Frontline industry executives from 1251 Capital Group, Amundi Pioneer Asset Management USA, Capital Group, Easton Vance, and PwC gathered during Nicsa's 2019 General Membership Meeting in Boston to share insights on how to stay relevant and bolster client value.
John Stadtler, Partner, US Financial Services Industry Group at PwC, moderated the event, which focused on how executive teams across the asset management differentiate themselves, particularly in the areas of technology, sustainable investing, and diversity & inclusion (D&I).
TECHNOLOGY
Lisa Jones, Head of the Americas, President & CEO at Amundi Pioneer Asset Management USA, said technology drives efficiencies in many areas of her business. Because Amundi’s front, middle, and back-office platform is in-house, rather than outsourced, the company can customize its own system with ease. “It allows us to move more quickly in terms of development,” she said.
As one of the 10 largest asset management firms in the world with a footprint across 37 different countries, Amundi also the advantage of a global perspective. “The banking robo-advice model is quite interesting in Asia and Europe, and there are things that I hope we in the U.S. can learn from that to help and wholesalers,” Jones said.
Tom Faust, Chairman and Chief Executive Officer at Eaton Vance, said that in addition to ongoing investment in a large-scale managed account platform, his firm is focused on leveraging the power of big data.
“There is an enormous amount of new data, mostly driven by the advent of smartphones, drones, and other technologies,” he said. “We’re in the very early stages of figuring out how to harness that direct data to drive alpha.”
John Hailer, President - Asset Management at 1251 Capital Group, agreed that harnessing the data is the industry’s biggest challenge. “The market's getting more and more efficient gathering data, selling data —but then what do you do with that data once you have it?,” he said. “To me, that’s a key factor in whether or not you are successful.”
DIVERSITY AND INCLUSION
Hailer said D&I efforts help firms mirror the society they serve and ensure long-term business sustainability. His firm aims to achieve diversity by removing age-old barriers to entry.
“It’s creating different situations that allow people to participate in a network they’ve previously been isolated from — not necessarily deliberately, but isolated because of the way the ecosystem was built,” Hailer said. “Unless you get enough people in thinking differently from you, you’re going to be limited to only thinking one way.”
Jones agreed that diversity and inclusion efforts are vital in acquiring the talent needed to deliver the best possible results for clients.
“I think we all have embarked on launching D&I programs because it’s so important to focus on race and gender,” she said. “What many of us have enjoyed about growing up in the asset management industry is really being exposed to that intelligent debate that you get when you have diversity of thought.”
SUSTAINABLE INVESTING
Jones said D&I efforts dovetail into environmental, social, and corporate governance (ESG) factors, which also pave the way for long-term performance advantages.
“The intersection of ESG, culture, diversity, and inclusion is a quite exciting part of my job,” she said. “You can't assess and evaluate a company based upon social issues such as pay equity, professional development, and respectful work environments the same way on a global basis because some of those criteria are quite different.”
Faust said the fastest-growing part of his firm is its individual separate accounts, which are structured to provide a level of customization in terms of ESG characteristics. “These are driven by the preferences expressed by the end investor,” he said.
Note: Although the observations contained in this work represent the best thoughts of the individuals comprising the NICSA panel, they do not necessarily reflect the views of NICSA or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.
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NICSA will once again partner with ALFI for the Association of the Luxembourg Fund Industry’s Global Distribution Conference from September 25-26 , where 650+ senior representatives from the global distribution community will convene to learn about the latest developments on the global distribution landscape.
The conference will reflect on 30 years of UCITS, explore the future of enhanced cross border distribution, and take a deeper dive into distribution trends in LatAM and Asia, product trends around the globe, and the technology that is making distribution easier and more efficient.
While at the event, I’m eager to hear from the 50+ speakers and to network with the fund distributors responsbile for the global reach of investment funds. I am also looking forward to sharing the ALFI stage with Sally Wong, CEO of the Hong Kong Investment Funds Association (HKIFA), to provide important perspectives regarding our respective markets as they relate to the global distribution ecosystem.
Fee compression and shrinking shelf space are on the watch list for global asset managers facing an increasingly competitive environment. Data-inspired distribution models and strategic alignment of intermediary partnerships significantly contribute to the future vision of global financial product distribution. All the while, technology-inspired service models designed for the digital era are taking center stage. A global view of these matters is critical to growth for innovative industry leaders. I look forward to sharing NICSA’s views with conference attendees.
NICSA has enjoyed a long and successful partnership with ALFI and its members. Events such as ALFI’s Global Distribution Conference are critical to serving the global asset management community as it meets the challenges posed by increasing globalization. Collaborating on innovative approaches to global distribution is certainly in line with the NICSA mission. Serving the distribution community within the global asset management industry has been a focus for NICSA in recent months, and will continue into 2019. Our organizaton recently formed two new working committees: a Product & Distribution Committee and a Data Analytics Committee. We look forward to sharing the good works of these important groups with our own membership and the ALFI community in the coming months.
#Nicsa Updates
Join us in Florida from April 3rd to 5th to address the industry’s most important issues head on. Let NICSA help solidify your 2019 business planning. Hear from all perspectives—asset management firms, broker dealers, and an extensive group of firms that include technology, law, and service firms that support the industry. We’ve got a line-up of 40+ expert speakers and 12+ hours of educational content.
Here are a few conference highlights:
Jim Fitzpatrick, President of NICSA weighed in on the mission ahead: “the Strategic Leadership Forum continues to expand its reach to provide relevant information to all segments of the NICSA membership. We are pleased to work with a talented group of industry executives, headed by committee co-chairs Larry Fahey, Vice President and Director of Corporate Operations at Eaton Vance and Lynette Turner, Managing Director at BNY Mellon Asset Servicing, to develop valuable content for our membership. I encourage all industry participants to join us in April to actively engage in the development of best practices within the industry we serve.”
NICSA is committed to bringing together today’s top thought leaders within the asset management industry to create an optimal opportunity for collaboration, networking and idea sharing.
It’s been a decade since the global financial crisis, and the industry remains in the midst of a changing regulatory environment. NICSA members heard a panel of experts discuss the future of these regulations during NICSA’s 2018 Strategic Leadership Forum. The panel, moderated by Don Andrews, Partner & Global Practice Leader for Risk and Compliance at Reed Smith, featured leaders from the U.S. Securities and Exchange Commission, SIFMA and Hughes Hubbard & Reed LLP.
“There’s been a change in administration, there’s been a change in focus and there’s a lot of talk about doing away with regulations,” Andrews said, addressing Sarah ten Siethoff, Deputy Associate Director at the SEC. “From your vantage point, is there any change in approach at the SEC?”
“A lot of the SEC’s day-to-day work doesn’t really change from chairman to chairman or administration,” ten Siethoff said, not representing the view of the SEC but rather her own personal experience. “If you look at our compliance and inspection division’s 2018 exam priorities, if you go through them and compare them to the last couple of years, you’ll see there’s really a lot of continuity there.”
Topics like retail investor fraud, senior investors and cybersecurity are essentially timeless. “People often tend to focus on particular points where there is a change, but really what we see a lot of is continuity,” she said.
Will Leahey, Vice President & Assistant General Counsel at SIFMA, discussed his organization’s concerns going into 2018 and beyond. “We’re really focused on how coordination between the SEC and the DOL is going to shake out,” he said. “There’s some focus on whether those two regulatory agencies can cooperate in a way that gives consistency for the underlying customers and investors.”
Panelist Roel Campos, Partner at Hughes Hubbard & Reed LLP, previously served as Commissioner SEC. He was sworn in on August 22, 2002, and served under three different chairs until 2017. “[SEC Chairman] Jay Clayton stating that his concern is retail investors is really kind of phenomenal,” Campos said. “His very clear, stake-in-the-ground, ‘I don’t want scandals, I don’t want problems,’ is really a major statement.”
Protecting Our Seniors
Andrews asked the panel what specifically is being done to protect retail investors, including seniors.
“The flavors of fraud change over time,” ten Siethoff said. “You might see some change in the particular way that people are trying to take someone’s money, but there’s always someone out there, unfortunately, who’s trying. Focusing on fees and expenses, that people are being properly charged what they’re told their charged, that people [are] aware of what they’re getting into — that’s a very bread-and-butter issue and something that our examiners are constantly looking at.”
Leahey said financial advisors are on the front line of identifying cognitive decline in clients. “SIFMA has had a deep focus on this with the close collaboration of the SEC, particularly FINRA and the state regulators, which recently provided flexibility to stop money transfers if they’re concerned about a senior experiencing cognitive decline or unwittingly participating in fraud by one of the people who has control over them,” he said.
The Rise of Cryptocurrency
The panelists also discussed investor protection in the context of cryptocurrency. “There’s a division to be drawn between Tier 1 cryptocurrencies – like Bitcoin, Ethereum and Ripple – and initial coin offerings, which appear a lot like securities and are based upon the technology of more popular crypto assets,” Leahey said. “But there’s no way to fit these currently into the custody environment.”
Campos said cryptocurrency is just one of many applications of blockchain. “All of this begins with blockchain, which are distributed ledgers,” he said. “It might be a disruptive and transformative technology, and some think it will be more impactful than the invention of the Internet.”
The beauty of blockchain is that it’s immutable and transparent, Campos said. “Anyone with the right program can look and see the historical chain of blocks and what the transactions are — therefore, it’s self-regulating,” he said. “The challenge is for the regulators to nurture a new technology, which could be game-changing, and at the same time keep scam artists from running amuck and hurting investors.”
Note: Although the observations contained in this work represent the best thoughts of the individuals comprising the NICSA event panel, they do not necessarily reflect the views of NICSA or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.
Asset managers gained valuable insight on how to capture advisors’ attention and leave a lasting impression during a recent #WebinarWednesday presentation on the topic.
Meredith Lloyd Rice, Vice President at Cogent Reports, Market Strategies International, moderated the session. “I’ll be sharing highlights from two of our syndicated research products: our Advisor Brandscape® and our Advisor Touchpoints® reports,” she said. “This way, attendees can gain an understanding of not only the challenges faced by asset manager today, but also opportunities to engage with advisors.”
Data from both reports were derived from 2018 surveys of registered advisors. From a broad perspective, Rice said advisors have shifted further toward increased reliance on fee-based compensation, and RIAs continue to make up the vast majority of that compensation through asset-based fees.
The research pointed to consolidation in terms of the number of relationships advisors are maintaining with mutual fund providers, underscoring the importance of building an optimal communication strategy.
“Advisors receive a lot of information from financial services providers,” Rice said. “When we asked advisors to think about the communications they receive in a typical month, they report an average of 96 touches across all financial services providers, with emails representing over half of those communications.”
While email remains advisors’ No. 1 preferred communication method, webinars and social media are gaining traction in terms of overall importance.
“Another thing we want to point out is that advisor preferences vary based on distribution channel, meaning that providers can better target advisor engagement and outreach efforts by aligning their communications to the unique preferences of each channel,” Rice said.
For example, the survey results indicated that RIAs are among the most digitally-savvy producers and thus likely to respond well to webinars and other digital forms of communication, while producers in national and regional channels are more likely to prefer external wholesaler visits. That said, Rice noted that wholesaler interactions were shown to spark the greatest life in brand consideration.
Overall, survey results indicated that successful wholesalers often make an effort provide content that is customized to advisors’ unique business needs. “We see the best wholesalers are described as being consultative, sharing value-add and best practices, and they’re striving to recommend investments that complement advisors’ current books of business,” Rice said.
“In order to attract RIA interest, firms should seek to strengthen engagement,” Rice said. Asset managers identified as drawing the most RIA interest have very strong digital engagement platforms.
NICSA thanks Cogent Wealth Reports for sponsoring this webinar.
Industry powerhouse Carla Harris, Managing Director and Senior Client Advisor at Morgan Stanley, shared “hard earned and hard learned” pearls of wisdom from her 32-year career on Wall Street during NICSA’s Strategic Leadership Forum this month.
“I dare say that I’ve learned a few things about not only surviving, but more importantly, thriving, in the seat that you sit in or the seat that you aspire to sit in,” Harris said. “And frankly, that’s what the pearls are all about.”
Harris shared three main pieces of advice with the audience:
“Pick three adjectives that you would like people to use to describe you when you’re not in the room that are absolutely consistent with who you really are — however, pick three adjectives that are also valued in your organization,” Harris said. “Then, you must have consistent behavior around those three adjectives, and you must use this language in your environment, particularly when you are talking about yourself.”
Harris said the most valuable currency is that of relationships, which never experience diminishing marginal returns. “At a minimum, you must have a relationship with every seat that touches your seat,” she said. “If the only person that knows you’re doing a great job is your boss, then your ability to ascend is going to be vulnerable. It’s your job to make sure as many people as possible in the organization is aware of your outsized contribution.”
Harris also provided her perspective on diversity and inclusion within the industry.
“I find it interesting that 30 years into this conversation around diversity and now diversity and inclusion, I still hear people say it’s the right thing to do and with all due respect, what’s most important is that it’s the commercial thing to do,” she said.
“You must start with a lot of different people in the room to get to that one idea that will allow you to innovate and capture and retain a leadership position in your industry — that is the business case around diversity.”
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According to the report issued today by ALFI to mark ALFI’s 30th anniversary, UCITS assets have the potential to grow at a compound rate of 5% in the next three decades, with average annual net sales flows rising from €201 billion in 2017 to €860 billion in thirty years. As long as certain risk factors are addressed, this growth rate would quadruple UCITS’ asset base to over €42 trillion by the year 2048.
The report, which was produced by Broadridge, also predicts that Europe’s Capital Markets Union and local initiatives to enhance long-term savings to meet demographic challenges will encourage future growth in Europe. Outside Europe regulators are likely to wish to protect their own markets, but the strength of the UCITS brand means that the UCITS structure is most likely to be the adopted vehicle.
Denise Voss, Chairman of ALFI, says “The report, which looks at the development of UCITS since they first came into being in 1988, demonstrates the success of the brand in terms of growth of assets and its global reach, as well as its potential for solving the challenge of changing demographics as the dependency ratio doubles over the next 30 years to reach 51%[1].
She continues: “The global footprint of UCITS bodes well for the coming decade as populations in many of the newer markets are encouraged by their governments to take on the mantle of pension provision. Regulators in most non-European countries will wish to build a local fund franchise, but the regulatory structures they use are most likely to be based on UCITS. This can only be good news for UCITS when doors begin to open.
“We can also expect UCITS to be a key beneficiary of the launch of the Capital Markets Union, which aims to increase investment and the choices available to retail and institutional investors and migrate some of the vast pool of deposit savings into managed investments.
“However, we recognise that further work must be undertaken by the industry to ensure that UCITS fulfil their role of providing long-term financial stability for people and economies. A key element is to set in place effective financial education so that people both recognise the need to build their long-term wealth and know how they are going to achieve that.”
The report outlines how:
Diana Mackay, Managing Director, Global Distribution Solutions of Broadridge, concludes: “The success of the UCITS brand is remarkable but the industry cannot afford to be complacent. Like any brand it must be guarded by all those who benefit from its recognition because any lapse will be destructive not only to the pool of assets invested in UCITS, but potentially to the investors that have been persuaded to believe in the brand.”
Note: Although the observations contained in this work represent the best thoughts of the author, they do not necessarily reflect the views of NICSA or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.
[1]European Commission, The Demographic Future of Europe – from Challenge to Opportunity. 2006
In an increasingly globalized economy, investment firms must embrace a global perspective when it comes to compliance with regulations worldwide. But doing so is no easy task.
“When implementing a compliance program in a global environment, there’s a number of challenges that organizations face, from standardization issues in terms of contractual agreements and practices to issues with respect to cross-border offerings,” said Nicholas D’Angelo, Director, Financial Services, PwC.
D’Angelo moderated the panel, in which asset managers and financial service providers from Citi, Franklin Templeton, and Putnam Investments discussed challenges in the current environment, organizational frameworks, and leading practices.
THE CHALLENGES
Stephanie Tyler, Manager, US Transfer Agent Global Risk & Control Compliance at Franklin Templeton Investor Services, LLC, zeroed in on communication challenges.
“It’s important to keep communication flowing between the different groups you deal with, whether it be legal, compliance, operations, or sales,” she said. “But that can be challenging in a multinational organization where you’re dealing with different time zones, language issues, locations, and environments, so I think that’s why communication always bubbles to the top,” she said.
Tyler also noted that it’s also difficult to hire qualified staff in some emerging markets, especially where talent pools are limited and highly competitive. “I think that goes hand-in-hand with how you don’t always know where the regulatory regime in that emerging market is going,” she said. “Sometimes it can evolve very rapidly or sometimes it could move very slowly, and you don’t know how staffed do you need to be to meet regulatory needs.”
Mark Trenchard, Director of Operational Compliance at Putnam Investments, said it’s also a challenge to understand operational costs. “It’s difficult to fully understand and appreciate what some of those costs, often driven by regulatory obligations, might be,” he said. “Are you deriving a benefit from conducting business or activities in some of these jurisdictions?”
Trenchard added that there’s typically a desire to adopt corporate-level policies throughout the company. But when you’re engaged in business activities in different jurisdictions, merging systems can be quite the challenge.
“We deployed a new HR system and, and the reality is that we have non-U.S. employees and there are different labor laws, so there’s different functionality that needs to be supported in those systems to effectively work with our non-U.S. associates through a common system that works for everybody,” he said.
LEADING ORGANIZATIONAL FRAMEWORKS
Diana Hanlin, Senior Vice President, Compliance, at Citi, said her organization takes a hybrid approach to its global compliance team. “We’re managed as a centralized function, but we have regional groups that have some autonomy and are able to adapt to local markets, which I think is critical,” she said. “The regional groups have to report back to that centralized function, keeping in mind that their goal is to understand the rules and regulations within those markets.”
Tyler said Franklin Templeton’s Corporate Policy Oversight Committee meets on a quarterly basis to share insights.
“We’re working toward consistency in our policy documentation, our approach, potential testing, and how we’re running programs in each of the different regions,” she said. “It’s great to have the chance to talk to not only the compliance folks but also legal representatives and business units to understand some of the challenges they see on the ground.”
Tyler added that flexibility is key in this era of sweeping regulatory change. “I think it’s important not to be married to your current structure or approach,” she said. “You may need to do a course correction along the way, so make sure you can make those changes fairly fluidly.”
Trenchard agreed. “There are scenarios where there’s a new requirement in a particular jurisdiction that may cause you to reexamine the whole activity itself and whether you want to continue to do business there,” he said. “It’s is important to evolve and work with your business partners to fully understand everything that needs to be done to operate effectively and profitably in a particular location.”
From a compliance and risk standpoint, D’Angelo said the last thing asset managers need to do is spend copious amounts of time gathering data — instead, they should focus on analyzing that data. And that’s where technology comes into play.
Tyler said Franklin Templeton is always open to exploring new tools, though finding a centralized platform is challenging. “We sometimes have to use different platforms to meet different regulatory market needs, so that is an ongoing technology challenge for us, especially in different regulatory markets that may be less mature,” she said. “But you just have to keep your eyes open because something could come on the market that will help you centralize those needs.”
NICSA members will have the opportunity to hear the unique perspective of an industry powerhouse in an intimate setting during the Strategic Leadership Forum at the Sawgrass Marriott Golf Resort and Spa in Ponte Vedra Beach, FL this April.
Carla Harris is the Vice Chairman, Managing Director and Senior Client Advisorat Morgan Stanley. Carla will share her unique perspective on multicultural innovation, the challenges facing today’s asset managers, and provide advice to younger members of the industry. Attendees will hear “Carla’s Pearls” – tools, strategies, and pearls of wisdom honed by her own experience – that have become the centerpiece for her many speeches and television appearances.
In her current role, Carla is responsible for increasing client connectivity and penetration to enhance revenue generation across Morgan Stanley. She formerly headed the Emerging Manager Platform, the equity capital markets effort for the consumer and retail industries and was responsible for Equity Private Placements. In her 30 year career, Ms. Harris has had extensive industry experiences in the technology, media, retail, telecommunications, transportation, industrial, and healthcare sectors. In August 2013, Carla Harris was appointed by President Barack Obama to chair the National Women’s Business Council.
Carla is author of the hit book “Expect to Win” and her newest book “Strategize To Win.” She is also an accomplished singer who has delighted audiences around the world, performed sold-out concerts at Carnegie Hall, and released several albums.
Harris will share her insights with the NICSA membership at the Strategic Leadership Forum in Florida this April.
We encourage all NICSA members to take advantage of this unique opportunity to exchange business perspectives with leaders and innovators in our industry. Hone your leadership skills at the NICSA SLF, April 3-5 in Florida.
Affluent millennials — defined as individuals born from 1982 to 2000 who have $100,000 or more in investible assets — are a nascent but quickly expanding population, and learning how to successfully engage them is of increasing importance to asset management firms.
According to a recent study by Cogent Reports, more than a third of U.S. adults qualify as affluent investors. Millennials represent a whopping 15% of the total affluent investor population and nearly 20% of affluent investors with $100,000 to $500,000 in investible assets.
“These aren’t your average millennials,” said Linda York, Senior Vice President, Cogent Reports, Market Strategies International, during a recent #WebinarWednesday event. “The average household income of the affluent millennials … is upward of $228,000 per year.”
York kicked off the educational session, which explored insights on working with the next-generation client, with a review of the Cogent Reports research.
“One of the striking findings from our report this past year was that affluent investors, and in particular, affluent millennials, are searching for new places, new ways to invest their money other than the traditional mutual funds, CDs, and bank accounts,” she said. “In fact, we found that the millennial population is driving up the use of ETFs, separately managed accounts (SMAs), hedge funds, and other alternatives.”
The report also revealed that affluent millennial investors receive more than three times the typical outreach volume every month compared to all other generations. They also received more touches than ready-to-act investors.
“Those are the folks that are in the shopping mindset – but even in comparison to them, the millennials are showing much more activity in terms of the number and types of touches that they’re reporting and receiving from financial services providers,” York said.
Millennial investors are also eager for information and most open to digital communication. “We’re seeing that these digital touchpoints can be a real win in both situations: for the financial providers as well as their potential customers.”
Matt Schiffman, Principal, Broadridge Data & Analytics, highlighted findings from his organization’s national research study on understanding the next generation of investors.
“We found that the vast majority of millennials, roughly 69% that we surveyed, do not have or use an advisor,” Schiffman said. “And the gender split overwhelmingly is dominated by men, underscoring the need to bring more women into the conversation.”
When compared to other generations, Schiffman said millennials display vast differences in their views and attitudes toward financial advice. In terms of asset growth, millennials stand in stark contrast to their parents. “For them, it appears to be less about the stock market and more about entrepreneurship and buying into a business,” he said. “They’re also way more confident in robo-advice than previous generations.”
Millennials also anticipate receiving an inheritance more than any other generation. “Millennials have a measurable level of optimism with regards to inheriting some money, but given numerous studies on boomer spending habits, in concert with rising retirement costs like healthcare, you have to wonder if this is a well-founded, solid plan,” Schiffman said.
“Recognizing and acting on these emerging millennial trends will position financial advisors and the industry to attract and keep this huge generation of clients at a critical time in their wealth creation and loyalty-building stage,” he concluded.
NICSA would like to thank Broadridge for sponsoring this webinar.
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