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Rating:Software Helps Firms Track Which Advisors Are Buy-and-Holders Not Rated 4.0 Email Routing List Email & Route  Print Print
Friday, September 05, 2014

Software Helps Firms Track Which Advisors Are Buy-and-Holders

Reported by Tommy Fernandez

It's one of the silent, invisible killers of fund firm profitability: advisors or brokers who quickly churn out fund products before the fund sponsor can actually make a return on the sales.

Tracking these turnaround artists used to be an easy process: take a look at the individual transaction data available with the transfer agent. But with the emergence of omnibus accounting, fund firms lost access to plenty of such data crucial to their wholesaling strategies.

But now, DST Systems is pulling back the curtain a bit on the contemporary mystery tied to asset retention amongst advisors and brokers.

The software developing firm and data specialist has created a module built into its distribution intelligence system, dubbed the SalesConnect Enterprise platform, that allows fund sponsors to understand an advisor's historical investing profile. With the module, fund sales executives can figure how long a particular advisor, broker-dealer office or an entire advisory company holds onto the fund firm's products.

"Fund sales folk face a lot of headaches when it comes to the issue of aged assets. The general rule of thumb is that you need advisors to hold your funds for about four years in order for that relationship to be profitable," Rick Niedt, DST's officer of distributor technologies recently told MFWire.

How did they pull away the veil of omnibus accounting? DST's data folk have a lot of experience building transfer agency solutions, and with data agreements from broker dealers and fund platforms, and were able to develop systems that pull up what is known as "First in, First Out" data in order to build highly detailed transaction histories, often on the level of CUSIP by CUSIP, of intermediaries.

"You can look at the dealer level, the firm level or even down to an advisor level and ask: how long do they hold onto these shares? You can do it on a granular level or you can into general categories, like does this advisor maintain long term holdings in large cap value or small cap growth," Niedt said.

What kind of questions can this system answer for a fund sales manager? You can figure out which advisors are actually high retention targets, and target your wholesalers on them. You can identify which advisors are turnaround artists and decide whether there is something you can do to change this trend, or end the relationship. You can figure out which types of products turn into buy and hold assets for which intermediaries.

And that's just the capabilities for now. Niedt said that this module, which is already available to clients of the firm's SalesConnect Enterprise platform, will also be built into a first generation predictive wholesaling system that will help fund folk figure out which advisors are worth targeting in the future. Asset retention will by just one of the factors measured by this cutting edge analytical system.  

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