blog

You Gotta Keep Your Head Up

by Lee

A survey released yesterday by Horsesmouth found that 66% of the advisors surveyed said that they had discussed the current market drop with at least three-fourths of their clients and 38% said they talked with nearly all of their clients.

Unfortunately, many wholesalers haven't taken the same approach. Instead, they have retreated and are simply waiting for advisors to call them. While 37% of advisors have called a wholesaler in the past two weeks, according to a recent kasina survey, many wholesalers are missing out on a key proactive relationship-building opportunity.

Rather than acting like an ostrich, wholesalers should be aggressive and take the following steps, as suggested by advisors in our survey:

• Provide client approved materials that advisors can send to their clients to help keep them calm
• Share best practices of what is working with other advisors - particularly around how to communicate with clients
• Use e-mail to share fund managers' insights
• Connect advisors directly to portfolio managers and strategists via conference calls and in-person events (especially before the markets open or after they close)

Overall, firms should head the words of one advisor and "don't hide - continue to reach out to me and offer anything that would be helpful!"

The Top Ten Shake-Down

by Anu

2008 marks the release kasina's 10th annual Top 10 Web Sites for Financial Intermediaries report. Just think for a second, what aspects of the web weren't in existence ten years ago:

• Google - incorporated 1998
• MySpace, Facebook - 2003, 2004
• The Blogosphere - coined 1999
• Wikipedia - 2001

At the same time, think about how long it feels like some of these integral web technologies have been around (ask a college student to try imagining the world sans Facebook). For ten years, web users have been rapidly evolving, and firms strain to keep pace. This year's study identifies and highlights those sites which set the pace for their peers, those sites which best managed to service advisors' needs while elevating expectations through continual innovation. Notably, this year saw:

• Fidelity re-design its already T10-caliber site, buffering its unparalleled granularity of data with smoothly integrated product, literature, and value-added functionalities
• DWS launch a completely overhauled, Flash-based site, establishing its site as, technologically, the industry's most advanced

A significant shake-up took place in the rankings as four of the top ten have completely re-designed in the past year and as sites continue to leverage new technologies to service advisors in more effective and efficient ways. At kasina, we're looking forward to discussing the insight gleaned from this year's report with all of our subscribers. Use our industry forum to continue the dialog.

Cents Ability Volunteer Teaching Opportunity

by Lindsay

For the past several years, the kasina Youth Foundation has partnered with a New York-based non-profit called Cents Ability, whose mission is to teach the fundamentals of personal finance to underprivileged New York City high school students. Cents Ability volunteers teach six-to-eight session classes at high schools in Brooklyn, Manhattan, and Queens, covering such topics as goal-setting, budgeting, credit, and investing.

kasina sees teaching financial education as a great way to give back to our community by sharing knowledge and expertise that we already have. By teaching a high school junior how to set up a budget, open a checking account, and map out a plan to pay for college, or by helping a high school senior understand how to distinguish between various credit card offers, and use his or her first credit card responsibly, we provide them with valuable skills that they will use for the rest of their lives.

kasina has a group of trained teachers who usually teach a few classes a year, but this year we're hoping to get some of our New York-based clients involved as well. Teaching requires a minimal time commitment (~2 hours of training, plus 8 hours of teaching for a typical class), and is a fun, rewarding experience. Fall classes are starting up over the next couple of weeks, and there are many teaching opportunities available. If you are interested in teaching, or in learning more about Cents Ability and how you can get involved, please e-mail me at lgeimer@kasina.com.

Cutting Fat - What Part of the Budget will be Cut

by Steven

The Dow went down another 3.6 percent on Monday and fell below 10,000 for the first time in nearly four years. The downward spiral of the economy will affect the budgets of distribution organizations.

Distribution heads are reluctant to cut wholesalers. The consensus at our latest Distribution Roundtable was that due diligence meetings were the first to go.

In recent years the cost of bringing an advisor to Boston or NYC has skyrocketed. Most firms had budgeted $1500 per advisor, but that is no longer possible. In working with our clients we found that those meetings were not very well-executed and rarely drove significant assets.

Firms are also being more diligent with the use of outside speakers. Some firms have started to charge the wholesaler for the speaking fees. The effect has yielded better qualified advisors and superior utilization of the speakers.

It is hard to predict when the market is going to flatten. In preparation, Distribution teams should cut what doesn't add significant value.

I Am Mad At Me

by Anu

For some ridiculous reason, I've started watching the talking heads on cable television. Why? I can't really say. Somehow, I want the news of the day distorted and contorted. Anyhow, why do any of us make these choices?

Simple, we're emotional and spontaneous. Yet, firm after firm seems to desire rote, tabular methods to market and sell financial advisors on the merits of their products. Firms will always get this wrong if they don't appeal to the emotions of the financial advisor in some way. Does the advisor worry about large-scale losses in client accounts? Does the advisor want to be seen as a hero to her clients? Do you know? Do you assess? Last week, Steven mentioned our proprietary research showing advisors are not panicking to move assets away from mutual funds. But are they shifting to funds with an emotional appeal to safety in times of duress? What decisions are advisors making?

Think about yourself and the decisions you make. Advisors have emotions and act on them. Look for kasina to bring more cutting-edge research in 2009 that connects emotions and decision-making.

What Makes a Good ETF Site?

by Johanna

During the research for the 2008 Top Web Sites for Financial Intermediaries report, I had the opportunity to review a number of prominent ETF provider Web sites, which got me thinking: What are the important differences between ETF and mutual fund (or other product)-focused Web sites? How does the criteria for an excellent ETF site differ from other types? A few key distinctions came to mind:

Importance of the Index: In addition to including information about the past performance and the goal of the ETF, it is also important to provide in-depth information about the underlying index. For example, Van Eck has a section within each product profile dedicated to index information. Especially with more products and varied product themes, understanding the inner workings of the underlying index becomes important for transparency and product differentiation.

Retail and Intermediary focus: Few mutual fund advisor sites have a section dedicated to "What is a Mutual Fund" or "Mutual Fund 101," even though this type of basic education is important for investors (who are an important Web audience). Furthermore, for newer products within the ETN space, the basic product education becomes paramount because many advisors really don't know what ETNs are or how to use them effectively.

Data Availability: Some mutual fund-focused firms pride themselves on the historical breadth and depth of pricing and performance information. On some sites, advisors can choose the historical time period to call up whichever combination of information data a decade or more back into the past. What about ETF sites? Given that the surge of product development didn't really get into full swing until after 2000, historical information really won't help. Instead, ETF sites do (and should) focus on presenting the data they have in interestingly visual ways. For example, ishares.com has charting tools for index error tracking.

Of course ETF Web sites cannot simply focus on the differences in products and audiences. Universal characteristics such as comprehensive site search and intuitive navigation, in addition to detailed and comprehensive content, are mandates for all product provider Web sites.

Can Washington Bring Confidence to the Market?

by Steven

I have never experienced a depression and I can't imagine what it would be like to have double digit unemployment and inflation. For the first time in recent years, we are facing the possibility that these things might become a reality. There is a possibility that the bailout will not work. Banks might not be able to sell their bad mortgages and will not be able to lend to each other. The system might just have to work its way out of this, but that could involve unavoidable casualties that would be really ugly for the general public.

I do know that there needs to be confidence in the financial system for it to function properly. Right now that is not the case. Washington has to do their share to provide confidence.

Thomas Friedman had a good op-ed in today's New York Times appealing to congress to get their act together. I have pasted some of it below for the full article click here.

"I've always believed that America's government was a unique political system -- one designed by geniuses so that it could be run by idiots. I was wrong. No system can be smart enough to survive this level of incompetence and recklessness by the people charged to run it.

This is dangerous. We have House members, many of whom I suspect can't balance their own checkbooks, rejecting a complex rescue package because some voters, whom I fear also don't understand, swamped them with phone calls. I appreciate the popular anger against Wall Street, but you can't deal with this crisis this way."

"I always said to myself: Our government is so broken that it can only work in response to a huge crisis. But now we've had a huge crisis, and the system still doesn't seem to work. Our leaders, Republicans and Democrats, have gotten so out of practice of working together that even in the face of this system-threatening meltdown they could not agree on a rescue package, as if they lived on Mars and were just visiting us for the week, with no stake in the outcome."

Most of us have only lived in a time of great prosperity, never having to experience the realities of an economic depression; let's make sure that we don't have to experience the unimaginable.

Advisors Are Not Panicking

by Steven

Even though our lawmakers didn't seem to be able to get it together yesterday, it is a positive sign that advisors are not fully retreating from the markets. In the kasina survey released September 26, 2008, 29% of financial advisors said that they are investing more in equity funds, while only 24% reported that they were investing less as a result of the current market conditions.

It's also good to see that the Treasury Department's announcement to create a temporary insurance system for money funds reestablished confidence among advisors. 37% of advisors prefer to park their clients' money in money market funds right now.

Furthermore, we found that more advisors are increasing their investments in bond, equity, and money market funds. Variable annuities and alternative investments, however, are not faring as well. 22% of intermediaries are investing less in VA's, while only 16% are investing more. Additionally, 31% of intermediaries are now investing less in alternative products (130/30, hedge funds, etc.), while only 14% are investing more.

The reason behind their optimism is not quite clear. One reason might be that most advisors weren't alive during the Great Depression. Therefore, unlike their parents and grandparents, they are unable to imagine the worst.

Hopefully, lawmakers will get it together today and pass the bailout. Advisors are going to benefit from avoiding panic in this market environment.

Web Writing

by Mike McLaughlin

My last blog post.

It was chock-full of links, bullets, and short paragraphs. Unfortunately, though, no bold text.

Did it attract your Lazy Eyes?

That link is the reason for this post. It's a good and interesting reminder of how people read, and therefore need to write for, the Web.

Even the comments are good, though one commenter might have me boiled in oil for writing this paragraph.

If you're not up for it, two things you should know:

• Jakob Nielsen would find me shallow right now, and
• You missed another opportunity to get Rickrolled.

What Is Going On? The Impact of the BofA/Merrill Merger

by Steven

With their industry in turmoil, asset managers are trying to understand what distribution changes they will need to implement.

It is likely that the mergers will continue. Morgan Stanley and Goldman could be next. The Merrill/BofA merger creates the world's largest brokerage unit, with more then 20,000 advisors and $2.5 trillion in client assets. A potential Morgan Stanley/ Wachovia merger will further consolidate financial advisory firms.

What does this mean for asset managers?

• Large brokerage houses will exercise more control over their financial advisors' investments. They can't afford to let advisors make bad decisions on behalf of their investors.
• More asset management sales will be driven by national accounts rather than by wholesaling. Due to the control of these centralized investment units, more sales will come through pre-set asset allocation products than through individual mutual funds.
• Wholesaling will shift more to the independent channel. With less control over sales at the wires, wholesaling will have a bigger impact at the independents.
• Wholesaling cost structures will be strictly evaluated. This will force the issue of hybrid wholesaling -- most firms will find that hybrids are a more cost effective way to sell to a disbursed advisor pool.

In troubling times like these, many analysts talk about a longer down market. A down market will only further intensify the competition for assets. Asset managers will have to seriously rethink their distribution strategies in order to win assets.