As mentioned earlier, technology is a popular way management firms try to stand out from the crowd. Both Lockwood and AIM emphasize the customization features of their SMA platforms as a key element of what they bring to the table when working with advisors.
By comparison Lord Abbett offers its Intelligence System, a technology created two years ago to provide financial advisors with a way to interact with world-class portfolio managers, as well as with tools to help find leads and prospects. The system allows advisors access to various data feeds, which pull lists of companies within certain areas-such as the small business sector or foundations-for use in obtaining new clients. The system also offers news on products and resources aligned to work with that particular demographic, such as a retirement plan proposal for small business owners, or a turnkey or tiered 401(k).
Lord Abbett continues to build the database, adding over a million 401(k) accounts in 2003. The system can be sourced by zip code, and advisors can learn the plan's provider and sponsor, along with other essential information. "It used to be that brokers and advisors would sit around a Bloomberg terminal for hours and get a list of maybe five people who were [Rule 144 stock] sale opportunities," says John Brett, director of strategic relations for Lord Abbett. "With this tool, you can generate much larger and detailed lists in a more efficient manner. It really helps in the area of business development."
But Russell Investment Group, perhaps more than any other firm, is developing new technology tools to stand out from the pack. "We've developed what we call our Portfolio Strategy Desk, or PSD," explains Greg Stark, director of sales and client services for Russell. "Essentially, we apply the same tools and analytics that we use on the institutional side of our business and apply them to existing portfolios of $3 million dollars and up."
True to the nature of value-added tools, Russell does not charge advisors or clients for the service but uses the opportunity to make suggestions regarding investments and managed accounts. Russell also offers advisors RPlan, a benchmarking tool that helps advisors compare themselves to colleagues. "It's a peer comparison tool," adds Stark. "It allows advisors to see how they fare against their peers, and it considers such elements as profit per headcount and assets under management per client." And since every advisor wants to be at the top of their game, RPlan also compares advisors with the top 25% of other wealth managers. "It truly looks at your client base as profit-per-effort-of-service," says Stark.
When it comes to value-added technology, Webcasts and access to password-protected Web sites have been the norm. In many cases this is still true, although the idea of online conferencing varies from firm to firm. "One of the things we do is make our professionals available through online resources," Brett says. "For example, our chief economist puts out a report every Friday that's e-mailed to advisors using our system." During a given month, Lord Abbett offers 12 different Web conferences with various portfolio managers, although not all are available to every advisor. "It allows us to convey the manager's experience to advisors in the field."
Seuffert, on the other hand, completely disagrees that Webcasts are worthwhile. "Most of those tools are information overload," he insists. Rather than use Webcasts and online information, Lockwood has opted to leave the flow of information up to the advisors themselves. "We've paid a lot of attention to the data, in response to requests from advisors, and we're focused on real-time decision-making tools instead of explaining what happened last quarter. There's too much of that already."
If anything has remained the same in the world of value-added tools, it's the role of the manager's marketing reps out in the field. Many of them are more knowledgeable than in years past, but they still can be counted on to make the expected office visits and sit down with clients when needed. "We've found that the concierge approach works the best," says Sachidanandan. "Advisors have different needs, and one packaged solution just won't cut it."
Despite the best efforts of management firms to stay competitive in the current environment, there's no question that the recent soft-dollar issue in the mutual fund industry has had some impact on separately managed accounts. Although no one was aware of such incentives actually occurring in the SMA field, some firms had been asked to make similar deals but declined, and preferred not to discuss the topic.
"It's difficult to measure the impact on the industry," adds Seuffert, "but the beauty of managed accounts in the world of independents is that although it's painful at times to show all the fees involved, it's all out there plain as day. But for now, it's too early to tell what, if any, effect it will have on this business."