Blogs 2020 12 Paige C. Scott
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November 2020

What is your playbook for “Insti-Retail”​ Sales?

It’s foolish for institutional asset managers to ignore the growing wealth/retail segment. Over the next five years, these assets are expected to grow by $45+ trillion—more than twice the growth of institutional.* Institutional managers will no doubt continue to generate attractive revenues managing defined benefit (DB) assets; however with the DB segment slowly eroding, the push to diversify assets has never been more urgent. Continued headwinds for active managers struggling with market volatility, geo-political uncertainty, fee pressure and cheaper passive alternatives have shifted the diversification game into overdrive.

Where are the flows? Answer: defined contribution (DC) and wealth/mass affluent segments.

One of the most common questions I get from existing and prospective institutional clients contemplating or structuring an approach to financial institutions and intermediaries is, “how will we ever compete with firms at scale?” The answer is that you don’t want to compete with them using their playbook. You need to use your playbook.

Let’s focus on how institutional managers might structure an approach to the wealth/retail channel:

Get Internal Buy in:

Going to market in the wealth/retail space means ensuring you get buy in from key internal constituents. Specifically, identify which investment professionals (PM’s) embrace the idea of raising money in these segments and understand the different vehicles and pricing requirements often expected from these intermediary platforms. Not all PM’s are interested in “giving up” portfolio capacity in exchange for higher volume AUM at lower fees. It may take one or two “adopters” who buy in to the diversification strategy (strategy style and capacity will undoubtedly play a factor in these decisions) …then getting buy in with compliance, I.T., legal and other distribution colleagues completes the picture.

Develop Integrated Consultant Relations Strategy:

As an institutional manager, presumably there is a consultant relations strategy already at work in the institutional channel. Ensuring this effort is augmented with individuals and/or a strategy catering to growing presence of consultants in the OCIO, RIA, private bank, B/D and family offices where their research teams now influence these flows.

Offer Relevant Vehicles/pricing:

Make it easier for your prospective intermediary clients to do business with you. Consider offering model portfolios, ETF’s and mutual fund vehicles with competitive pricing to attract relevant professional buyers. Financial advisors (FA’s) are increasingly outsourcing investment management to model portfolios. These vehicles allow FA’s to better customize underlying funds (managers) and control tax implications.

Think Lean & Mean Sales Team:

Often managers believe they must hire a fleet of wholesalers to be effective in the retail/wealth space. The reality is that most institutional managers will offer only a select handful (maybe just one or two) of specific strategies. There is no need for a massive sales team. Instead, hire 2-4 regionally focused sales professionals with strong investment depth and portfolio construction knowledge to surgically cover only the most relevant platforms, FA’s and their clients. This sales team will be complimented with 1-2 people covering strategic accounts (e.g. “key accounts” or “national accounts”) to manage the largest, most complex platforms and gatekeepers.

Enable With Technology:

Institutional asset managers can learn a lot from the technology prowess of some of the larger “at scale” managers. This does not mean you have to have the most expensive or extensive technology; however, there must be an investment in data and technology to enable sales teams to know when, where and what they need to do to be in front of FA’s and intermediary gatekeepers. Even having a CRM and reporting systems that ensures internal teams are coordinated and updated with “real time” information will allow for far more effective coverage and servicing of these clients.

With a focus on these key elements, an institutional manager can effectively build a playbook based on factors that are customized to each manager’s strengths. It is not necessary to throw resources at the wirehouses, for example, when you realize the strategies or vehicles you offer may not be relevant in the face of continued manager consolidation. Instead, developing a playbook that is unique to each manager’s value proposition is by far the best and most effective way to compete.

#investmentmanagement #assetmanagement #institutional sales # executivesearch

*”The Institutionalization of Retail” – A whitepaper by Paige C. Scott and Amanda Tepper