Monday, January 9, 2017

THE INSTITUTIONAL SALES CYCLE - Don’t Get Caught Upside Down

Institutional investment managers are often bought like portfolio managers purchase stock.   And just like those portfolio managers, institutional investors need to apply discipline, intentionality and insight to avoid the curse of buying high and selling low.  To the frustration of investment managers, even large and sophisticated plan sponsors can fall prey to this trap by hiring managers who are in favor only to hire a new flavor of the month who exhibits (temporarily) a better performance record, often harming the overall performance (and risk profiles) of their own plan assets.  This interaction of behavioral finance and agency costs can create a truly lethal mix that combines suboptimal performance, hidden transaction costs and the potential to stand in direct conflict with the institutional investor’ fiduciary duties to its plan beneficiaries.

While the trap has severe consequences for the institutional investor, what can institutional investment managers do to avoid getting caught in this trap?

Remember the complexity of the institutional investment business.  The institutional investment business is composed of institutional clients, investment consultants and investment managers, all of which rest upon a foundation of money and people.  With the potential amplification of human failings, even among experts applying their best intentions, the complexity can quickly rise to a whole new level.  It is important to monitor and respond to the flow of information and carefully consider what motivations are operating and how resources can best be deployed.

Create and maintain awareness of your firm.  It is important to never become comfortable that the investor’s assets will always remain in place.  Keep reminding investors of your firm’s style, what differentiates you in the marketplace and what are the highlights of your value proposition.  This can be accomplished through firm overviews, client reports and database updates.

Develop and refresh familiarity of your team.  Good institutional investment managers need continual renewal to avoid complacency and continue to speak to current issues in the investment marketplace.  This entails review your specific strategies and developing your thought leadership.  This can be further accomplished through strategy specific overviews, pitch books, thought leadership papers, speaking opportunities and consultant educational events.

Establish and confirm favorability.  Maintaining a fresh view means staying in the minds of prospects, consultants and current clients in direct contrast to your competition.  This is accomplished through an established and consistent RFP/RFI process, solid finals presentations, thorough database management, accepting and incorporating market feedback to your message and regular client and consultant reviews.


Following an intentional process and executing the above steps will allow institutional investment managers to best defend against the natural attrition of assets.  While you may think your clients and consultants understand your story, a wise manager works hard to ensure that their client and consult base remains well informed as to why their style remains an important part of their overall asset allocation.

Monday, January 2, 2017

NexTier's Industry Cyber outlook for 2017

With 2016 behind us, the promise of 2017 offers the opportunity to execute our firm strategic visions and realize our personal and professional goals. For our investment management firms, this means charting a course to increase responsiveness to the new challenges that lie ahead.

The investment management industry has seen many regulatory changes focusing on cybersecurity over the past three years. With each year, the regulatory enforcement actions from the SEC increase in number and scope. In addition, the regulatory demands there have been multiple high profile cybersecurity incidents that have impacted the integrity of the financial markets in general and specifically impacted investment management firms both in their reputation and operational viability.

As debate over cyberattacks is pervasive across private, public, commercial and social sectors of our country, NexTier’s Investment Management Industry Cyber outlook for 2017 calls for more of the same; Expect higher regulatory demands for government and self regulatory associations as well as heightened threats to financial systems as a whole and market participants in particular.

Most immediate is the Department of Financial Solutions Cybersecurity rule which makes several demands of investment management companies to ensure data security and privacy controls are in place with their respective roles and responsibilities for information risk management.

Other states are not far behind with proposed legislation. While federal legislation for cybersecurity reporting is not far behind, the SEC is continuing its trends of audit sweeps and targeted guidance intended as a precursor to a regulatory mandate on cybersecurity compliance.


Beyond regulatory requirements, Cybersecurity is a critical element of enterprise risk management the need to protect our firm’s viability is highly dependent on the information which fuels our business processes. Data and the information it represents can serve as both an enabler and differentiator. Technology can provide multiple benefits such as competitive advantage, customization for client's financial and investment needs, or enhanced collaboration across business partner platforms.