2012 has been a good year for John Hancock Funds. In October, the firm won both Mutual Fund Education Alliance and Money Management Executive NOVA awards for retail and advisor communications and innovation in customer experience, respectively. Meanwhile, institutional sales have been growing strong, up 44% over the same day the year prior as of June 22, and Defined Contribution Investment Only product and service sales were up 49% compared to the year prior.
At the forefront of Hancock's retirement services business is Todd Cassler, senior managing director and head of institutional sales. In an interview with Money Management Executive, Cassler talked about how Hancock has established itself as a relevant provider in DCIO products and services, as well as the challenges Hancock looks to meet in the marketplace going forward.
John Hancock's DCIO sales have grown considerably from 2010 to 2011. To what do you attribute your success, and how do you plan to maintain these figures?
We've done a good job with distribution excellence, which is advisor and platform segmentation. And we've continued to deliver high quality value-add programs, and will continue to build on that and bring out new material that is top-of-mind for retirement advisors. We will continue to focus on our segmentation, targeting those advisors that are doing the majority of their business in the retirement space, and refining platform segmentation.
The fourth thing that we'll focus on as it relates to platforms is those outside firms that are making recommendations as a co-fiduciary. So you have firms like Wilshire, Morningstar, Mesirow that are building line-ups for plan sponsors or helping to build line-ups for plan sponsors. So targeting those firms from a due-diligence standpoint will be an area we'll spend some time on.
What are some patterns you've observed among advisors in the retirement space, and what does that mean for the business?
What we are seeing is the lines between retail and institutional are becoming grey. You have consultants that are making recommendations into the retail space-for example, you have Wilshire working with Ameriprise. You have financial advisors that are working with endowments and foundations, large corporate entities from a retirement perspective. You have RIAs that are bigger on a discretionary basis on some of the broker-dealer platform wrap programs.
And so firms starting to think about how do they deploy their distribution resources and how do they provide materials to support that changing dynamic in the business. You're seeing that based upon how firms are lining their institutional teams, the types of materials they're making available in various spaces, how they create communication across their different channels of distribution.
One growing trend in retirement is the use of alternatives in client portfolios. How is John Hancock uniquely positioned to help advisors trying to select the right alternatives for client portfolios?
Advisors struggle with lack of product because there's not a tremendous of product in the alternative space in the '40 Act structure. How do they do due diligence on that product because it may not have a long track record, it may be from a firm that they're not familiar with, the amount of data that's available is limited, the firm's willingness to be transparent from an investment perspective may be challenged? What are those correlations of that strategy to their existing managers in the alternatives space and from an overall perspective within my account.
And then the last piece is, do they fund it from equities or fixed income, how much do they allocate to it, and then on an ongoing basis how do they manage that position in the overall portfolio?
Because of our asset allocation franchise and expertise in the alternative space, we can help with portfolio construction and guidance around how you use these in your individual portfolios. Because we're a sub-advised mutual fund provider, we have our own internal due diligence team that can go out and find the very best in a particular category and then make them available in a retail '40 Act structure.
And then the last thing as it relates to helping advisors on the content side, because of our sub-advised structure, we can go out to our partners and provide material and content as it relates to how the product is used institutionally.
You mentioned platform segmentation, and differentiating between open-architecture platforms, platforms with recommended lists determined by research teams, and companies offering co-fiduciary services. Could you talk about how you address those different types of platforms in the retirement space?
It's very important to focus on the individual platforms because if your products are not on the platforms, it becomes very difficult to be successful. As far as how we are supporting it, for those platforms that have a research component, we treat those just like we treat any other analyst and gatekeeper team, whether it's a consultant, a broker-dealer, a bank trust department.
Our goal is to provide them access to portfolio managers so they can make educated decisions from a manager due diligence perspective, provide them high-quality, ongoing reporting capabilities, tools or materials so they can evaluate what's taken place over the quarter. That is, institutionalize the relationship, which is giving them access to things they otherwise would not have access to. Another example of that is giving them access to folks that are on the ground in Asia.
Hancock has been striving to move up-market. What progress have you made in this regard, and how do you plan to continue this effort?
You have to have good quality product, and you have to have the appropriate share classes and structures that high-end retirement advisors are looking for. So the R6 share class (offered without sales charges) for example, because they're working with larger plans, they're going to want very specific things from a product-pricing perspective. Second is: What kind of programs are you making available from a value-add perspective? So that's part of our strategy is to make sure the value-add programs are designed and targeted to the topics they're focused on.
And then the last thing is providing the ongoing product resources for them to compete and be successful. So the same things we would provide to an institutional consultant, we make available to the high-end retirement advisor.