Asset managers are harvesting data to help them market mutual funds better

World's largest asset management firms have quietly launched an arms race to collect, analyze and exploit data about advisers

Jun 14, 2015 @ 12:01 am

By Trevor Hunnicutt

Phil Huber is being watched, and he knows it. When the chief investment officer at Huber Financial Advisors gets an email from an asset management company, he hesitates before clicking on any links.

“It's kind of funny. You'll get an email from a fund company, click a link, and you can pretty much guarantee within a day or two you're going to get a phone call from them,” said Mr. Huber, whose firm manages $849 million.

Mr. Huber is not alone.

At BlackRock Inc., the world's largest asset manager, advisers are plotted on a graph based on their previous sales history with a firm as well as factors like the number of BlackRock emails they open and the number of links they click on.

Like most top money managers, the company has access to data on hundreds of thousands of advisers, virtually the entire population in the U.S., including those with whom they have never done business.

“We're able to identify brokers where there's high engagement and low value and able to direct our investment consultants to help those advisers extract more value from BlackRock, which subsequently means that they use more BlackRock products,” Charles S. Hallac, the company's co-president, said about the initiative last year.

The world's largest asset management firms have quietly launched an arms race to collect, analyze and exploit data about financial advisers. Some of the larger companies have entire teams dedicated to the effort.

The data typically include the investment product purchase history for the adviser and the adviser's firm, market share information about the adviser's practice, web statistics pulled from fund companies' own sites and information from the adviser's broker-dealer.

These investment firms are looking for clues about how to sell products better, and in some cases how to predict what advisers will do before they even know, according to interviews with nearly a dozen fund company executives, as well as officials from technology firms and broker-dealers.

Companies say the goal of data harvesting is, at its simplest, to understand when — and when not — to speak to an adviser. In some cases, that may mean an asset manager stops emailing or calling because it knows the adviser isn't interested.


“In most cases, it's not obvious. We don't tell them that we're doing this, but if they thought about it they might notice that they get fewer emails from us that are not helpful,” said Bob Cunha, a veteran of the fund-data space who now manages marketing and distribution strategy at Eaton Vance Corp., which manages $296 billion. “We think that's common sense, and that's good manners.”

The efforts come as the industry is being squeezed. Management fees are under pressure. The cost of paying wholesalers, in some cases, has increased. Regulators are seeking more authority to regulate the industry. And more than half of mutual fund assets are in stock-picking strategies that have lost more than $600 billion from investor withdrawals over the last seven years.

“Today's mutual fund wholesaler is a besieged gladiator, fighting to gain favorable attention from advisers,” according to one marketing brochure directed at asset managers, which positions “predictive analytics” as the solution. “Greater ethical and fiscal oversight has reined in the practice of lavishing advisers with expensive dinners, golf outings, wines and other gifts. Such interactions now receive a higher level of scrutiny from internal compliance personnel, regulators and the media.”

If success in the industry requires not just good performance but taking market share and building a brand, that gives new urgency to questions such as: How often does an adviser trade and what will she want to buy next? And asset managers believe answering those questions could help advisers win assets they otherwise wouldn't and keep them for longer.


In today's world, a natural place to turn for answers would be data but some firms say asset managers are far behind consumer businesses such as online retailers and credit card issuers at using data.

Netflix Inc., for instance, has used information about its customers' viewing habits to develop new series and recommend programming. With its blockbuster “House of Cards,” Netflix did both.

Crunching its own data, the video-streaming service found that a good portion of its audience liked director David Fincher of “The Social Network” fame, movies that featured actor Kevin Spacey and political thrillers. When “House of Cards” — produced by Mr. Fincher and starring Mr. Spacey — debuted, it was promoted extensively and automatically among that target audience. Netflix also delivered trailers tailored to what audience members had watched most recently.

“I don't think asset managers always use the data that they have today as effectively as they should, but the data sources are just becoming so much more effective,” said Aric Faber, vice president of sales and marketing at SalesPage Technologies. The firm is one of many that have popped up and grown as asset managers look to catalogue and analyze data on advisers. “Broker-dealers are increasingly providing more information. Historically they've been pretty close to the vest.”


Now the largest wealth managers have entered the business of selling adviser data to fund companies. They join a group of third-party firms — like FactSet Research Systems Inc.'s Market Metrics, Pershing's Albridge Solutions Inc. and DST Systems Inc. — that already specialize in collecting and selling data about financial advisers.

InvestmentNews reported in March that Morgan Stanley's wealth division was developing a program to sell data about which of its financial advisers are selling funds — and which funds they are selling — to exchange-traded fund managers, which otherwise have little information about their customers.

In regulatory filings, the largest U.S. wealth manager by adviser head count disclosed that it now charges asset managers of all stripes between $100,000 and $200,000 a year for data on advisers.

Another wirehouse, UBS AG, said its large U.S. wealth management unit is planning to sell data on its complete group of nearly 7,000 advisers for between $150,000 and $300,000. Other firms could follow suit. (Those brokerage firms either declined to comment or did not respond to inquiries.)

Advisers who are the subject of these deep data dives have mixed feelings about it. Mr. Huber said he thinks it's smart of mutual fund companies to learn more about advisers.

“They can't just come into your office and immediately start pitching product,” he said. “They have to understand what your firm's investment approach and philosophy is, and start the conversation there.”


However, at the same time, he said knowing that his online activity is being monitored has trained him to be more reluctant to check the emails and browse the websites of the companies watching him.

Keith Amburgey, CEO of Rutherford Asset Planning, said he doesn't have a problem with what asset managers are doing as long as details on specific clients are left out of the information they are gathering.

Tony Sirianni, a former adviser who now runs a public relations and marketing firm, said he doesn't see the benefit to advisers of asset managers “looking over their shoulders.”

What an adviser is recommending to a client is “the client's business and it's the adviser's livelihood, so in my mind you don't need a third party in there,” Mr. Sirianni said.

Financial planner Michael B. Keeler said he's not interested in having fund companies magnify the faults of each of their competitors whose products he uses.

“I'm very cagey at what information I give them,” Mr. Keeler said. “In my opinion, they would not know what fund I need just from their limited view.”

Financial advisers may not need to be as concerned as they are. That's because the data, in some respects, is still very raw. Much of what exists today is basic, not transparent, or “unstructured,” which simply means the data aren't organized in a useful way, according to asset managers.

So the day of being able to generate full-scale predictive or behavioral models is far away — if it's even possible, asset managers said.


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