Dreyfus' New Year's Resolution
January 6, 2003
Stephen Canter is the chairman and CEO of Dreyfus Corp. of New York, with $182 billion in total assets under management, and vice chairman of Mellon Financial Corp. of Pittsburgh, which acquired Dreyfus in 1994.
Canter joined Dreyfus in 1995 as vice chairman and chief investment officer, became president and chief operating officer in 1999, and attained his current status May 2001.
In charge of the strategic direction of the firm's retail and institutional mutual funds, including sub-advised assets and separately managed accounts programs, Canter recently spoke with Mutual Fund Market News' Editor-at-Large Lori Pizzani about the firm's initiatives for the new year.
MFMN: What will be Dreyfus' top theme for 2003?
Canter: Organic growth, something that has to be foremost, the real driver of our strategic development.
We cannot be dependent upon acquisitions. We have to put a stake in the ground and ask: What are the strategies that will give us organic growth going forward?
We can't do everything. The greatest risk is losing your focus. We need to spend a lot of time analyzing the environment, then assess what we think should be the three-to-five strategic things to pursue.
MFMN: What, then, is your focus for the coming year?
Canter: We will place more emphasis on our separately managed accounts business, a business we started in February 2000. We see this area as a huge opportunity and one that's complementary to our mutual fund business, not cannibalizing it.
We now have $4 billion in separately managed account assets, including the $566 million that we recently acquired with the purchase of Ashland Management's, separate account business.
MFMN: What does Dreyfus bring to the separately managed account (SMA) table?
Canter: Dreyfus has a great brand name that advisers like and which their customers are comfortable with. But Dreyfus is part of the greater Mellon organization where other parts are institutional. We can give advisers access to institutional managers through both Dreyfus and Mellon that would otherwise not have been available, including managers from The Boston Company, Newton, Fayez Sarofim, and others.
We are able to tap those resources, repackage them and get onto various SMA platforms. We are on 10 different sponsoring platforms now and we will continue growing the separately managed account business, positioning more products on more sponsoring platforms.
We currently have nine different quality managers and 16,000 accounts, and we are opening 1,000 new accounts per month. Our annual growth rate of sales is high, over 100%, and we expect growth rates to continue to be 60% to 70%. We are, very quickly, becoming a top-tier player.
MFMN: Will the intermediary channel continue to be important to Dreyfus?
Canter: We will continue to emphasize the advice channel, and it will become even more important to us.
Everything, ultimately, has to relate to customers - how are they changing, what do they want, who is the customer?
But most, 90%. come to us through the third-party sales channel, so we have to be sensitive to the needs of the end customer as well as the advisers.
We continue to think customers will be willing to pay for advice and guidance. They are more sophisticated, but they know that their financial affairs are complicated. And let's not forget the demographics - older investors with bigger portfolios - and the huge whack they've had taken out of their wealth by virtue of the bear market. They'll have concerns with getting ready for or living in retirement.
The intermediaries we are working with are going to be responding to customer concerns. We think intermediaries will be more interested in selling a process, not just a product. Advisers will be pursuing a more conservative, holistic approach. They are increasingly behaving like institutional customers and are more interested in the finer points. That will mean major changes in how we work with them.
MFMN: What kind of changes do you envision?
Canter: We will have to prioritize the firms we deal with. We might not deal with everyone the same way.
We will focus on companies we can form strategic partnerships with, those where we understand what they lack and can help them develop what they need, such as developing training tools to help them counsel a group about retirement or help an adviser pursue a more consultative approach.
MFMN: Do you foresee making any challenges to your growth plans?
Canter: To grow, we will be required to execute well. How we relate our process to advisers will be the biggest challenge.
Our advisers are demanding greater transparency of information, and we want to improve the transparency of our organization for intermediaries. We are focusing on figuring out how to effectively convey the information to them when and how they want it.
We will not succeed unless we deal very, very well with that one.
MFMN: Any other big plans for 2003?
Canter: We want to broaden our relationships with customers of our institutional cash management business. That includes banks, insurance companies, broker/dealers, hedge funds and corporations. This is a business we do well.
Our investment performance is good and our sales and service activities are strong. This is a scalable business, so we can add billions of dollars without adding to the cost structure. There's an opportunity to do more for these customers.