Similarly to Raymond James, Lincoln boasts LFA University-an overall training program that includes SMA education on separate tracks during their national planning forums, one-on-one branch programs and web-based options. They also have developed an in-house "skill index" for rating managers. Says Rob Studin, executive director of financial advisory services at Lincoln Financial, "It takes the due diligence burden off the advisor."
LPL provides a number of vital tools for their advisors, including its Portfolio Review, Portfolio Manager and Wealth Management Presentation tools. According to Tracy Gallman, vice president of advisory sales and marketing, their analytical tools allow customization of asset allocation, benchmarking against current portfolio allocation, performance monitoring and reports, among other capabilities. LPL's wealth management offering completely supports the consulting process, with more than 100 downloadable PDF documents on manager profiles, research, asset allocation and "everything they need for SMA support to print, bind and present to clients," says Gallman.
Gallman adds that the firm also provides in-depth training on the understanding and implementation of SMAs. This includes its Manager Select coaching classes that help groups of advisors build an SMA practice and their Manager Select symposiums, which are "road-show" type, hands-on training with members of the LPL team and select managers who discuss their style of management.
Business Challenges
Despite the combined training and technological advances in SMAs, challenges still face advisors doing separate account business, and some broker-dealers disagree on just what those challenges are.
"I think the biggest challenge is an old one," says Royal Alliance's Goldberg. "It's what matters to the advisor who's trying to run his or her business efficiently. We try to make the administrative paperwork burden lighter, but given the regulatory environment, it's somewhat voluminous." He says that AIG has worked to reduce the amount of paperwork associated with separately managed accounts, but it's a struggle. "We tend to focus on lowering administrative burdens within our industry. If I were to suggest to any organization where they should focus their energies and monies, it wouldn't be in marketing, or practice management, but on lowering the burdens for advisors to use these programs."
For Lincoln's Studin, understanding the pricing involved in combining various products is the biggest challenge facing advisors. "Pricing has been the biggest challenge, only because we're mixing so many things other than SMAs within our platform. We're bringing in no-load mutual funds, ETFs, stocks, bonds and other investments, and when you bring that all together the pricing gets a little bit confusing. If we were still using an isolated SMA platform that only handled managers, we wouldn't have that problem."
Others believe the biggest task facing broker-dealers is the age-old challenge of getting advisors to use SMAs. "I think the only real hindrance today is inertia on the part of advisors," says National Planning's Dreffein. "If you're used to doing something a certain way, change is difficult. We're all like that. SMAs are wonderful products, but the environment requires advisors to educate themselves about their benefits and relearn how to make these presentations to clients."
Kawakami agrees. "Advisors got very familiar with the investment choices they were using before. They had systems in place and established relationships with wholesalers. Now they're entering a new arena, and they're going to have to invest the time learning it. In addition, information on SMAs is not always as readily available as other products, which means they're going to have to go look for it. So the challenge is time and the cost benefit tradeoff of investing in a new business."
Challenges also exist for the platforms themselves. Because they are proprietary tools that are continuously evolving and changing, broker-dealers must work to stay on top of advisors' needs.
For Studin and Lincoln Financial, the challenges facing the platform mirror the pricing challenges facing advisors. "We're working to price the portfolio to the advisors, not the client," he states. "For the client, pricing is fairly seamless. We charge a set fee based on assets under management, with certain breakpoints. But an advisor may be paying 30 basis points for an ETF, 50 basis points for a separate account manager and underlying charges for mutual funds. We've developed technology that helps clarify this, and it's in the works right now."
According to Studin, when advisors input the different asset mix for an account, they'll get not only the total cost to the client, but a breakdown of the separate fees of managers as well as total compensation to the advisor.