SSgA retools sales force in bid to boost ETF sales

Mar 19, 2007 @ 6:27 am

By David Hoffman

PHILADELPHIA — As exchange traded funds proliferate, ETF producers are getting more aggressive when it comes to pitching product.

Just last week, in an effort aimed mostly at bolstering its ETF sales, State Street Global Advisors of Boston announced that it is splitting its sales team into two units.

One unit will concentrate on broker-dealer firms. The other will concentrate on wealth managers, including banks; hedge fund and mutual fund managers; proprietary trading desks; registered investment advisers; and family offices.

“The biggest reason for the change is about focus and segmenting the business, based on the needs of our customers,” said Anthony Rochte, a senior managing director with SSgA.

Financial advisers, however, said they fear that it means SSgA will push product more aggressively — an unwelcome trend they see among ETF providers.

Even officials at The Vanguard Group Inc. of Malvern, Pa., said recently that they had a small sales force designated to sell ETFs to hedge funds — a group that seems diametrically opposed to Vanguard’s focus on long-term investing.

One adviser, who said he’s recently been pitched various ETF products, questioned whether it is a good use of money.

“A sales force is nice, because you need to get [the] story out there, but it costs money,” said Richard Romey, president of ETF Portfolio Solutions Inc. in Overland Park, Kan.

That money may be better spent elsewhere, he added — especially considering the lack of effect it has on some advisers.

“I think there are so many new ETFs that to keep track of it all, a sales effort is helpful,” said Marvin Appel, chief executive of Appel Asset Management Corp. in Great Neck, N.Y. “But I don’t hear a lot from [Barclays Global Investors of San Francisco], and frankly, I still think they have the best product line.”

Such comments have to be disconcerting to other ETF producers hoping to chip away at Barclays’ ETF lead. At the end of February, it was the largest ETF provider by assets, with $254.26 billion across 128 ETFs. SSgA was second, with $98.46 billion across 45 ETFs.

That discrepancy probably is why in October SSgA hired Mr. Rochte, the former national sales manager for iShares ETFs, away from Barclays, several industry watchers said.

Advisers said they like the approach Barclays has taken to marketing its ETFs.

Rather than just push product, Barclays has gone the extra mile to explain how its ETFs work, said Jim King, a wealth manager with Balasa Dinverno & Foltz LLC in Itasca, Ill.

They hold regional conferences and “webinars” that are useful when it comes to educating advisers about ETFs, said Tom Lydon, president of Global Trends Investments of Newport Beach, Calif.

Barclays learned early that education is key to a successful ETF business, said Lee Kranefuss, chief executive of BGI’s intermediary and ETF businesses.

“While ETFs are getting to be better known, anything that’s new requires explanation,” he said. It’s not enough to just put product in front of an adviser and assume they will bite, Mr. Kranefuss said.

Mr. Rochte apparently has taken that lesson to heart.

In addition to the breakup of the sales team at SSgA, Dodd Kittsley was appointed director of the company’s strategy and research group, a team of eight research strategists dedicated to providing customized portfolio solutions to financial advisers, asset managers, RIAs and family offices.

“What it really provides is a dedicated team that can provide research and analytics based on inquiries from sophisticated investors,” Mr. Rochte said. Only time will tell if advisers warm to Mr. Kittsley and his group.

SSgA, however, has been pulling out all the stops to get their attention.

Last week’s reorganization comes after the launch of a new branding campaign for SSgA’s ETFs, and a recent spate of international ETF offerings.

What SSgA is doing is impressive, said Mr. King, who just last month sat in on a call with Mr. Rochte.

He was impressed particularly by one of SSgA’s most recent ETF offerings: the SPDR DJ Wilshire International Real Estate ETF (RWX).

Launched at the end of last year, it’s the only ETF available that gives investors the ability to invest in international real estate. Having collected about $500 million in less then three months, it has proved popular with investors.

SSgA plans more such offerings.

That’s significant, because while sales and marketing are important, for any ETF provider to be successful, it’s the products that count most, Mr. Appel said.

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