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November 27, 2000 12:00 AM

GOTTA ADD VALUE: NO MORE SCHMOOZE

Money managers relying more on performance analytics and less on golf, parties and junkets to earn sponsors' attention

Christine Williamson
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    Tiger Woods has much less to fear lately from money management marketers.

    That's because they are spending much less time schmoozing on the golf course and a lot more time learning how to use and explain advanced performance analytics to their clients.

    "Just look at my handicap. Marketing has definitely changed in the last few years," said C. Gabriel Hayes, director of marketing at fixed-income manager Smith, Graham & Co., Houston.

    While lavish parties and junkets to exotic locales for client conferences aren't completely gone, it's a lot harder to get people to attend them, said money management marketers.

    "It's been much more difficult to get a crowd in the last three years -- on the golf course, at a breakfast or a lunch," said Stephen N. Potter, senior vice president and a marketer at Northern Trust Global Investments, Chicago.

    "You can't win business these days with parties: CFOs are way too busy. If you want to get on their calendar, you've got to be adding value," said consultant Kent H. Novell, managing principal and chief operating officer of BRG Consulting Services, Woburn, Mass.

    Mr. Novell said he's grateful the long nights he had to spend as a consultant drinking with union pension fund trustees in the 1970s are a thing of the past. "It was part of what was expected. Each guy would come with a bottle of bourbon to a meeting and you had to drink them under the table," he said.

    Complex details, less help

    The change in the schmooze level has been driven especially by plan sponsors trying to do their jobs in an increasingly complex performance and compliance environment with larger asset pools and fewer people.

    "Human resource guys, vice presidents of finance, treasurers - they don't have a lot of time to spend on the golf course. They want more knowledge, more content and more solutions. The better you do at these things, the less they have to see you. And that's what they want," said Joseph P. LoRusso, president of Fidelity Institutional Retirement Services Co., Marlborough, Mass., which serves corporate defined contribution plan clients.

    "Schmoozing isn't totally dead, but you are definitely judged a lot more now on what you can do -- performance, client service, information delivery. Sponsors don't have a lot of time to waste and you can't go in any more to sell `product.' You have to sell a solution," said Northern Trust's Mr. Potter. "How we talk to clients about new products now is very akin to how we offer to consultants for shelf space only those of our products that they can recommend to clients. To either group, we only talk about products they can actually use, rather than trotting out for display our entire spectrum of products."

    "The days when the sales guy came in with a whole bag of tricks are over," agreed John F. McNamara, president of Fidelity Management Trust Co., Boston, which serves institutional investors. Mr. McNamara said his term for the new style of marketing to institutional investors is "solutions selling" and he has spent his first two years at Fidelity fostering a new culture to support that model.

    "The web has made all knowledge about all money managers real-time. So the days when being there first had a competitive advantage are over. Relationships are still important, but plan sponsors are able to dissect data in all kinds of ways and are just much better informed than ever before," Mr. McNamara said.

    "What do you replace the golf course with?" he asked. "It's simple: value-added services. You have to train people to think in a solutions-based way and to understand the whole product range Fidelity offers. They won't sell what they don't understand. They need to bring something else to the party besides the last quarter's investment performance."

    Mr. McNamara's unit now has a strategic services group, which coordinates all the products Fidelity could sell to institutional investors.

    More consultation

    Like many money managers, Fidelity has become more consultative in its relationships with plan sponsors and consultants, developing new risk management and budgeting tools and creating the investment director's job, a new link between the portfolio manager and the client or consultant. The investment directors, former portfolio managers, are the link between the money manager and the client. They "buy more time for portfolio managers," whom Mr. McNamara said already are at full capacity.

    In Fidelity's 401(k) company, Mr. LoRusso said a team of investment managers serves as a separate consulting team to help clients with specific solutions. The relationship manager in his department has evolved into more of a project manager, helping sponsors with planning, strategy and execution issues that are mainly benefits-related issues.

    "Sponsors have become smarter, better educated and more focused on managing the assets in the last 20 years. You have to be the communicator and you have to be more knowledgeable about investment performance, attribution and risk. Sponsors are expecting solutions, not a broad, shotgun approach on products. You can't waste their time. It's not at all unusual for a sponsor to say `I have 30 minutes and have to focus on these three things,"' said Deb Boedicker, chief marketing officer and executive director at UBS Asset Management, Chicago.

    Marketers, in turn, have to "keep fresh, to know how our specific strategies are performing and why. It's energizing for me to be able to increase my personal knowledge," she said.

    Mr. Potter said Northern Trust's new client service and marketing hires are "95% CFAs." Not too many years ago, the chartered financial analyst was most often found managing money.

    Added Ms. Boedicker: "A CFA designation is more compelling for us than a master's degree. It's more specific, more applicable."

    MFS Institutional Advisors Inc., Boston, has been hiring far more CFAs than ever before, partly to satisfy "the huge demand on the time of plan sponsors. They need us to add value to our relationship with them," said Joseph J. Trainor, president. But MFS also uses technology, especially the Internet, to deliver the information sponsors need when they need it.

    Quarterly web casts with MFS portfolio managers, for example, put an explanation of the quarter's performance in a particular strategy on a sponsor's desktop any time he or she chooses, all without having to leave the office.

    Using liquidity management

    At Smith, Graham, it was Mr. Hayes, the chief marketer, who thought of a way to use the company's liquidity management capabilities to create a new product that brought in as much as $700 million in its first year, said Ronald A. Johnson, president and chief investment officer. Smith, Graham is a 10-year-old, minority-owned fixed-income shop with about $2 billion under management.

    In "solution marketing" to prospects, Mr. Hayes saw that plan sponsors often had a lot of cash that wasn't earning much in sweep accounts. He realized Smith, Graham could use its liquidity management capabilities to sweep all cash out of a sponsor's portfolio, pool it, further segregate it into smaller pools by the cash liquidity needs of the client and manage it actively. Thanks to Mr. Hayes' idea, the firm now counts Continental Airlines Inc., Enron Corp., Houston Municipal Employees' Retirement System and Chase Manhattan Corp. among its pooled cash strategy clients.

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