The New Model of Fund Company-Advisor Relations

Thought this little tidbit from this weekend’s Barron’s cover story on TIAA was worth passing on. In it, the firm details the type of engagement they’re going to use in order to increase their presence in the portfolios of financial advisors (as opposed to their retirement plan / annuity bread and butter). TIAA acquired Nuveen, a century-old fund shop with some $882 billion invested its products.

This is what all of the successful fund and ETF providers are getting right in the field – it’s the type of relationship my firm has with all of the vendors whose funds end up in my client accounts:

But Nuveen’s sales force can no longer push just one hot fund. Like everyone, financial advisors are pressed for time. Historically, salesmen met advisors seven times a year. That is no longer feasible. Instead they must convince financial advisors of the value of Nuveen’s “solutions,” says Advani, “using data analytics and science.”

For example, an advisor might share her portfolio with the salesperson, who would then run it through Nuveen’s models and demonstrate how particular Nuveen offerings would reduce volatility or increase the chance of outperforming. The variety of offerings, including alternatives, will help. In addition to providing investment consulting, Nuveen’s salespeople will help advisors develop their practice, address family-wealth issues, and provide retirement and tax strategies. Says Advani: “We’re offering the home-theater system: The best speakers under a particular brand, the best amplifier under another, the best TV.”

Advisors, as opposed to brokers, are no longer in the business of selling past performance, now that the ubiquity of data has made the futility of this game blindingly obvious. Instead, we increasingly see ourselves as being in the business of clarity and wisdom. This means the construction of advisor portfolios rooted in evidence and transparency.

To play on this field, fund companies will have to become more consultative and less promotional. The best and the brightest – Dimensional, iShares and Vanguard – have a nice head start. This isn’t to say that JP Morgan Asset Management, Fidelity, State Street, Goldman Sachs Asset Management and, yes, even Nuveen, can’t come in and compete bigly.

The RIA business is a great business to cater to for the asset managers. We are, for the most part, forced to make use of outside fund products like ETFs, even if they’re only being used as building blocks for our internally managed strategies. Because for fiduciaries, creating our own fund products that we would get paid on, and then recommending them for client accounts, represents a conflict that the majority of us aren’t interested in exposing ourselves to.


TIAA/Nuveen: A Trillion Dollar Startup Is Making Its Move (Barron’s) 

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