership in the Investment Company Institute (ICI) are “deeply concerned” about the potential of a federal government default, especially those with significant exposure to U.S. Treasuries and the markets affected by their pricing.   

 

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That was the message delivered by ICI President and CEO Paul Stevens in recent testimony to the U.S. Senate Committee on Banking, Housing and Urban Affairs. During his address, Stevens pointed to a number of harmful, domino-like effects that could result from the U.S. failing to make interest or maturity payments on Treasury securities.  

“U.S. Treasuries trade in the deepest, most liquid market in the world,” Stevens said. “Their interest rates set the benchmark for other debt issuers—and, as the ‘risk-free rate of return,’ these rates factor into the pricing of a wide range of other assets, including stocks and real estate.”

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During the talk, Stevens pointed to the fact that ICI members hold more than $1.7 trillion in securities issued by the Treasury and other U.S. government agencies, accounting for more than 10% of their total assets. But the risks to financial markets are not limited to those directly holding Treasuries and government debt products, because, as Stevens put it, “the health of the Treasury market underpins all financial markets.”

This means that the $15 trillion in assets ICI members manage in total on behalf of more than 90 million shareholders could also fall significantly in value should Congress and the president fail to reach agreement over extending the nation’s borrowing authority. That authority could reach its $16.7 trillion limit as early as October 17. 

A Lesson That Cannot Be Unlearned

“Once the Treasury has exercised the option to delay payments, investors will learn a lesson that cannot, and will not, be unlearned—even after all missed or delayed payments have been made good,” Stevens said. “That lesson is simple: Treasury securities are no longer as good as cash—they carry a future risk of further missed payments.”

Such a risk will have to be priced into the interest rate investors demand, Stevens said.

What is more worrying is that investors are already seeing the early signs of these effects as the October 17 deadline approaches. For instance, rates of the Treasury securities most at risk have already risen sharply, with yields on Treasuries maturing between October 17 and 31 rising from around 2 basis points on September 24 to between 20 and 25 basis points on October 8.

Another example: The price of credit default swaps on six-month and one-year Treasuries—basically the premium for insurance against default on those securities—hovered between $11,000 and $12,000 per $10 million of coverage in mid-September. Now those premiums are more than $50,000.

A full transcript of Stevens’ speech can be found here. 

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