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ETF Strategy Solutions Guide

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ETF Strategy Solutions Guide Powered By Docstoc
					Distribution Strategy for Managed ETF Solutions
          A Guide to Developing Effective Growth Strategies in a Competitive Market




Randy Bullard

CEO

ETF Strategy Group

www.ETFStrategyGroup.com

October 2012




                                  www.RandyBullard.com
The Managed ETF Solutions industry has experienced significant growth over the last several years. According to
Morningstar’s ETF Managed Portfolios Landscape Report, the entire industry is growing at approximately 50%
annualized as of September 2012. With this growth has also come a proliferation of new products, as well as a
growing number of maturing products with competitive 3+ year track records. Recent conferences hosted by the
major ETF issuers for ETF Strategist asset management firms have highlighted the increasingly competitive
nature of the industry.

Morningstar currently reports on almost $50 billion in AUM/AUA from 130 ETF Strategist firms. But only a dozen
of those firms are managing or administering over $1 billion in AUM, and only one (Windhaven) is over $10
billion in AUM/AUA. Relative to the broader asset management industry, even the larger ETF Strategists are very
small firms, and most struggle with growth on a variety of dimensions. The vast majority of ETF Strategist asset
management firms are operating well below the critical scale necessary to run efficient and profitable
businesses. Compounding this problem, the most recent Morningstar report indicates that the big are getting
bigger, with flows of new assets predominantly going to the handful of largest providers. Smaller firms are
struggling to stand out in an increasingly crowded market, even with annual industry-level growth of 50%.




Growth Through Effective Distribution
It will not come as a surprise to any veteran of the asset management industry that distribution is the key to
building a long-term successful asset management firm. Even firms with great stories, performance track
records, and management teams will fail to succeed in growing their businesses without a well-developed and
executed distribution strategy. ETF Strategy Group has developed this overview and guide to aid ETF Strategist
investment management firms in understanding obstacles and opportunities for distribution in the wealth
management industry, and to aid them in formulating productive distribution strategies that will help th em be
more competitive in the market, raise awareness of their products and services with financial advisors, and grow
assets under management/advisement. The guide is broken into the following main topics:

      Evolution of the Managed ETF Solutions Market

      Wealth Management Program Types & Product Packaging

      Distribution Channel Overview & Opportunities

      Implementing a Productive Distribution Strategy

           o   A Content-Centric PR & Marketing Strategy
           o   The Changing Face of Advisor Sales & Wholesaling




Page | 2
 Evolution of the Managed ETF Solutions Market



The market collapse of 2008 was a watershed event for the asset management industry. A number of industry
trends already in process have accelerated in the subsequent market recovery. One of those trends is the
considerable growth in all categories of managed solutions.


                                                                    Managed Solutions (including traditional
                                                                    separately managed accounts, mutual fund
                                                                    wrap/advisory,    Rep-as-Advisor,    Rep-as-
                                                                    Portfolio Manager, Unified Managed Account,
                                                                    and ETF Advisory) have all seen a steady
                                                                    recovery since 2008. Due to expanded
                                                                    regulatory requirements for delivering a
                                                                    fiduciary standard of care, and pressure to
                                                                    increase margins and recurring revenue,
                                                                    advisory firms in all channels have
                                                                    aggressively pushed their advisors away from
            Assets in Total Managed Solutions                       traditional transaction-based investment
                ($Billions) – 2007 to 2011                          products, and towards fee-based managed
                                                                    solutions.
    Source: Money Management Institute & Dover Financial Research




Exchange Traded Funds (ETFs) had a small footprint within the realm of managed solutions prior to 2008, and
were largely relegated to brokerage accounts and the self-directed market. Since 2008 though, and particularly
since 2010, ETFs have had the fastest growth rates within the Managed Solutions marketplace. In their 2012
report “Growth in a Time of Uncertainty, The Asset Management Industry in 2015”, McKinsey Consulting predicts
that the “second act” is about to begin in ETF industry growth. Currently at $1.5T in total assets (at the time of
the report), they predict that by 2015 more than $1.6T in new money will enter ETFs with a globa l market in
excess of $3.1T.


Managed ETF solutions (as defined by the Money Management Institute and reported by participating MMI
survey respondents) have seen the most dramatic growth of all of the different program types within managed
solutions (28.1% in 2011). This growth in managed ETF solutions is likely understated though, as the MMI survey
data focuses on the wirehouse and national/regional broker dealer markets, and a large portion of the g rowth in
managed ETF solutions has been in the independent RIA and independent broker-dealer markets.




                                                                                                         Page | 3
The utilization of non-correlated asset
classes and diversification through style-
box constrained investment products (e.g.
growth / value, large / small cap, equity /
fixed income) according to modern
portfolio theory failed to protect many
clients in 2008 when supposedly non-
correlated products became highly
correlated in a collapsing market.


At the same time, the ability to add alpha
through individual security selection has
come under renewed attack. Managers
and products that focus on individual                2011 AUM, Market Share & Growth by Program Type
security selection (e.g. long-only equity            Source: Money Management Institute & Dover Financial Research
separately managed accounts and mutual
funds, as well as traditional transactional brokerage business) are declining in favor with advisors. The most
dramatic growth in recent years has been in lower cost indexed or passive investment strategies through ETFs
and mutual funds. An increasing portion of the returns that investment products produce are explainable in
various forms of beta. As a result, there has been a proliferation of product development and innovation from a
growing universe of ETF issuers that package that beta in very low cost ETFs. As demonstrated by the graphs,
the growth and adoption of ETFs is now challenging the traditional security selection-centric asset management
industry, leading advisors to change the types of solutions and products they offer their clients.


Building on these market dynamics and others, a new category of asset managers has emerged in the last
decade – ETF Strategists. Rather than seeking alpha through individual security selection, ETF Strategists
generally seek to minimize risk, improve diversification, and seek alpha by selecting and managing exposures
using ETFs rather than through stock or other security selection. By using ETFs, strategists are able to avoid
stock/security specific risk, while addressing many of the shortcomings in the failed traditional style-boxed based
investment approach.


The development of the ETF Strategist segment of the asset management industry began around 2000 with the
growth and adoption of ETFs, but has seen its most explosive growth since the 2008 market reset. Starting
around 2000, a large number of independent RIAs and emerging quantitative asset managers began
constructing solutions for their clients using ETFs rather than the individual eq uities and bonds that had
traditionally been used. The products developed by many of these firms have now matured, resulting in top-
performing portfolios with one, three, five, and even ten year track records, making them suitable for broad
market distribution into the fast growing managed ETF solutions market. The next phase of evolution for this
segment of the industry is now upon us – broad market distribution and adoption.



Page | 4
 Program Types & Product Packaging



ETF Strategies are inherently “simple” investment products in their underlying construction (a portfolio of ETFs).
But there are a variety of different types of programs, and product packagings that are tied to various types of
distribution platforms, channels, and advisor types. Many of these programs have substantial systems and
operational requirements, compliance/legal issues, and setup costs that managers must consider in determining
exactly how to package their products for productive distribution.

The following diagram outlines the primary types of programs and product packagings (columns), and the
various operational processes and systems (rows) that managers will need to develop to support those programs.




                                     Portfolio Delivery Framework


The following sections provide additional details on each of these program types, and issues ETF Strategists
should consider in determining how to package their products for maximum effective distribution. Cross-
referencing these program types with information in the section on Channels can be useful in determining which
packagings will create opportunities in specific channels.



                                                                                                         Page | 5
Direct Separately Managed Accounts (SMA) – In this type of program, the ETF Strategist is directly soliciting a
client, operating as a primary fiduciary RIA, and typically working on one of the major RIA custodial platforms for
custody, trading, and other services. The key distinction between direct SMA business and other business is the
strategist firm is acting both as a fiduciary advisor to the client and as the asset manager. There is no other
advisor sitting between the manager and the client. For this reason, asset managers offering their products
directly to clients via Direct SMAs must have robust client service teams, and compliance procedures to ensure
adherence to fiduciary standards. Because the strategist is operating as a full advisor to the client, Direct SMA
business tends to be the highest margin (and highest cost) business, with a typical advisory fee of 50-125bps
depending on the nature of the firm and client relationship.


Dual-Contract SMA – Many firms (wirehouse, regional/national BD, RIA custodians) operate dual-contract SMA
programs in which the manager has a direct contract with the client and is serving in the same
discretionary/fiduciary role as with Direct SMA business. The primary differences with Direct SMA are that the
manager is working in concert with the client’s primary advisor (who has their own contract with the client,
hence the term “dual contract”), and the manager typically must trade and manage the assets on the advisor’s
custodial platform. Dual-contract SMA programs are a bit of the “worst of both worlds” in that they have all of
the operational costs and complexities of managing accounts on a 3rd party platform, but are generally not
promoted or otherwise heavily supported by the home office organization. Managers available in dual-contract
SMA programs are explicitly not covered by home office research, and are not “endorsed” or recommended to
advisors, thereby limiting growth and distribution opportunities. On the positive side, managers can typically
charge higher fees (individually negotiated directly with the advisor and/or client). To operate on a dual-contract
SMA platform, managers will either need to utilize an in-house multi-custody shadow portfolio accounting and
order management systems, or access and trade the accounts directly via tools provided by the custodian o r
platform provider. Some ETF Strategists have had great success building high-margin books of business via dual-
contract SMA programs, particularly in the wirehouse channel.


Sub-Advised SMA – Sometimes called SMA “wrap” accounts, or just separately managed accounts, Sub-advised
SMAs were historically the largest type of program accessible to ETF Strategists, prior to the development of
model-based UMA/SMA programs (more on that shortly). Managers/products available to advisors through
Sub-Advised SMA programs must be approved by the sponsor’s research organization, typically requiring
managers to have a minimum of $500mm in total AUM/AUA, $100mm in specific strategies to be supported on
their platform, and a 3+ year GIPS compliant track record. Sponsors typically negotiate lower fees in sub-advised
programs, often with volume breaks (e.g. 40bps for the first $100mm, 35bps for assets over $100mm). In Sub-
Advised SMA programs, the manager is discretionary and responsible for all trading. As with dual-contract SMA
programs, managers typically need to have a robust portfolio accounting and trading infrastructure that
supports trading through the underlying brokerage’s desk, or trading away with settlement to the custodian.
Sub-Advised SMA programs are generally superior distribution opportunities (as compared to dual-contract
programs) since they have smaller product rosters and are promoted to advisors and better supported by th e
sponsoring institution.



Page | 6
Mutual Fund & Sub-Advised – An increasing number of managers are having success packaging their strategies
as 40-act mutual funds, or even as an “ETF of ETFs” (e.g. AdvisorShares). Mutual funds are more accessible to
advisors and clients, are simpler to administer than SMAs, and are more cost-effective for smaller account sizes
(e.g. < $50k). There’s also a significant portion of the advisor marketplace that are more comfortable using
mutual funds than various forms of SMA and UMA programs. Managers wanting to launch mutual funds of their
portfolios should budget $125,000 in total startup costs, and will need to get AUM up to approximately $20mm
before the administrative costs of the fund are being covered by fees. Managers can typically charge a much
higher asset management fee in mutual funds and have greater control of the economics as compared to
SMA/UMA programs. There are several quality outsourced providers that can turnkey the development and
operations of a mutual fund for ETF Strategists. In addition to launching a mutual fund directly, there are
numerous fund families that actively research and hire sub-advisors for their own funds. The details and business
case considerations regarding mutual fund development and sub-advisory distribution opportunities are beyond
the scope of this paper, but launching mutual funds for high performing and high potential products can be a
cost effective means to generate assets in many channels that are inaccessible via SMA/UMA programs.


Model-Based SMA/UMA (Unified Managed Accounts) – The most accessible (requiring the least infrastructure)
and fastest growing form of distribution for ETF Strategists is via Model-Based SMA/UMA programs. In UMA
programs, managers transmit changes to their model portfolios to the sponsor or overlay manager who is
responsible for trading and other operations. The manager is operating solely as a “research provider” or non-
discretionary sub-advisor in the provision of their model. Because of this reduced role, managers typically receive
a reduced fee (20-35bps) in model-based programs. Most UMA programs have research-constrained product
rosters, as well as pre-configured asset allocations administered by the sponsor’s research organization. These
pre-configured asset allocations are often particularly productive distribution opportunities for ass et managers
as they are promoted heavily by the home office and are the easiest solution for advisors to access for their
clients. Some sponsors have begun to convert their existing sub-advised SMA programs to model-based
SMA/UMA programs as a means to capture additional revenue and reduce manager fees. Some sponsors have
also begun to set up separate and distinct model-based ETF Strategist programs that have become the most
productive distribution channel for a number of the leading ETF Strategist asset managers.


Model-Based Rep-as-Portfolio Manager – Rep-as-Portfolio Manager programs are generally utilized by more
sophisticated advisors that select securities directly and act as their own portfolio mana ger, rather than selecting
ETF Strategists or other 3rd party asset managers to manage their clients’ assets. There are though a growing
number of programs that allow advisors to select securities (e.g. individual stocks, bonds, ETFs) for a portion of a
client portfolio, and comingle those selections with models managed by 3rd party strategists. Some of these
programs are configured as Unified Managed Accounts, whereas others are configured more like discretionary
brokerage accounts where the advisor is given trading tools and direct access to manager mo dels for
implementation. Presently there are limited distribution opportunities for ETF Strategists in these types of
programs, but as the fee-based platforms within the industry continue to evolve in the coming years, it is likely
that the lines between rep-as-PM and UMA programs will continue to blur, and ETF Strategists will have
increasing opportunities to distribute their portfolios to the sophisticated advisors that utilize those programs.

                                                                                                           Page | 7
 Distribution Channel Overview & Opportunities



ETF Strategist asset managers have multiple opportunities for distributing their portfolios, from directly soliciting
and serving retail investors as a discretionary RIA (typically via directly managed SMAs), to sub-advising in the
institutional market. The following framework outlines the major distribution channels available to ETF
Strategist asset managers with sample firms (certainly not exhaustive lists) within each channel. The following
pages provide details for each channel, some perspective on the distributio n opportunity for the channel, and
costs, considerations and strategies for pursuing opportunities in the channel.




                                 Distribution Channel Framework

Page | 8
Wirehouse – While the term “wire house” has a much broader definition in some circles, general usage refers to
the (now) four major historic broker dealer advisory firms – Morgan Stanley Smith Barney, Wells Fargo Advisors,
Merrill Lynch (owned by Bank of America) and UBS. The wirehouses led the development of fee-based wealth
management solutions and have the largest and most mature platforms, accessible to thousands of advisors.
Wirehouse advisors are generally constrained to the solutions/programs supported by their home office
organizations. Some ETF Strategists have raised significant assets in the dual-contract programs of wirehouses
without research coverage or endorsement from the home office, but as of this publication, the wirehouses are
not broadly distributing 3rd party ETF Strategist solutions in their more productive sub-advised (SMA and UMA)
programs. This is typically because they have developed proprietary asset allocation products that they would
prefer to promote over 3rd party offerings. As ETF Strategists gain traction in the broader market and the
wirehouses are forced to compete for advisors that use those portfolios, and as the wirehouses’ in-house
solutions are forced to compete (on a performance basis) against 3rd party managed ETF solutions, the channel is
likely to become more productive for ETF Strategists.

Regional/National Broker Dealer – The “regional” broker dealer market has shrunk considerably in the last
decade as firms have been acquired and merged into the wirehouses (e.g. UBS acquiring Piper Jaffray and
McDonald Investments), and as former regionals have merged to become larger nationals (e.g. Stifel Nicolaus
acquiring Ryan Beck and others). Nevertheless, the regional broker dealers are a strong channel and represent a
good distribution opportunity for ETF Strategists. Some regional/national broker dealers have been leaders in
the promotion of 3rd party ETF Strategists to their advisors, even constructing dedicated programs (e.g. RBC
Wealth Management Consulting Solutions). Most of the regional/national BDs have mature fee-based platforms
analogous to the wirehouse offerings, but are typically easier to work with and provide sales coverage for.

Independent Broker Dealer (IBD) – Unlike advisors in the wirehouses and regional/national broker dealer firms,
independent broker dealer firms don’t typically have strong proprietary fee-based platforms that would support
ETF Strategist distribution. Advisors at IBDs vary considerably in the nature of their practice and utilization of
investment solutions (e.g. insurance affiliated brokers focusing in insurance products, or transactional brokers
focusing on traditional stock brokerage business). IBD advisors will often operate in a hybrid model, being
affiliated with a broker dealer for their brokerage business, and one or more of the RIA custodians or turnkey
platforms for their fee-based advisory business. IBD advisors that provide any substantial investment advisory
services typically use one of the turnkey platforms (see below). ETF Strategists that seek opportunities in the IBD
market should focus on specific firms where they can develop a preferential home-office sales relationship, or
pursue firms in partnership with the TAMPs that are better positioned to service IBD advisors.

Registered Investment Advisors & Hybrid BD/RIA – Independent RIAs are the fastest growing channel of the
financial advisory market. Independent RIAs generally partner with one of the major RIA custodians (Fidelity,
Schwab, TD Ameritrade or Pershing) for custody and trading services, and often for other platform and product
services. The TAMPs (see below) also generally target advisors in the RIA market, and also partner with the
major RIA custodians. We have also included LPL and Raymond James in this category as “hybrid” firms that
straddle the line between national broker dealers and independent RIA platforms, in that they have programs
that allow advisors to operate independently and utilize their platforms as independent RIAs, competing with the

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other RIA custodians (e.g. Schwab). While the entire independent RIA market is growing, it is also one of the
most complex channels to target for distribution. Independent RIAs are very different in how they practice, the
products they use, and the vendors they partner with. Many ETF Strategists also operate as RIAs in servicing
their direct retail clients, and many are actively partnered with one or more of the major RIA custodians for
marketing and promotion of their solutions to other RIAs. The Independent RIA channel probably represents the
highest potential, but also complex to address market for ETF Strategists.

Turnkey Platforms (TAMPs) – The TAMPs are typically used by advisors in the independent broker dealer and
independent RIA channels. Some turnkey platforms target other niche markets such as small banks. Turnkey
programs are extremely varied in their product rosters and philosophies. Some firms (e.g. Placemark) have a
broad super-market approach and provide very easy access for ETF Strategists, where other firms (e.g.
Genworth) offer their advisors very constrained product rosters based on their internal research and investment
philosophy. Some TAMPs have also created their own managed ETF solutions (e.g. Envestnet PMC) that compete
with 3rd party ETF Strategist portfolios. The TAMPs as a category have been early adopters and promoters of ETF
Strategists and represent good distribution opportunities/partners and efficient access points for ETF Strategists.

Multi-Family Office (MFO) & Small Institutions – The smaller institutional (< $100mm) and multi-family office
markets have traditional used more sophisticated products (e.g. hedge funds, private equity, limited
partnerships, real assets), often selected in partnership with institutional consultants. Recently though, some
institutions (particularly $10-50mm portfolios) have begun working with established ETF Strategists in lieu of
institutional consultants in something of an outsourced CIO model. Like the independent RIA channel, the MFO
and small institutions market is very heterogeneous and difficult to penetrate without a highly experienced sales
force. The larger traditional institutional market is not covered in this guide, as those firms generally would not
consider ETF Strategists for their portfolios.

U.S. Banks – The U.S. banks could rightly be sub-segmented by size (smaller regionals vs. the larger nationals) as
well as advisor types (retail bank brokers and wealth advisors vs. HNW private client and trust groups). In
general, banks are late adopters of wealth management solutions, and the bank channel is not a particularly
lucrative market at this time for ETF Strategists. In addition, many bank research groups are averse to tactical
management and other characteristics of many managed ETF solutions, and typically control asset allocation
choices and limit product selection to traditional products (e.g. long only equity and fixed income). There are
exceptions though, and some ETF Strategists have had considerable success partnering with banks (particularly
regional banks) in utilizing their managed ETF solutions as the “house” solution for their advisors.

Canada – While not truly a “channel” per se, the Canadian market represents a unique opportunity for U.S.
based asset managers. The market is dominated by approximately six bank-affiliate financial institutions, plus a
handful of independent RIA equivalents and a few large insurance affiliated advisory firms. Two of the top -3
firms have well developed model-based programs that provide efficient distribution opportunities for managers,
and the rest have well developed sub-advised SMA programs. The Canadian market is typically several years
behind the U.S. market in product development/adoption, but the major Canadian platforms are likely to develop



Page | 10
ETF Strategist rosters for their advisors in the next few years, following in the footsteps of the major U.S. based
platforms.

Direct Retail – Many ETF Strategists started as wealth managers, directly soliciting and servicing individual
investors and operating as independent RIAs. Managed ETF solutions are particularly well suited to direct retail
distribution given their relatively simple operations, holistic nature (as compared to style-box constrained
products), transparency, and low cost. For ETF Strategists with established direct retail advisory practices,
invested in digital and local market marketing efforts can be highly productive. Some ETF Strategists have
developed very innovative and productive direct retail strategies, such as hosting a local radio program. For ETF
Strategists that do not presently directly solicit or service retail investors, developing a full advisory offering can
be a cost-effective way to diversify the business.

International – Like Canada, “International” isn’t truly a channel, but it does represent a very large potential
future distribution opportunity for ETF Strategist asset managers. The non-U.S. markets are extremely varied in
their regulatory requirements, and in their use of investment products. The European markets are increasingly
accessible to U.S. based asset managers, and some ETF Strategists have had success packaging UCITs for EU-
wide distribution, typically in partnership with the major European banks. The European private banks, as well
as major private/trust banks in Asia (Singapore, Shanghai, Tokyo), the UAE and Latin America are all potential
distribution partners for ETF Strategists. Effectively selling into any of these markets requires considerable
investment in understanding the market, legal/regulatory expenses, and the establish of partnerships with
foreign banks/institutions with dedicated and knowledgeable sales resources.

Insurance / Annuities – The U.S. insurance industry has primarily utilized proprietary (and expensive) mutual
fund families for annuity products. Recently some insurance companies have begun using (or at least
considering) ETFs, and managed ETF portfolios within variable and fixed annuity wrappers. Success in the
insurance channel generally requires sales, legal and operations resources familiar with the operating
requirements for running portfolios within insurance packages, and an active partnership sales model with a
leading insurance provider.

401K / Retirement – Perhaps one of the largest (largely untapped) distribution opportunities for ETF Strategists
is the 401k (and other retirement accounts) market. 401k programs tend to be dominated by proprietary (and
often expensive) mutual fund offerings, but in recent years several providers such as Mid Atlantic Capital Group
have begun offering programs and technology for implementing managed ETF solutions efficiently within 401K
programs. As with other channels, opportunities in the 401k market are best developed by experienced sales
staff that are familiar with the variety of 401k program providers and plan administrators.




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Implementing a Productive Distribution Strategy



Distribution is more than “sales”. Implementing a productive distribution strategy for an ETF Strategist asset
manager requires planning and execution across six primary disciplines and functional areas.




PR & Centers of Influence Awareness – An effective press strategy can provide enormous leverage in support of
sales. A PR strategy requires the cultivation of relationships with key writers for the on -line and print
publications most frequently read by a strategist’s primary target channels. Creating regular newsworthy
“events” or stories, as well as writing by-lined articles can provide significant inbound interest in your portfolios,
as well as provide content (reprints) that can be used in support of your direct sales and marketing efforts.

Event Planning, Marketing & Materials – A productive marketing program is organized around key industry
events and activities, with a deliberate plan and calendar to drive preparations of necessary materials, event
planning, follow-up communications and sales dialogs, etc. Collateral that highlights product metrics and
attributes are necessary but insufficient to support mailings, digital distribution and conference participation.
Value-adding content in the firm of meaningful research and ideas that advisors can use to support their
utilization of your product are critical.

Digital Marketing – Not surprisingly, today advisors often first turn to an asset manager’s web-site to learn more
about the firm and products. A high quality, professional, and regularly updated web site is a basic “cost of
entry” requirement for ETF Strategists operating in a competitive asset management market. A well-organized
direct email marketing infrastructure, managed social media presence, webinars, and other on-line interactions
can build awareness and loyalty with advisors.



Page | 12
Key Account / Home Office Sales – Generally responsible for getting your portfolios “on the shelf” and keeping
them there, key account management and home office sales is particularly important for ETF Strategists looking
to compete in the wirehouse, regional/national BD, and independent BD/hybrid channels. Key account staff need
to be highly skilled (e.g. CFA holders) and able to represent the firm well both in research dialogs, and business
exchanges (i.e. financial arrangements) required to get preferential positioning on major fee-based platforms.

Outside Advisor Sales – Historically referred to as “wholesaling”, the role of outside advisor sales has changed
significantly in the past decade. Due to the cost of providing branch-level support, most ETF Strategists have
adopted a hybrid sales model in which representatives participate in major events/conferences and pursue
referrals generated from digital marketing and inside sales campaigns. The section below on “The Changing
Face of Advisor Sales & Wholesaling” provides additional content on this topic.

Inside Sales & Support – Most asset managers (including ETF Strategists) typically maintain a ratio of at least
one inside agent to one field wholesaler, with that ratio being much higher in some instances. Some ETF
Strategists have been very successful in staffing a larger inside sales function to drive sales through targeted call
and email campaigns, and in digital marketing campaigns tied to major industry events. Inside sales is much
more cost-effective and flexible than outside wholesalers. See the section below on “The Changing Face of
Advisor Sales & Wholesaling” for additional thoughts on the role of inside vs. outside sales.



 A Content-Centric PR & Marketing Strategy
Core to a productive public relations and digital marketing strategy is regularly developing content that is
compelling and value-adding to advisors. Beyond information specific to your strategies and investment
philosophy, what is your firm going to be known for? Developing compelling content is hard work and requires
deliberate planning and resource allocation. While some firms work with outside agents/consultants on the
development of content, a content strategy must ultimately be driven by the CIO and other thought leaders
within the ETF Strategist’s organization. Content can take the form of white papers, “how to” guides, trade
rationales, economic views and opinions, and other topical content that advisors can use to become informed,
and also aid them in their own efforts at raising assets and utilizing your products in the development of
solutions for their clients.



 The Changing Face of Advisor Sales & Wholesaling
The advisor sales model has changed significantly in the past decade. In the 1990s and before, branch-level
wholesaling (often buying lunch for the branch and handing out sleeves of golf balls while giving a rote product
pitch via PowerPoint) was key to driving product awareness and adoption. Increasingly, large sponsors do not
allow wholesalers in their branches, and advisors don’t want to invest the time. There are multiple models that
ETF Strategists have developed in lieu of putting ‘feet on the street’, primarily digital marketing, event marketing,
and outbound campaigns via inside sales organizations. Partnership selling with ETF issuers, TAMPs and other
industry Centers of Influence are also increasingly providing sales leverage for ETF Strategist asset managers.

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 About Randy Bullard & ETF Strategy Group



ETF Strategy Group (ESG) was founded in July 2012 to help ETF Strategist investment management firms develop
and grow their businesses. ESG provides a variety of services including the following:

       Strategic business consulting, and distribution strategy development and implementation services for
        ETF Strategist asset management firms.
       Third-party marketing services designed to help ETF Strategist asset managers execute effective
        distribution strategies and grow assets under management in key markets.
       Investment banking services designed to help ETF Strategist asset managers gain access to growth
        capital, and implement productive growth and business transformation strategies.
       Consulting and business development services to ETF issuers, private equity firms, and product/service
        providers targeting the growing ETF Strategist asset management market.



ETF Strategy Group is led by Randy Bullard. Randy has over 20 years of industry experience in strategy consulting
and asset management services, most recently as co-founder in 1999 of Placemark Investments. While at
Placemark, Randy led the firm’s PR, Marketing and Business Development efforts, as well as many aspects of the
firm’s product and service development and evolution. Randy led the establishment of custom wealth
management programs for ~20 leading providers including Smith Barney Consulting Group, UBS, RBC Wealth
Management, TD Ameritrade, BMO Nesbitt Burns and many others resulting in $8B+ in assets under
management and relationships with thousands of financial advisors. Prior to founding Placemark Investments,
Randy was a Principal Consultant with A.T. Kearney, leading strategy and systems implementation projects for
firms in the financial services industry including Goldman Sachs and Citigroup. Randy has published numerous
articles and papers on wealth management industry topics, and is a frequent speaker and cited industry leader
on a variety of topics including Unified Managed Accounts, Overlay Management, Wealth Management
Platforms, and Managed ETF Solutions.

For additional information, please contact Randy at Randy.Bullard@ETFStrategyGroup.com



Copyright © 2012 Randy Bullard, ETF Strategy Group. Distribution in whole permitted withou t notifica tion. Distribution in
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posted:10/23/2012
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Description: This ETF Strategy Solutions guide was developed as a resource to help ETF Strategist investment managers better understand the distribution landscape, aid them in making product development decisions necessary to support broad market distribution, and provide guidance about how to organize and implement a productive distribution strategy.