Compensation is key, says Putnam

Retaining talent may be the biggest challenge facing investment firms today, said Don Putnam, managing partner of Grail Partners LLC , a privately owned advisory merchant bank in San Francisco, at the annual meeting of the Money Management Institute in New York today.
In a free agency environment, “talent goes to money,” Mr. Putnam told an audience of more than 500 people in New York.
“People used to care about careers. Now they care about compensation.”
This is going to change the way of doing business.
“It’s going to punish margins, alter risks and alter exposures,” said Mr. Putnam.
He also discussed asset-management mergers and acquisitions, saying the trend is toward more public ownership.
“I don’t think permanent, private ownership is possible,” Mr. Putnam said.
The mutual fund industry is under attack from ETFs, model portfolios and separately managed accounts, he said.
“The killer in the next one-to-three years is that the business is being ‘Walmartized’ or better, ‘IKIEA’d’ by the big market share guys,” he said.
“Capital Group and Fidelity have reduced fees every year for the last five years and they will continue doing it.”
There are few companies that can out-price, improve performance, reduce risk and make a profit, he said.
“It’s becoming a scale business in a dangerous way,” Mr. Putnam said.
He was one of several speakers at the MMI’s two-day program.