Archive for the ‘Press’ Category

The V-Word Is Back

Tuesday, October 7th, 2014

This the name of our 4th quarter newsletter. The V-Word is of course volatility. After a long hiatus we are back to seeing +/- 100 moves in the DJIA on a daily basis. But this is not necessarily a bad thing, as perhaps the market is finally acknowledging that is all not well in the world.

The newsletter also contains an article on “Creating A Buzz To Grow Your Business.” It talks about ways that you can act as your own publicist to grow your business.

Click here to see the entire newsletter.

AK In The News: Gross’ PIMCO Exit Throws Door Open For Institutional Competition

Monday, September 29th, 2014

I was asked to comment on an article in today’s Fundfire (A Financial Times Service) about the departure of Bill Gross from PIMCO last Friday (he left the firm to go to Janus Capital).

Frankly, I was not surprised by this move and think that it is a longer-term positive for both firms. Ever since PIMCO’s former CEO Mohamed El-Erian left in March, the firm has been in turmoil and Gross’ future there has been in question. Stories have emerged of erratic behavior, mistreatment of employees and most recently a threatened exodus if Gross stayed.

While we will never know the true inner workings of the firm, perception is reality as they say, and it had become increasingly clear that if Gross stayed so would the turmoil. His abrupt departure reinforced the animosity between the parties and the untenable nature of the relationship. From that perspective, it is good for PIMCO to get this negative attention behind them and focus on the future. They have moved swiftly to name replacements and try to begin anew.

The negative for PIMCO is that Gross’ departure will trigger automatic mandate reviews by institutional investors, and analysts expect the firm to lose billions of dollars. But this increased scrutiny (being put on “Watch” lists) was already increasing with El-Erian’s departure and underperformance. At least the departure of Gross allows the firm to position that all of the changes are over and allows it to look to the future. Already the California Public Employee’s Retirement System (CalPERS) has announced that it has no plans to move the approximate $1 billion they have invested through PIMCO.

For Gross, the move is one which allows him to try and save his reputation, which has been hurt by not only the turmoil and negative press that has been coming out, but also by the recent underperformance of his Total Return fund. There can be no question that the unraveling situation had to be affecting his ability to manage effectively. While he is leaving to manage a much smaller fund, he does have the opportunity to reestablish himself at Janus Capital and grow his influence at the firm over time.

To quote from the article: ““There’s been such a negative cast on Gross since El-Erian left the firm, [with] people blaming him,” says Andy Klausner, principal at AK Advisory Partners. “It was becoming harder and harder for him to stay,” he says, adding he wasn’t surprised to hear Gross was leaving. “All in all, it’s probably positive for PIMCO,” says Klausner. And the move isn’t bad for Gross either, as he can still ride his strong reputation as a fixed income expert, says Klausner. “It’s a good PR move for [Janus],” he says. Gross’s name will lend himself well to be a spokesperson for the firm.”

AK In The News: The Wirehouse Cost-Cuttting Conundrum

Thursday, August 28th, 2014

I was asked to write an opinion piece on recent announcements by UBS and Morgan Stanley that they were undertaking measures to reduce costs. UBS chose to lay-off a small number of client service and support staff, while Morgan Stanley chose to pass along some additional costs to its advisors. So, is one way of cutting costs better than the other? The piece was published in today’s FundFire (A Financial Times Service).

In reality, I don’t think that one method of cost cutting is better than the other. The fear these and other sponsor firms always have is that they are going to “piss off” their advisors with such moves and that this may result in defections. The reality is that when you look closely at these cuts, they effect only a small number of advisors -generally  those at the lower end.

Management has an obligation to shareholders to run efficiently and smartly; they also need to foster a positive environment for their employees. Attempts to become more efficient can keep everyone happy. Often times it is the headlines that make the cost cutting efforts seem “bad” and far-reaching when in reality they are minor.

UBS, for example, laid off 75 client service associates. This is out of thousands of such associates at the firm, and you can bet it did not impact their top producers. One can argue that cuts aimed at the lower end help weed out lower producing advisors who are probably not adding much if anything to the bottom line. The financial crisis helped firms see that being the biggest is not necessarily a goal they need or want to pursue. They rather have the most efficient advisors.

And Morgan Stanley, while passing along more costs to advisors, in fact gave their top producers a pay out increase at the beginning of the year, so net-net, the effects are not that great.

All firms must cut costs at certain times. It just seems that everyone still likes to forecast the demise of the wirehouses, when in fact they have made great strides in becoming more competitive over the past few years.

Contact me if you would like me to send you a copy of the article.


AK In The News: US Managers Win World Cup Of Marketing

Thursday, June 12th, 2014

Today’s Fundfire (A Financial Times Service) has an article on how U.S. asset managers rank first (and U.K. firms second) in effective marketing – both defending their home turf from foreign competitors and competing abroad – according to a new survey by FS Associates; I was asked to comment on these results.

The results are not surprising, given the maturity of the pension markets in the two countries. To quote from the article: “The marketing domination by U.S. and U.K. firms should be expected, says Andy Klausner, principal and founder of AK Advisory Partners.

“It’s a size issue,” he says. Both the U.S. and U.K. are home to the world’s largest asset managers, and have more developed institutional investor markets, he says. “It’s the bigger players that go overseas,” he says. Available resources are important for strong marketing.”

The article also discussed how managers could grow their businesses abroad. Again, quoting from the article: “But marketing for institutional investors is inherently different than for retail investors, says Klausner. “You’re marketing yourself to that consultant,” as opposed to directly to a client, he says. Institutional managers need to focus on building their brand through relationships with consultants, particularly the large, global consultants.

If a manager can have a strong relationship with a consultant in the U.S., it’s likely that the consultant will also look at the manager for its institutional clients in other countries as well, says Klausner.

“It’s very rare that a manager would be brought into [an institutional] relationship not through a consultant,” says Klausner. But, asset managers can still focus on building brand awareness with institutions. While a consultant may drive a manager selection process, institutional clients may still request the consideration of certain managers they’re familiar with, says Klausner.”

AK In The News: Advisors Use Preferred Lists, Don’t Admit It To Clients

Wednesday, June 11th, 2014

I was asked to comment on a poll which asked Ignites (a Financial Times Service) readers on the impact that the Preferred Lists provided by their firms has on their investment selection process. More than half (57%) said that they regularly use them but don’t admit it to clients. 20% said that they were highly influential in their selection process.

Now, lets be honest, when you answer a poll question you have to pick the one that is closest to your thoughts. I chuckled when I heard the results because of that extra line “but don’t admit it.” I don’t think this answer is quite as scandalous as the headline might indicate. The reason is that there is often no reason to tell the clients that you do rely somewhat on the advice of your firm – as long as you do something above and beyond just taking their recommendations.

In fact, in my mind, that is what differentiates the better advisors from their peers – they take the available information and then add some layer of their own work above and beyond it. To quote from the article: “But the extent of that influence varies by channel and advisor type.

Advisors with investment expertise — as opposed to financial planning and client service specialists — are more likely to forgo consulting recommended lists and instead pick funds based on past experiences with certain products and managers, consultants say.

Even so, such advisors remain likely to at least evaluate these firm-approved products as a starting point for their own analyses. Whether advisors look beyond the preferred list likely hinges on their comfort level with technical investment concepts, says Andy Klausner, partner at AK Advisory Partners.

“It depends on the advisor’s sophistication, their experience and the size [of their book]. It’s the newer, younger, less experienced advisors that rely more on recommended lists and model portfolios,” Klausner says. “The more experienced people want to say, ‘I pick my own manager and do my own research.’

“It’s always a good selling point to address what you do above and beyond what the firm does.”

Certain segments of the industry are also more likely than others to balk at buying products prescribed by a central research unit. Both Klausner and Fronczke say that reliance on recommended fund lists appears highest in the wirehouse and regional broker-dealer channels and least prevalent in the independent RIA space.”

AK In The News: Platform Pumps Up SMA Menu, Crafts Models, Adds New Clients

Wednesday, June 11th, 2014

Today’s Fundfire (A Financial Times Service) featured an article on FolioDynamix adding a new client in the bank trust department space. I was asked to comment on whether or not this signals a new trend – banks turning more toward third-party providers of investment platforms rather than developing them on their own – and what effect this has on SMA managers.

I don’t think that this signals the beginning of a new trend, because in fact, their has been growth in outsourcing for many years. It may be new for FolioDynamix, and signal a new direction for their business, but banks that have expanded into the fee-based business arena have for many years faced the issue of building it v. buying it.

And frankly, if you don’t have the expertise, personnel or resources in-house, it is easier to buy it. While ultimately the end fees to clients may be higher because you are paying a third party, it has been a way for banks to get up and running faster and quicker.

As to the question of what this means for SMA managers, to quote from the article:

“As the shift away from proprietary offerings toward more open architecture continues, turnkey platforms, like FolioDynamix can pose an opportunity for model SMA managers to expand their distribution without having to deal directly with small bank research teams, explains Andrew Klausner, founder and principal of consultancy AK Advisory Partners.

“If a bank or trust is new to the business they’re not used to managers having to come through,” Klausner says. “From a marketing point of view it’s easier to get in with these [turnkey] firms that will showcase you.”

“It’s definitely a way that you can reach a lot of bank trusts through a single platform, as long as you’ve got the product that they want,” he says. “Getting on a platform like FolioDynamix will help, but [managers] have some work to do on their own to differentiate themselves and make their options valuable for a bank trust.”

For banks, “it makes sense to hire these third party TAMPs [turnkey asset management platform] that offer models as well,” says Klausner, the consultant. “The easiest thing to do is go out and buy the whole bundle.””

AK In The News: Layoff Axe Still Swings Often, But With Less Force

Thursday, May 1st, 2014

The recent announcement that State Street is going to lay-off 400 employees prompted Ignites (A Financial Times Service) to seek my opinion on whether or not this signaled the beginning of a trend in the industry. I do not believe that it does.

Layoffs are a natural course of business, especially as companies increase their technological capabilities. And emotions aside, this layoff number is relatively small, less than 1% of the firm’s total workforce. Layoffs are also natural after mergers and as a way to reduce duplication. While layoffs will always be an unfortunate part of any business, I don’t think too much should be read into this announcement.

The industry has done a much better job since the financial crisis of restraining itself when hiring during good times. To quote from the article:”“Before the crisis, the industry was known historically for hiring a lot during the good times and laying a lot of people off during the bad times,” says Andy Klausner, founder and principal of AK Advisory Partners. “But since 2008, the industry has gotten better. It hasn’t overhired during the good times, so the overall level of layoffs has probably declined.”

The dismissals from State Street are not part of a trend toward more layoffs industrywide, but rather a move toward leaner back-office operations and support staff workforces, according to Klausner.

“You’re not hearing about massive layoffs anymore,” he says. “You’re hearing about rationalization in servicing clients and replacing the human factor with technology.”

Indeed, industry layoffs have grown less frequent. Experts say operational employees are the ones receiving pink slips, particularly those made redundant due to technological advances and structural changes at the firm.”

What do you think?

AK In The News: Baird Dumps Wilshire, Hauls Fund Selection In-House

Tuesday, April 29th, 2014

I was asked to comment on an article which appeared in today’s GatekeeperIQ (A Financial Times Service) on Baird bringing research on mutual funds in-house (and terminating its relationship with consultant Wilshire).

There can be many reasons why a B/D hires an outside firm to conduct due diligence and also why they would end such a relationship. Often times, as it seems to be in this case, it has more to do with the client’s ability to conduct the research  in-house, perhaps because of growth of staff or maturation of its programs, than it is dissatisfaction with the consultant.

To quote from the article: “The decision of whether to outsource some aspects of manager research is often a question of staffing and numbers, says Andrew Klausner founder and principal of consultancy AK Advisory Partners.“When you’re building a platform or expanding a platform, it’s easier to hire an outside research shop,” Klausner says. “As you mature, add staffing and add assets, it becomes easier to justify bringing it in-house.” Taking greater control over the process provides the home office greater say over the timing of research and the ability to decide whether to include affiliated products, he says. “You have a little more control over how things get done,” Klausner says.”

A sensitive topic is affiliated managers/funds. Hiring an outside firm to conduct due diligence on these products – even if you have the ability to conduct it in-house – is often a smart move to remove any potential (or perceived) conflicts of interest. I am a firm believer that adding this level of third-party oversight, especially on affiliated mangers/funds, sends a great signal to advisors and clients that you are serious about having only the best products available.

AK In The News: Baird Ramps Up Northwest Exposure, Snags $10B Wealth Shop

Friday, April 11th, 2014

I was asked to comment on an article in today’s Fundfire (a Financial Times Service) about Baird’s acquisition of Seattle-based B/D McAdams Wright Ragen (MWR). To me, the deal makes a great deal of sense. It extends Baird’s footprint in the Nortwest, and the employee owned boutique-firm seems to have a similar culture and operating philosophy.

But mergers are never easy – no matter how good the fit. There will inevitably be growing and consolidation pains; even the best merger partners experience some pain when they integrate operations, and any change is always traumatic on clients and in turn financial advisors. Having said that, the long-term gains from a successful merger do outweigh the pain. And in this case, I think the similarities in the firm’s cultures will keep the pain to a minimum – if they get the rest of the stuff right.

Contrast this to a merger between a B/D and a bank, or a regional B/D and a wirehouse, where in both cases the cultures are quite different and the odds of trouble in a merger are greater. The results of a merger are never perfect or easy to predict, but from what I can tell, I feel positive about this one.

To quote from the article: “”It seems like culturally the firms are a good fit – two regional players. This will help Baird increase its footprint in the Pacific Northwest. Baird has a reputation as a good regional firm and this step seems logical as they continue to expand,” says Andy Klausner, principal and founder of AK Advisory Partners. “Certainly the merger of two regional brokerage firms – from both a cultural and operational point of view – would be easier than the merging of a regional firm with either a bank or a larger brokerage firm. While Baird is larger and the acquirer, it is more a merger of equals than you see in many other mergers.””

AK In The News: Industry Split On Greater Allianz Scrutiny Of Pimco

Wednesday, April 9th, 2014

I was asked to comment on an article in today’s Ignites (A Financial Times Service) about the industry’s reaction to reports that Allianz, the parent of Pimco, is going to increase its oversight and be more hands on with the subsidiary because of the continuing bad publicity the firm is getting in the wake of Mohammed El-Erian’s resignation in January. El-Erian was the heir apparent to CEO Bill Gross, and his departure has raised questions about the culture of the firm, among other things.

The article detailed results of a reader poll in which 43% of participants said that increased oversight would hurt Pimco (26% of these respondents felt that the negative effects would be significant). 38% of respondents believed that increased oversight would benefit the firm. 20% said such action would have no impact.

Parent companies in the asset management business traditionally give their subsidiaries large amounts of autonomy. In fact, Allianz increased Pimco’s autonomy in January 2012 when it gave Pimco control of its worldwide distribution. The overall fear is that micro-management of subsidies, in an industry where people are so important, could potentially lead to mass defections.

My belief is that if Allianz does become publicly involved, it is more of a way to shore-up public confidence in Pimco then to actually get in there and make significant changes. Perception is reality, and the perception in the industry today is that Pimco is broken. If Allianz can help shore-up confidence, and get the firm out of the media spotlight, perhaps it can help the firm turnaround.

To quote from the article: “Overall, the perception of damage has already taken its toll on Pimco, experts say. Andy Klausner, founder of strategic consultancy AK Advisory Partners, expects any Allianz involvement in fixing Pimco to be enacted more for public relations reasons than any other purpose, particularly due to doubts that Allianz has the appetite to restructure Pimco’s culture. With immense media coverage of Pimco recently, the real issue is that the firm’s reputation has suffered, he says. “Whether Pimco is right or wrong in the debate about their future, it does not matter,” Klausner says. “The perception of their culture being broken is important to note and it cannot be ignored.””

What do you think?