Recent surveys offer a mixed picture between what advisors are selling, what money managers are promoting and what consumers are buying

By D. Bruce Johnston, President, DBJ Associates

According to Schwab Institutional’s recently released Independent Advisor Outlook Study, 90% of independent advisors added new clients in the third quarter and intend to take more risk with their client’s assets. These advisors are seeing more opportunities in equities, and are signaling moves away from cash and fixed income. Nearly one-third say they plan to invest more in US small cap and large cap equities over the next six months. Only 25% plan to invest more in fixed income, down from January’s high of 42%, and just 8% plan to hold more cash in client portfolios.

The better mood over domestic equities is also accompanied by other positive themes:

  • Market Outlook: Advisors’ six-month outlook for S&P 500 is most optimistic in two years.
  • Economic Outlook: four in 10 RIAs expect current recession to end in less than 12 months.
  • Client Outlook: Almost half of new assets coming to RIAs left full-service firms.
  • Investment Outlook: Intent to invest more in U.S. small-cap equities at all-time high for RIAs.
  • ETFs remain the favorite investing vehicle for independent advisors with 83% currently using exchange traded funds and 39% planning to use more ETFs.

If I’m a mutual fund company creating product for delivery through the independent advisor market the Schwab study makes it pretty clear as to the products I should be developing to meet market demand. That is until I reviewed the results of a July 14, 2009 Ignites poll titled: “Do you believe your firm is positioned in terms of product choices and service quality, for a post-crisis investment landscape?”

The Ignites poll, although a much smaller sampling of 241 participants and conducted just two weeks prior to the Schwab Study, provides a very different view.  Three-quarters of the respondents believe their firms are well positioned to deliver the product and services that will meet the post-crisis demands and needs of investors.

And what are those products and services? Investment firms are developing retirement income funds that seek to provide steady income and stability through guarantees in addition to funds that are less correlated to the equity and fixed income markets.

Could there be a bigger disconnect between the investment firms, independent advisor and their customers?

Now to confuse matters more KPMG published a study in the same time frame as the others.  According to the KPMG study of global investment executives, 65% of the respondents said their firms’ top management lacked vision and posed a major obstacle to change during a financial recovery. The study also revealed that 90% of the respondents had no confidence in their firms’ upper management.

Confused yet? What’s wrong with this picture? Actually nothing because it fits right into how it should work if you are still employing yesterday’s marketing concepts and approaches.

You know what I’m talking about – firms relying heavily on the sizzle of the message and the brand imagery; firms claiming that they know what’s right for the customer because obviously they don’t know what they want; and firms developing products and messaging in-house without consulting with their customers.

Note the contrast in how successful firms of the future will approach marketing versus those of yesterday.

  • They will listen and respond to their customer’s needs, not their own needs. 
  • They will admit they don’t know what is exactly right for their customer’s but will engage their customer’s constantly in order to make adjustments to products to meet those needs. 
  • They will admit that product is important, which is why the need for constant communication through the organization in order to be successful.

Social media will allow firms to create and leverage functional customer intelligence which will be the difference between giving customers what they presume they want and what they actually need.  Firms that get this right will be viewed as Thought leaders allowing them to Expand their Market Presence and through Measured Results; they will know when they have achieved success.

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