As clients have become better informed and sophisticated, so too has the asset management industry, with more demanding gatekeepers, a flood of products, competition and tougher regulation forcing firms to demonstrate value and innovate, industry heads say.

"People that invest with you are not only thinking about what you're doing today, they are comfortable that down the road, you're going to be there also," Robert Reynolds, president and CEO of Putnam Investments, told the audience at FundForum USA 2014 in Boston last week.

"The market will support good performance no matter where it comes from," he notes. "I still think if you can truly add value versus a benchmark, or if you can create product that manages risk, there will always be a buyer for your product. The second you stop adding value, you're out of business."

As the conference's keynote speaker, Reynolds says the asset management industry needed to do more to convince American workers to save for retirement. Since the economic and fiscal crises of 2008 and 2009, he adds, the global market has been underweighted in equities, and in need of liquidity. "What's going to bring those people back? It has been a phenomenal market, but most people have missed it."

Internally, the industry has already seen changes brought by the fiscal and economic crises, noted a number of speakers. One is a shift toward greater selectivity of products among firms.

"Advisors are going to be using different brands, and you're competing for a small share of an advisor's book," says Ben Huneke, managing director and head of investment solutions at Morgan Stanley Wealth. "The focus should be on your key strategies and key products that are best for the advisor."

Part of better product sales, Huneke says, is gaining a more intimate understanding of your client and acknowledging that a sale will not encompass an entire product suite.

"Advisors now are multistate entities, with multiple millions of assets under management, and the old brokerage model of calling clients just doesn't work on that scale," he adds. "It's important to talk to the team and know who the right person is to talk to about coverage. It used to be that you could do a lunch and get 15 tickets out of it. Not anymore."

Such a change has meant sales teams now have to possess deeper market knowledge, notes Carter Sims, head of intermediary distribution in North America for Schroders. "Three-quarters of our team are CFAs or CIMAs," Sims says. "They need to know the product very well. You need to be further in the conversation with your client, as to where the product would fit in their portfolio."

In agreement was Kimberley D. LaPointe, executive vice president and head of national accounts at Prudential Investments, who says her firm continues to make investments in its wholesaler teams. "These are folks who can have a conversation about the market first, and products second," she says.


Sales pitches and team members aren't the only things being refined, the group notes, as products themselves now need to be calibrated to each prospective client.

"Product lines in the past were trying to be everything to everyone," says Scott Brady, head of U.S. mutual funds at Merrill Lynch. "Now, every firm has a unique business model, and you have to understand what the provider needs are. The closer you get to your distribution partners, the better you will know what they need."

"You can't come in and say we're a big investment company and say, 'This works better for you in this situation,' " adds Brad McMillan, CIO of Commonwealth Financial Network. "Asset management firms at the end of the day want to serve clients and make money doing so. A solution for Commonwealth might not work for Merrill Lynch or Morgan Stanley."

Examining the industry from a broader perspective, various company heads note how the growth of alternative investments and globalization of wealth is directly impacting asset management firms.

There are a number of factors affecting the marketplace right now, says Niket Patankar, senior vice president and global head of banking and financial services at Sutherland Global Services, including extreme volatility, low yields in fixed income sides, changing demographics, increased regulation, and even mass affluent clients demanding products that were once reserved for high-net-worth clients.


The effort to capture newly created wealth in the world - $4.1 trillion, according to research presented by Patankar - has created a shift between investment strategies a decade ago and today, with traditional core assets declining and supplanted with a demand for specialties and alternates.

His peers voiced caution on alternatives, though. In the push for non-traditional strategies, says Ted Truscott, CEO of global asset management at Columbia Management, a number of illiquid entities are being considered liquid. "The industry has seduced itself into thinking liquidity is free, but it is not," adds Truscott. "What solutions people bring to you is important."

There is still debate within the industry on what can be considered liquid alternatives, says Lucas Turton, CIO of Windham Capital Management. "There are different perspectives and definitions of what liquid alts means," he adds. "There is no one perfect definition. It's very hard to define liquid alts."

And there is skepticism about their benefits, says Tim Clift, chief investment strategist for Envestnet. "Demand is slow in the alt space," he says. "The pitch is add this because someday you'll need it. It's a hard sell. Do they actually provide that downside protection? Time will tell. What we need is a big correction for the alternative trend to spike."

Patankar notes that of the forecast for global new wealth generation, which he says is pegged at $46 trillion over the next five years, half is expected to come from the Asia Pacific region.

Such increased globalization of wealth has already impacted the asset management industry, Truscott states, noting the unique demands of sovereign wealth funds and the rise of Islamic finance. "Our clients are more diverse and found in other parts of the world; some have problems that we have always faced, and some are very different."

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