Reaching for the Top

Investment products of firms such as Fidelity or T. Rowe Price are well-known and often utilized by retirement plan advisers and sponsors as a convenient extension of the firms’ recordkeeping offering. However, these days, using their recordkeeping services does not lock you in to using their funds. While, once upon a time, investment management firms frequently viewed offering recordkeeping (or attempting to) as a prerequisite to attracting the interest of retirement plan participants, these days, so-called “investment-only” (IO) firms have been able to take advantage of open architecture platforms to make significant headway. While performance certainly counts for much, perhaps even most, in terms of adviser recommendations, many IO firms provide valuable programs and services for advisers and their clients.  

In fact, aside from the prerequisite of superior investment products, Yaqub Ahmed, Managing Director, Investment-Only Division, Retirement & Insurance Markets at Columbia Management Distributors, Inc., says advisers wanting to work with IO firms should ask what the company can do to help them grow their businesses. Columbia Management’s defined contribution (DC) mission statement is “to provide tools, services, and industry knowledge that will allow advisers to succeed in the retirement plan space,” he says. 

Columbia does just that with its suite of adviser services. The Columbia IO DC Suite of Services includes: Provider Research (Pathfinder and Talking Points); Fund Selection & Monitoring; Business Development & Expansion (Columbia Learning Center); Technical¬ Support (Resource Desk/Internal Sales Desk/Product Specialists); and sponsorship of various industry designations. 

Looking for Partners
According to a recent PLANADVISER survey, advisers most frequently turn to investment providers for research (cited by three-quarters of retirement plan advisers), followed by conferences and marketing collateral (see “Playing Favorites,” page 38), all of which are readily offered by the IO DC firms. 

When seeking to work with these IO DC providers, Scott Brooks, Director of Defined Contribution at Managers Investment Group, LLC, says advisers should look for providers that offer such value-added services—at least two or three components. Providing services and relationship management to allow both advisers and their plan sponsor clients to fulfill their fiduciary obligations is part of the value proposition of Brooks’s firm. Managers Investment Group is a wholly owned subsidiary of Affiliated Managers Group (AMG), an asset management company with equity investments in a diverse group of growing, boutique investment management firms. Since being acquired by AMG more than two years ago, Brooks says Managers has focused on providing research and marketing collateral for advisers. Within the next six months, the company plans to add practice management services and, within 18 months, adviser conferences, broadening the firm’s value to its adviser clients. 

Stressing the importance of complementing an adviser’s business, Michael Rosenberg, Senior Vice President, Director of IO DC Distribution at JennisonDryden, says his firm aims to help advisers differentiate themselves in the marketplace by, in addition to providing a plan-level investment review, offering educational tools and white papers, and retirement-related research. JennisonDryden also offers The Adviser Institute, which provides a framework to educate and provide value-added components for advisers, such as development tools and presentations about topics including 401(k) service, client retention techniques, and retirement plan fiduciary responsibilities, Rosenberg says. Although the JennisonDryden Advisor Institute (JDAI) does not offer any specific designation, all of the JDAI programs offer advisers the opportunity to earn continuing education credits for their CFP. CPA, CIMA, CLU/ChFC, CFA, or state insurance licenses.  

Sponsor Services
To support plan service delivery, Brooks says Managers Investment Group has a robust offering of sponsor services that can be delivered through an adviser or to a plan sponsor directly, providing in-depth institutional-quality investment reviews that assist plan sponsor clients in fulfilling their fiduciary obligations to plan participants. “We are an open book when it comes to our investment fund products,” Brooks says. The firm is growing its legislative/regulation update services. 

JennisonDryden approaches sponsor services a little differently. “We created a whole suite of materials that can be used by sponsors from a fiduciary perspective, but they generally are used through the plan’s adviser,” Rosenberg says. JennisonDryden does not market these tools directly to sponsors, but only through advisers. 

Among this suite of tools is a plan-level investment review that can be used not only to make sure the plan’s investment policy statement is being followed and that there are no gaps in investment offerings from the plan, but also as a proposal by advisers for the investment lineup. Other examples of tools provided by JennisonDryden are sample investment policy statements and materials to educate a plan’s investment committee members about their roles and responsibilities. 

Columbia Management also provides its sponsor services via advisers. “All of our resources are tailored to each individual’s practice and client. These include provider research, fund selection and monitoring, and ERISA technical support,” Ahmed says. 

Investment OfferingsOf course, these value-added services are in addition to the menu of investment products offered by Managers Investment Group, JennisonDryden, and Columbia Management Distributors. All three companies offer mutual funds, commingled funds, real estate funds, and separate accounts. Managers Investment Group also has a risk-based managed-account asset-allocation offering, while JennisonDryden makes available asset-allocation funds and managed-account products and, via its relationship under Prudential Investment Management, real estate investment trusts (REITs) and annuity products. Columbia Management is a subadviser for annuity products. 

Looking beyond those value-added services and investment menu, Brooks suggests advisers find a firm that is experienced and has substantial assets under management in the DC arena. Advisers should make sure investments offered by the IO DC firm are accessible through a plan’s record-keeper’s platform. Today’s open architecture environment means that it is not quite as complicated as it once was to get on those platforms, but Brooks says it is still an involved process to get onto a platform. Managers maintains a recordkeeping platform relationship with the top 36 recordkeepers, including Fidelity, CitiStreet, and Schwab. Rosenberg says JennisonDryden maintains recordkeeping platform relationships with approximately 50 recordkeepers. Columbia Management has direct agreements with more than 50 recordkeeping organizations, including 27 of the top 30—the top five of which are Schwab, Fidelity, Merrill Lynch, Sun Life, and Vanguard. 

Rosenberg points out that, when advisers look for support they should be getting from IO DC firms, they should look for a complementary suite of investment products. Specifically, he suggests advisers would not want to double up on investment types that already may be offered within the plan through the recordkeeper by selecting the same or similar products from outside investment managers. “I think IO providers are out there to complement the initiatives of the platforms, and the platforms are in support of us. The relationships are good and benefit advisers and sponsors,” Rosenberg says.  

SIDEBAR:Brand Hex?
Value-added programs need better link to adviser brand 

A new report calls for asset managers to create initiatives that are tied more effectively to a firm’s brand and market position as understood by the adviser, providing a logical connection to a specified family of investment products. 

A study by kasina, a consultant to the financial services industry, found that look-alike value-added programs often fail to link financial advisers to a specific family of investment products, so ideas and materials from one fund group are used to support sales from competitors. The consultant defines value-added programs as information and tools used to grow an adviser’s book of business, educate the adviser in a meaningful way, or facilitate the adviser’s ability to meet client needs. 

“We see asset managers investing anywhere from $100,000 to $1 million annually in designing and disseminating value-added programs for advisers, with little or no impact on assets under management,” says Anu Heda, Manager at kasina. “In many cases, advisers simply take the concept from one asset manager and use it to support the sale of someone else’s product. Not only are they not helping their own sales, they are, in effect, underwriting the efforts of their competitors.” 

The study found 67% of industry marketing executives are unsure of the value of these initiatives as they are constituted presently, and kasina notes that part of the challenge stems from too many asset management firms thinking alike in developing value-added programs and targeting IRA rollovers, college savings plans, and the Boomer retirement income market. 

Kasina suggests that, once asset managers identify logical areas of opportunity, they: 

• Improve their ability to segment the targeted adviser population—delivering programs only to those advisers with a relevant need. This segmentation should be based on adviser preferences and behaviors, not on the distribution channel;  
• Fine-tune the overall outreach process with an emphasis on better communications between marketing and sales and stronger wholesaler programs;
• Put in place the tools required to measure the effectiveness of every value-added program launched by the firm, with new asset flows as the single most important metric.