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Funds Cut Advisor Programs


Belt-tightening measures throughout the fund industry are squeezing wholesaler programs designed to support independent advisors and financial planners out of existence, industry consultants say.

In the past six to 12 months, a growing number of funds have eliminated value-added programs that offer independent advisors practical advice and information on how to develop their business, said Chip Roame, a financial industry consultant with Tiburon Strategic Advisors of Tiburon, Calif.

Those programs offer advisor seminars on how to organize their businesses and best practices reports with case studies outlining how top advisors sell to their clients. The programs also often provide advisors marketing support, helping with direct mail campaigns and customized literature with the fund companies' product information, he said.

However, as sinking markets shrink fund companies' assets and revenues, more firms are scrapping the programs at a time when independent advisors are fielding more calls and inquiries from clients wondering what has happened in the markets and more specifically, to their investments.

That has created a window of opportunity for fund companies. By keeping programs that help advisors retain and attract assets, funds can strengthen ties with independent representatives.

While performance is ultimately the deciding factor in any advisor's decision to push a fund, a company that offers value-added programs for its independent representatives can differentiate its product from other funds with similar performance as well as develop loyalty among advisors, said Roame.

That's important because most independent advisors are running their businesses on their own. While large broker/dealers and wirehouses offer their representative in-house support, independent advisors are typically running small offices and don't have that network, he said.

Meeting Independent Needs

Moreover, by analyzing how successful independent advisors sell product, fund companies can tailor value-added programs to meet successful representatives' needs, said John Bowen, CEO of CEG Worldwide, a consulting firm for independent advisors, and editor-at-large with Financial Planning, a publication for independent reps. (FP is owned by Thomson Financial, publisher of MFMN).

But in slashing budgets, many funds cut spending on outside consultants, Bowen said. Because many of those programs were designed and implemented by consultant groups, they have been scaled back as a result of the budget cutting, he said. Since the market drop off, most consultants have seen their businesses shrink by nearly a third, he said.

That's a problem because fund wholesalers do not fully understand how to implement value-added programs for independent advisors, said Edward Sierawski, president of Sequoia System International, a consulting firm based in Naperville, Ill. that provides sales training to financial advisors and wholesalers. "The problem is the wholesalers think that the product is the program and not the actual fund," he said.

More importantly, fund wholesalers aren't catching on to the idea that the sales process needs to center on the client's needs, not the effectiveness of a value-added program, he said. Wholesalers can have a comprehensive program for independent advisors and if the product they offer is not suitable for that advisor's client, the program is worthless, he said.

And while a handful of fund groups have made initial steps toward offering value-added support programs, the fund industry is already trailing the managed account industry which is more effective at meeting independent representatives' needs, Sierawski said.

Still, fund companies are making efforts to help advisors sell their products. For instance, Carmel, Ind.-based Conseco offers a program called the "Speakers Bureau." The program features some 12 different speakers ranging from business consultants to motivational speakers. The program is intended to offer practical advice, but also to provide interesting speakers that independent advisors can invite their clients to hear, said a company spokesman.

Keeping Well Informed

In addition, Conseco attempts to keep its independent reps well informed by having frequent contact with portfolio managers who discuss their investment strategy and market trends.

And the firm's wholesalers began using a new sales tool that allows them to give advisors a more in-depth view of a fund. That product was developed and launched last October by Wiesenberger, another division of Thomson Financial.

It allows the fund wholesaler to develop sales presentations that highlight a fund's strengths even if performance is lagging. For instance, rather than showing a fund's one-, three- and five-year performance, the product can show the number of consecutive months the fund outperformed its benchmark or its overall tax efficiency, according to Wiesenberger senior fund analyst Ramy Shaalan.

The product, FundEnterprise, is not intended to help independent advisors retain assets, but by showing advisors how they can accentuate a struggling fund's strengths, fund wholesalers can help advisors address some of the issues their clients may have in the midst of the bear market, Shaalan said.