Monday, January 9, 2017


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.

Thursday, December 15, 2016


NexTier Consulting Solutions, LLC has developed a Cybersecurity practice to address these emerging challenges that have a particularly profound impact on the operations of small and medium sized investment management firms.
We understand your business model and the security risks facing your operations, making us the ideal trusted advisor to help your firm meet the following objectives:
·       Confidentiality and privacy of information associated with your firm, business partners, and clients.
·       Integrity of trade orders, positions, performance data and company reporting information.

·       Availability of client portals, investment management systems, business partner platforms, market data feeds, and third party outsourced services tied to your firm's operations.

Monday, December 5, 2016

COMPLIANCE: What's Coming in 2017

While the Securities and Exchange Commission’s (SEC) annual list of priorities is probably a few weeks away, the list of priorities has already started to take shape for many compliance professionals.  As we look to the new year, what appear to the hot button issues that either the SEC or the industry will bring to the front-burner?

Cyber-security.  This is not only first on our list, but is also the most obvious and will rightfully get its own post.  From the election to the SEC’s recent and frequent commentary on cybersecurity, to the State of New York Department of Financial Services ruling requiring a Chief Information Security 0fficer by the beginning of 2018, the year promises to be a busy one.  2016 ended with many people thinking that cybersecurity and “hacking” was mostly the realm of the gigantic retail firms like Target and salacious hacks like Sony and Ashley Madison.  But in 2016 we learned that hacking, phishing and ransomware can effect regular people and small firms.  2017 promises more of the same as nefarious parties continue to develop new ways to steal large and small amounts from the investment management industry.

Fiduciary Status.  For a while this issue seemed to be settled after many years of simply being ignored.  But the issue continues has new life as multiple regulatory bodies weigh in and extend the realm of fiduciary duties.  With Department of Labor regulations regarding fiduciary status going into effect in April, concerns about the effects of conflicts of interest on plan participants will remain important considerations.  In an industry that sometimes seems to be dominated by the egos of a few high profile managers, regulators are trying to keep the focus on the interests of plan participants and small investors.

Regulation.  Perhaps the greatest uncertainty in the upcoming year involves the events and appointments in Washington and how this trickles down into the industry.  Will the nominee to head the SEC  Jay Clayton, most recently a lawyer with New York firm Sullivan & Cromwell, continue the trends toward consumer and investor protection or undo some of the regulatory thicket that has encumbered the economy?

Whatever the specifics, 2017 promises to be an exciting year for compliance officer and institutional investment managers.

Wednesday, January 7, 2015


Most investment firms were originally founded by people with a gift for managing money.  Their genius is understanding the financial markets overall and managing the specific investments that have been entrusted to them by their clients.  Running the business itself is typically not something that they want to spend time doing, since it is often viewed as a distraction.

One aspect of running the business is the development and execution of a marketing plan.  Usually when the term marketing plan is used, the immediate reaction is “yes, we have sales objectives.”  But “sales objectives” aren’t even a sales plan nonetheless a marketing plan.  Marketing and sales are two different (but related) animals and understanding the difference is critical to making each work effectively.

Marketing should be focused on the strategy of how you plan to grow your business – product development, pricing, distribution channels, promotion and people.  Sales, meanwhile, describes the tactics of how you plan to grow your assets under management – prospect profiling, customizing your pitch to prospects’ needs, managing the business development process and closing the sale.

Briefly, a marketing plan is a blueprint of how you want to approach your marketplace.  Done well, it represents a competitive advantage, since most investment management firms tend not to have marketing plans.

A marketing plan encompasses the following elements:
  • Previous year performance
  • Value proposition or edge
  • Major revenue generating actions for the upcoming year
  • Market environment
  • Significant opportunities
  • Material threats
  • Key Impediments
  • Upcoming year objectives
  • Strategies
  • Tactics
  • Budget
Developing a marketing plan requires you to adopt a more disciplined approach to how you plan to build your business during the upcoming year.  Ideally, it focuses your firm on the three to five major drivers of your business that have the potential to generate significant assets under management, revenues and profits.  While it is hard work, the return on your investment is high and well worth your time.

Lesson Learned: Marketing plans are a critical component of running an investment firm.

Henry Hakewill, IV
Managing Director and Chief Marketing Officer
NexTier Companies, LLC

Sunday, December 21, 2014


Every investment management firm has a brand; the key question is whether you are actively or passively managing your brand in the marketplace.  Actively managing your brand is critical to being successful in attracting assets under management from the institutional marketplace, since how well you manage your brand will be viewed as an indication of how well you manage the rest of your firm.
To help you gauge whether you are currently actively managing your brand, please take a few minutes to think about the following questions:
  • Do you have a marketing plan?
  • Does your marketing plan provide guidelines to help you manage your brand?
  • Does your marketing plan include a communications strategy designed to create positive awareness of your brand?
  • Do you have well-articulated values that help shape your culture?
  • Do you have a clear mission statement?  Vision statement?
  • Have you developed a well-defined edge that differentiates you relative to your competitors?
By having a well-thought out marketing plan, communications strategy, values, mission statement, vision statement and edge, you have the foundation for an effective brand strategy.  A brand strategy is similar to an investment strategy in the sense that it defines how you want your brand to be viewed in the marketplace and how you will manage the perceptions of your brand among clients and prospects.

A good brand strategy has three primary benefits:
  • Makes it clear who you are and what you do
  • Helps differentiate you from your competitors
  • Enables you to generate more visibility, “shots on goal” and assets under management
Developing and implementing an effective brand strategy typically encompasses four primary steps:
  • Assess:  review all current online and offline materials; determine what works well, what works OK and what is not working; conduct market research among your current clients and investment consultants to learn how your brand is currently perceived
  • Strategize:  develop your values, mission statement, vision statement and edge and ensure that they are integrated into your marketing plan and communications strategy
  • Translate:  using your values, mission and vision statements and edge, translate them into actionable ideas for online and offline marketing materials
  • Implement:  develop relevant, useful marketing tools (online and offline) using a consistent look and feel and tone of voice
Lesson Learned: Actively managing your brand is critical for success.

Henry Hakewill, IV
Managing Director and Chief Marketing Officer
NexTier Companies, LLC

Tuesday, December 2, 2014

THE BURDEN OF COMPLIANCE: A New Era for Private Equity

As a former senior compliance officer for Hewitt EnnisKnupp, Inc., I’ve seen the United States Securities and Exchange Commission (SEC) steadily increased its compliance demands.  It  seemed to start slowly for private equity funds, with the majority of the initial Dodd Frank burden being carried by hedge funds.  But the day is fast arriving for private equity funds, if it hasn’t already arrived.

Registration as an investment adviser, with either the SEC or a state securities agency, requires an ongoing program of compliance.  State securities agencies, such as our own Illinois Securities Department, almost universally look to the SEC for leadership in this regard and rely upon them for regulatory guidance.  Accordingly, best practices in compliance requires following SEC guidance.  The SEC’s emphasis on the ongoing and constantly evolving nature of a compliance program is one that consistently causes trouble for newly formed advisors.  Private equity fund advisors, who are a relatively new addition to the SEC’s regulatory oversight, are particularly vulnerable to overlooking essential compliance tasks since it is not part of the industry culture. 

Along these lines, the SEC has been very vocal about its desire to investigate newly formed and/or newly registered private equity funds, including forming a special task force specifically organized and trained to perform this task.  Recently, the SEC has also spoken out about the consistent deficiencies that it has uncovered in private equity investing, publicly noting in May, with several recent enforcement actions emphasizing the point, that significant issues were found in over 50% of the funds that it had investigated.  Consequently, institutional investors have been quick to seize upon the compliance programs of potential investments as an increasingly important piece in their investing checklist.  For institutional investors, a thorough review of compliance matters is an essential way to meet their fiduciary duties to their own investors and to quickly weed out private equity firms that are not suitable. 

This twin focus, from both regulators and potential investors, on compliance issues has raised the importance of understanding investment adviser registration as much more than just an initial registration, but as an ongoing set of tasks that play a critical role in the organization and constant attention.

Lesson Learned: The compliance burden is only getting larger and it pays to be prepared.

Randy J. Heinig, Esq.
Director and General Counsel
NexTier Companies, LLC