Data & Research January 22, 2010

Morgan Stanley Smith Barney Ranks as Top Fund Distributor to HNWs

Morgan Stanley Smith Barney was the highest-ranked wirehouse among affluent and high-net-worth (HNW) investors, according to Cogent Research’s list of top fund distributors.
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Cogent’s 2010 Investor Brandscape report ranked the top five fund distributors as Charles Schwab, Fidelity Investments, Morgan Stanley Smith Barney, Edward Jones, and Merrill Lynch. UBS came in at number seven.

Fidelity was bumped from its spot as both the top distributor and mutual fund provider. Cogent said Fidelity has been hurt by lower awareness and favorability ratings and a trend of affluent investors putting more assets in IRAs than in employer-sponsored retirement plans (see “Affluent Investors Have More Money in IRAs than Employer Plans“).

The fund provider rankings included Vanguard, Fidelity, American Funds, T. Rowe Price, and TIAA-CREF in the top five.

Cogent said while The Vanguard Group has improved its relationship with investors over the past year as a fund provider, Fidelity has seen a decline in loyalty. Vanguard performed the best among its rivals on drivers of loyalty such as financial stability and range of products, as well as fund performance.

In contrast, Fidelity no longer ranks among the top five mutual fund companies on performance. Ratings for the firm on both mid-term and long-term performance declined considerably over the past year, according to Cogent.

Cogent’s report is based on a survey of 4,000 affluent and high-net-worth investors (having $100,000 or more in investable assets, excluding ESRPs and real estate) in the U.S. The distributor and fund provider rankings are based on Cogent’s proprietary CoRe Score, which combines brand equity, customer loyalty, market penetration, client mix, and share of wallet.

More information about purchasing the report is available at www.cogentresearch.com.

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Products January 21, 2010

New York Life Teams with Ibbotson on Asset Allocation Model

New York Life Insurance Company has tapped Ibbotson Associates to help develop a set of tools "to help registered representatives account for their clients’ total economic wealth and optimize their portfolios by making insurance and investment decisions together."
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A press release said Lifetime Wealth Strategies put the appropriate questions in plain language and provide clients with the answers they need.

“When clients are asked about their wealth, or what they are worth, they immediately think of cash, stocks, bonds, and real estate. But they often need to be prompted to consider another aspect of their worth—their human capital. In textbook terms, human capital is the present value of future earnings. In the real world that translates into what a paycheck is worth to a family over a lifetime,” said Michael Gordon, first vice president of New York Life, in the press release.

Gordon explained that once a client fills out the Lifetime Wealth Strategies questionnaire, a registered representative can give him or her three different proposals. The registered representative can propose investments only, insurance only, or an integrated investment and insurance solution. “When clients or prospective clients see the options laid out next to each other they will usually see that the integration of insurance and investments gives them a better potential outcome and better manages their risk than keeping them separate,” Gordon said.

New York Life has a patent pending on one aspect of the Lifetime Wealth Strategies system, the Protection Solution Decision Model (PSDM). The PSDM produces the life insurance recommendation for the client, determining the most economically optimal type of life insurance product based on the client’s specific profile, including their risk tolerance.

“For retirees, the Ibbotson model also considers longevity risk, the client’s risk of outliving his or her savings, by incorporating a single premium immediate annuity in the asset allocation. That factors in the all-important part of retirement income—guaranteed lifetime income from a highly rated insurance company. With so few retirees covered by a defined benefit pension plan today, and the relative certainty that Social Security won’t be more generous in the future than it is today, more and more Americans are looking to immediate annuities to buttress this part of their portfolio,” Gordon said.

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