Archive for January, 2012

AK In The News: Active Management Down, But Not Out

Thursday, January 26th, 2012

Active management has unquestionably been under fire lately, especially since the vast majority of actively managed funds have underperformed the market the past few years. So is active management down and out, or just down? Ignites, a Financial Times Service, conducted a poll of its readers last week and roughly 83% of respondents felt that active management will come back; almost 800 people responded to the survey.

I was quoted in the article – and I agree – active management may be down but it is not out. My quote:

“It has unquestionably been a tough time for active management. Witness the outflows at American Funds and some other mutual fund complexes. I do agree that stockpickers will be back and some have actually done quite well despite the overall trend. At the end of the day, it is important to remember that it is a market of stocks. Some will do better than others based on company-specific characteristics and industry specifics.” I added “The rise of indexing and exchange-traded funds will continue, but portfolios still will be composed of both actively and passively managed funds.”

I also want to add that in the case of American Funds, which has been hit hard in the press, it’s also an issue of size. As any fund gets bigger it gets harder to outperform as they are forced to invest new cash regardless of their current outlook on the market. As they become larger, they become more like the market – and thus outperformance becomes more difficult.

So let’s be careful not to confuse size and underformance with the death of active management. This isn’t the first time that this discussion has taken place in down times, and it probably won’t be the last!

RIP Morgan Keegan

Thursday, January 19th, 2012

The old Morgan Keegan as we know it will soon be gone. Isn’t it ironic that the grand plan of management to resurrect the firm via venture capital financing was apparently sidetracked by the mess at MF Global among other things – when the reputation of MK was itself irrevocably harmed by its own financial mess with its RMK Funds.

The saddest thing for me is that the losers in this deal – the home office personnel of MK – are a great bunch of loyal employees and long-time friends. They are the people that are least able to afford losing their jobs, and since many have long-term ties to Memphis, the least able to pick-up and move to Florida. The other loser from this deal is the City of Memphis.

Sure, part of the deal included an undefined support center in Memphis. But I can guarantee you that it’s not going to be 900 or 1000 people for very long. The only way that a deal like this can make financial sense for Raymond James is going to be for them to consolidate operations, IT and some of the investment product areas among other support areas. Credit the folks at MK for getting some concessions so that Memphis does not lose all of its jobs. But in 12 or 18 months, when the deal gets closer to being done, the outcry over job losses will be far less than it would be today.

I do give MK upper management credit for being master negotiators even though they were not able to take over the firm themselves. The CEO of MK is now President of Raymond James and his old department, Fixed Income, is not surprisingly going to be headquartered in Memphis (as is Public Finance). So the top executives did okay for themselves. Anyone surprised?

For most financial advisors, the deal will work out just fine. In fact, a close friend who is an advisor at the firm said to me last week that Raymond James is one of the firms he would have considered going to. Advisors will be paid to stay; and if these offers are too low, they will leave and get paid by another firm. But most will continue on at the combined firm for now with only the interruption of new paperwork for their clients.

RIP Morgan Keegan – and good luck to the many loyal back office employees that made this firm great.

2012 Success – It’s As Easy as 1-2-3

Tuesday, January 10th, 2012

A new year brings new challenges.

For many it’s about the balance between growing the business on one hand and providing good client service on the other. Luckily, these choices are not mutually exclusive.

Finding a balance between your time, energy and focus may be easier than you think. Our newest White Paper, entitled “2012 Success – It’s As Easy As 1-2-3,” highlights three basic concepts that underlie successful businesses:

  • Differentiate yourself from the competition
  • Segregate your clients and prospects into niche market segments
  • Communicate consistently and effectively
Practitioners and businesses that follow a strategy that incorporates these principles will position themselves for success vis-a-vis their competition. However, it’s important to point out that including these principles is not enough – you must successfully implement them as well.

Click here
to see the complete White Paper.
Click here to see our 1Q2012 Unlocking Real Value newsletter.

Advisors – Be Patient – Social Media Works!

Wednesday, January 4th, 2012

2011 ended with a number of studies sighting advisor frustration with social media. For example, a study by the Aite Group concluded that advisors were not getting the desired benefits of better brand awareness, competitive differentiation and revenue growth. 20% of advisors surveyed said that social media was unimportant to them while another 40% said that they were neutral on social media.

My reaction? Be patient! There are two primary reasons for advisors to become engaged with social media – the aforementioned prospecting and branding and client servicing. Many advisors fail to see this second but very important use for social media. In fact, even if you never get a piece of new business from your social media efforts, yet are able to better serve your clients, I for one would argue that your social media efforts have been successful.

In today’s 24/7 viral news world, clients are demanding information when they want it and how they want it – it’s no longer good enough to dictate to clients when you will be calling or meeting with them. Social media provides a great outlet to get your ideas out to clients in a timely fashion, and it’s not a lot of ¬†additional work to offer your clients multiple social media outlets – Facebook, Twitter, Google + – so that they can choose the one that they are most comfortable with. (As an aside, don’t let these social media efforts limit your face-to-face time with clients – it’s still important that you make the time to sit down with clients as often as possible.)

Also interestingly, of all of the social media sites followed by Aite Group, only LinkedIn increased its overall use between 2009 and 2011. LinkedIn does not, however, address the client servicing side of the social media question. What about e-mail marketing systems such as Constant Contact? To me, this is one of the easiest and most efficient ways to enter the social media game, and it allows you to not only provide clients with information, but also in a branded way!

Advisors did mention some positive feelings for client communications in the Alite Group survey, but it was relegated to the back of the headlines. I say move forward – come-up with a client servicing plan that makes sense and is flexible. The prospects will come, albeit more slowly. As they say, if you build it they will come.