Retention bonuses a big deal on Wall Street

I got a nice note today from Janet Levaux, an editor at Research Magazine. My most recent column on the hefty retention bonuses that wirehouses are offering f.a.s is No. 1 on the website. Pretty cool. Here's a link if you'd like to read about this important trend.

Earthquake in Haiti puts everything in perspective

So much happening on Wall Street. The public is so angry at the bankers and everyday the news brings new ways to flog 'em. But I have to say that the devastating news from Haiti really puts everything into perspective. A lot of the issues that people get worked up over -- is my signing bonus big enough -- are minor in comparison. We are really blessed.

Wall Street: Slash and burn

The worst may be behind us for the economy but Wall Street continues to slash and burn support staff in the retail industry. I find this pretty ironic. On the one hand, Wall Street is offering huge compensation packages to recruit top talent or enticing financial advisors to stay home with handsome retention payments. On the other hand, they are squeezing costs in home office support, especially for marketers of the firm's various fee-based offerings.

Look for my next newsletter on this topic the old-fashioned way -- in your mailbox. Or drop me a line and I'll email it to you.

Bear market roars but opportunities abound

I've never seen a market like this. Who could imagine that the government would be making a contingency bailout plan for Fannie Mae and Freddie Mac? I can remember people talking about that 20 years ago. But we thought they were Chicken Little's crying: "The sky is falling!" Let's hope it is just a scare that will pass, but until then there's plenty that you can do to avoid a clawing from the bear -- like staying in touch with clients and providing good information.



I've been through many market cycles and I've been contributing to quite a few publications recently to share my experience with those who have net gone through as many ups and downs on Wall Street. Some of my recent Fundfire interviews focus on recruiting in a tough market and handling defections.



This month Research Magazine published a wonderful profile of my career on Wall Street. It emphasizes my years dealing with high-end financial advisors. But as you all know, I work closely with the entire investment management community, both on the buyside and the sellside.



Here are the links to the Fundfire interviews. Enjoy:

How do you make sales teams work?

Recruiting in a rough market

Will economy cause wirehouse defections?

UMA distribution system makes low fees palatable

There's something new and counter-intuitive happening in managed money: The lowest fee sector is the fastest growing because -- surprise! -- it's pretty profitable.

Unified Managed Accounts (UMAs)growth is outpacing the granddaddy of managed account formats -- the Separately Managed Account (SMA). Wirehouse distributors have figured out how to make the UMA, which appeals to investors and advisors for its one-stop shopping qualities, more economical for managers. Wirehouse distributors are simply taking over the UMA models and performing all the trading and operation functions for the managers. That eliminates a big slice of overhead.

The five major wirehouses control approximately 75% of assets in retail separately managed accounts. They've used that leverage for many years to reduce fees to outside managers with whom their retail salesforces place client money. SMA fees to managers have declined from 45-50bps down to 36-38bps (depending on the style). UMA fees are even lower, about 25bps.

Institutional managers who lack the infrastructure for retail distribution on a massive scale can now participate in the UMA business. They no longer need to ante up for back office costs. Some of the large money managers that have expensive legacy operational systems are now at a disadvantage.

These changes are enabling new institutional players to enter the business. Most advisors that I know want to offer clients unusual boutique managers that other wirehouse competitors can't offer. They've complained to us about the commoditization of the SMA business in recent years. From wirehouse to wirehouse, it's same-o, same-o: the same 20-30 managers no matter where you go.

Now some new blood is starting to come into the business. Some wirehouses are starting to actively compete for new entrants or new portfolios from existing players by trying to streamline their due diligence processes or, in at least one case, by allowing managers flexibility in setting fees. Increased competition is a positive in my view. It usually makes things better.

Oldsters just want to feel smart

We just got back from a Boston meeting on retirement -- and we just beat out the snowstorm, too. For anyone thinking about the retirement scene this was the place to be. Francois Gadene put together a really terrific group of thinkers -- not all of whom agreed on what to expect as boomers enter their senior years. Take John Ameriks from Vanguard. He stopped a lot of people in their tracks with his message of cautious optimism: Based on what he has seen so far, retirees are not going to draw down their assets so quickly. So don't go calling the 9-1-1 retirement police. At least not yet.

Not everyone saw it that way at the Managing Retirement Income Conference: The Retirement Income Industry Association survey shows that retirees will need to slash spending by more than half to make their savings last through the golden years. Consultant Matthew Greenwald worried that spending in retirement years needs to go up. Health care is a big culprit in that one. And also, in the early years of retirement many people have more time to spend money. So they do.

Here's a tidbit that made us sit up: Connie Williams of Synectics Inc. (can you say that fast, three times?) described a complex marketing study she conducted of aging boomers. And you know what she found: They don't want the details on Medicare Part D, or how your financial thing-a-ma-jig works. They just want to feel smart. So if you want to attract these boomers, don't try to educate them. Make them feel smart.

Got it?

SMA marketer survey gets big play in Fundfire

We've had a very busy few weeks in the press: We've been in Barron's and Investment News. Today you'll find us in Fundfire.

The online must-read pub gave us big play on our newly released survey of separately managed account marketers. We've been doing this survey for a few years now, and all I can say is it hasn't been easy. For those who survived the carnage of the tech bust, things are looking a bit up. Compensation is rising for the typical marketer by about $25,000 to $300,000. Top earners can broach $500,000.

To be honest, though, it's hard to be too optimistic about the outlook for SMA marketers: Investment managers are earning less and less on these programs. And many sponsors are scrapping SMA specialty salesforces in favor of generalists. You can read all the dirty details on our website: 2006 SMA Survey.

Baby boomer delusions; Key retirement meeting

I hope you didn't miss my colleague's wonderful column in Barron's on retirement. Nancy really punctured a lot of myths about what everyone is assuming will happen with baby boomers when they hit their golden years. For example, did you know that boomers weren't the first group to plan on "cycling" from work to leisure in their later years? Guess what: It usually didn't work out.

Here's a link to the piece, called Delusions of Retirement Solvency.

Like many on Wall Street we are tracking closely the implications of the demographic bubble created after all those GI Joes came home from WWII and economic prosperity set into this nation. Next week, Nancy & I will be attending IIR's 3d Annual Managing Retirement Income conference in Boston. Let us know if you'll be there. We'd love to say hello.