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Rating:Another Fund Recommender Joins the Game Not Rated 5.0 Email Routing List Email & Route  Print Print
Tuesday, June 15, 2004

Another Fund Recommender Joins the Game

Reported by Theresa Sim

Add Standard & Poor's to the list of fund raters who are trying to advise advisers. Morningstar has Morningstar Advisor and other products, Lipper has a fund screener called Horizon, and now Standard & Poor's has its Model Allocation Portfolio product.

The company announced the launch of the web-based tool, developed for registered advisers to use in crafting sales recommendations and managing client portfolios, last week.

While Lipper's Horizon provides information for 17,850 mutual funds, it does not make any specific recommendations. Morningstar Advisor provides ratings and recommendations on 60,000 stocks, mutual funds, variable annuities, exchange-traded funds, and separate account products.
S&P's product, in contrast, will recommend mutual funds, exchange-traded funds as well as individual stock baskets, and will restrict fund recommendations based on funds that are supported by clients' clearing services.

In the case of S&P MAPs' first client, MassMutual, S&P assessed all of the funds available through their clearing agent and picked the most appropriate funds out of that selection, said Ken Ennis, managing director of Investment Services. "[We] try to fit into the way the firm does business," he added. S&P does not add their own fund recommendations when working with a client, said Ennis.

S&P bases each client's customized solution on three base MAPs -- one composed of all mutual funds, one of all exchange-traded funds, and one composed of a stock basket. With six risk profiles under each MAP, there are technically 18 MAPs available to an adviser. A total of six to 12 base MAPs is typically the "sweet spot" for clients' solutions, said Ennis.

Equity recommendations may remain the same from client to client, however. Baskets of stocks are chosen by S&P's investment team. Among ETFs, mutual funds and stock baskets, Ennis said mutual fund MAPs are the likeliest to differ across clients.

MassMutual's customized version of the S&P tool has six profiles, and the tool will be an option for the company's advisers to 2,000 advisors starting on Wednesday, said Ennis.

Although the S&P tool will be available to MassMutual's advisers, there is no guarantee that the advisers will make use of it, since the S&P tool will be available in addition to other products. Ennis characterized the availability of multiple tools as "pretty typical," calling the adviser product space "still competitive."

The product development team at S&P plans on developing additional MAPs over time, including tax sensitive MAPs, MAPs with sector exposure and different stock baskets MAPs. Ennis estimated that eventually, dozens of MAPs will be created.

The company is marketing towards broker dealers who have advisory arms, insurance companies, independent, regional and bank broker dealers, and some trust companies, said Ennis. S&P will not target advisers directly. 

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