Higher Calling: Chanda Sour, Ludwig Financial Group

CLS sits down with financial advisor Chanda Sour, Ludwig Financial Group, where he explains the emotional impact becoming a financial advisor has had on him.


How to Explain Smart Beta Investing with a Simple Example

Content provided by Joe Smith, CFA, Senior Market Strategist

Smart beta ETFs continue to dominate the financial news as more investors and asset managers grapple with the continued shift from active to passive investing. Despite this movement, smart beta investing is still widely unknown, and there is little understanding about what it actually means. At CLS, we are heavy users of smart beta ETFs. We employ them primarily to gain access to return premiums, such as value, size, momentum, quality, and minimum volatility.

Smart beta ETFs aim to marry two differences between active and passive investing (fees and exposure) by screening for stocks the way an active manager would. The only difference is smart beta ETFs use rules-based methodologies to find stocks that meet an investor’s target investment exposure without the need for human judgement.

To illustrate this point, let’s take a look at the suggested holdings for both the MSCI USA Index and a hypothetical smart beta index targeting value stocks within the same index universe. The MSCI USA Index is simply a market-cap-weighted index, while our hypothetical smart beta index targets stocks that score with high exposure to the value factor.

So what do the results tell us? Not only does the smart beta index have less in common with the market-cap index in terms of the top names held in the portfolio, but the stocks clearly score much higher on the desired exposures (in this case, value) than the market-cap index. In effect, a smart beta index captures the essence of a typical active manager’s intent, but with transparent rules that re-base a traditional index along an investor’s desired exposure.

The key takeaway is smart beta investing is not necessarily new, but it’s an exciting twist to exposures investors have long accessed through active managers and their stock-picking abilities. Smart beta ETFs provide additional value for investors, including those in CLS portfolios, by providing a more cost-effective approach to accessing return premiums that deliver value for the long haul. Just one of the many reasons I love being smart beta invested!



Understanding The True Cost of Mutual Fund Distribution – Part Three

This is part three in a series on The True Cost of Mutual Fund Distribution. Part one focused on product placement, click here to read it first. Part two focused on active sales and marketing, click here to read part two. Part three focuses on tracking capabilities.

Tracking Capabilities

An investment manager will need to evaluate needs and determine what types of technology should be utilized. Although these costs are optional, it is important to evaluate each one and determine if any are necessary for the business.
Types of Technology Costs

  • CRM Tools
  • Sales Reporting
  • Omni/SERV

Customer Relationship Management Tools (“CRM”) – Customer relationship management tools help organize and document sales calls, email campaigns, and meetings. Most commonly utilized CRMs are Salesforce, Redtail, SalesPage, and ACT.

Sales Reporting – Aggregation tools provide consolidated data from custodians, broker-dealers, and other intermediaries. This type of service provides more detailed sales reporting to assist in managing territories, tracking sales traction, and determining market share. Providers may include Celera, AccessData, MARS Salesfocus Solutions, and SalesConnect.

OMNI/Serv – As more intermediaries are moving to Omnibus trading, Omni/SERV is an optional service to see account and rep level transparency for Omnibus trading. Although this is optional, it is important to have rep level data on trades.

Questions Advisors Should Consider

  • How can you use a CRM tool to your advantage?
  • How are you currently tracking sales data? Would using a CRM tool help your sales tracking?
  • Do you have Omnibus business? If so, does Omni/SERV make sense for your business?



7266 GFS-4/5/2017


How Orion Social Makes Support Simple

Orion Social

In today’s article, we’ll discuss how Orion Social makes support simple. Everything you need for great service can be found in one place.

The post How Orion Social Makes Support Simple appeared first on Orion Advisor Services.


Understanding The True Cost of Mutual Fund Distribution – Part Two

Join us for part two of a three part series on The True Cost of Mutual Fund Distribution. Part one focused on product placement, click here to read it first. Part two focuses on active sales and marketing. Part three focuses on tracking capabilities and will be released tomorrow. 

Active Sales and Marketing

The next phase in distribution planning are the avenues in which investment managers will seek to raise brand awareness and create sales and marketing activity.  The most common considerations are the creation of a sales team, investment in various public relations and marketing, and sales related activities. The extent of the distribution efforts are closely tied to the individual firm’s target market and budget.

Types of Sales Personnel

  • National Account Managers
  • Wholesalers
    • External Wholesaler
    • Internal Wholesaler

National Account Managers
National accounts, key accounts, and relationship managers are an extension of the business development team. They focus on interfacing and managing the overall relationship with key strategic intermediary home office relationships. Key account managers are charged with creating and managing the execution of distribution business plans through coordination with all interested constituents. They work towards forging partnerships, with an emphasis on increasing market share, through leveraging all centers of influence and “delivering the firm.” Key account managers proactively work with the investment manager to uncover product placement opportunities. They are tasked with understanding the client firm’s strategic priorities, search activity, product and marketing initiatives, and opportunities for engagement. It is the national account manager’s responsibility to develop and maintain strategic relationships with all centers of influence. This individual also positions strategies and portfolio construction ideas to home office audiences, manage all dealer agreements, participates in contract negotiations, and is the interface with the transfer agent. They also coordinate all marketing, sales, and support services, anticipate and resolve complex problems, and disseminate intelligence to the sales force and home office to improve sales execution.

Wholesalers are categorized as internal, external, or a hybrid of the two. Wholesalers are typically paid commission only or a combination of base salary plus commission. There are also third party marketing organizations that offer individuals or teams for hire. There are several key items to consider when hiring wholesalers. The wholesaler should have experience in the desired strategy and have existing relationships or proven ability to build relationships within the territory. They should be able to not only sell, but also position and utilize consultative development approaches, as well as contribute to marketing ideas and utilize CRM programs. Above all, you want to hire an individual who will blend with the company culture and be a positive addition to the sales team.

External Wholesalers – External wholesalers, often referred to as regional directors, cover specific target channels (independent broker-dealers, registered investment advisors (RIAs), broker-dealers, bank and trust, insurance and retirement intermediaries) in a specific U.S. territory. External sales representatives tend to have established relationships and focus on positioning and selling the investment manager’s strategy and funds. They have strong communication skills with the ability to convey traditional and complex products in a concise manner to both advisors and their clients. Client coverage also includes management practices that are designed to offer solutions to advisors.

Internal Wholesalers – Internal wholesalers work with external wholesalers to cover a specific target market. Much like externals, they are expected to have the skills necessary to cultivate and maintain relationships within their designated territory. They contact the advisors in their territory regularly and manage the sales process. Internals respond to daily telephone inquiries, follow up with financial consultants who establish new business, and continually educate them on current products and upcoming new products. Internals should have the ability to converse knowledgeably with financial advisors and other key personnel about investment solutions and current economic and market conditions and provide account activity and sales reports to assist the sales team.

Questions Advisors Should Consider

  1. What type of sales team does your firm currently need?
  2. What type of budget do you have for a team? Do you have/need a budget for travel, expenses, and a CRM program?
  3. What are some realistic, long-term sales goals?

Marketing Costs
Each investment manager has specific marketing goals. Some investment managers will seek the services of a third party press and advertising agency while others may hire an in-house employee. Investment managers should consider the type of marketing opportunities that make sense for their firm, budget, target market, and overall goals. Marketing channels can include items such as industry or broker-dealer conferences, email campaigns, promotional items, hosting lunch and learns, and your website.

Types of marketing costs

  • Press & Advertising Agency
  • Conferences & Industry Events
  • Marketing Materials
  • Digital Marketing

Press & Advertising Agency – Annual costs for specific negotiated items that may include but are not limited to media tours, bylines, advertising, conference panel representation, and public imaging.

Conferences & Industry Events – The financial services industry offers many national, regional, and local conferences. Conferences may be hosted by third party intermediaries, such as broker-dealers, custodial firms, service providers, associations, and research organizations. Attendees may range from savvy investors, research analysts, financial controllers, financial advisors to investment managers. Each conference will have specific costs, depending on if you would like to sponsor or simply attend. There are costs for attending or sponsoring but there may also be costs for travel, hotel rooms, entertainment, marketing, and booth materials.

Marketing Materials – Example of marketing material costs would be the cost of design, printing, and shipping of the prospectus, fact sheets, brochures, and other marketing materials.

Digital Marketing – This includes the overall cost to create, maintain, and update a website. Service may begin at basic layout or a more in-depth website including blogs and videos. Pricing is dependent on the extent of the services needed.

Questions Advisors Should Consider

  • Will you budget to attend industry events or sponsor conferences? Which ones would you like to attend?
  • What do you need for marketing materials? Will you hire a third party to create these materials?
  • What functionality does your firm need for a website?



7265 GFS-4/5/2017


Higher Calling: Jonathon Davis, JT Davis Asset Management

CLS sits down with financial advisor Jonathon Davis, JT Davis Asset Management, where he discusses the importance of treating his client-relationships as friendships.


Understanding The True Cost of Mutual Fund Distribution – Part One

Join us for part one of a three part series on The True Cost of Mutual Fund Distribution. Part one will focus on product placement. Parts two and three will be released on Tuesday and Wednesday, respectively. 

Northern Lights Distributors, LLC (NLD) believes a successful mutual fund distribution strategy requires a solid competitive philosophy, process, and expertise as well as consistent performance and excellent client service. It also requires investment managers who thoughtfully plan and invest in a scalable sales and marketing strategy.  Distribution has a variety of associated costs. The amount of associated costs is dependent on each firm’s individual goals and its place in the mutual fund sales cycle. While some investment managers may have large goals, seek broad sales and marketing exposure, and desire expansive platform availability, others may pursue a more finite approach.

Distribution Growth Cycle
NLD developed the distribution growth cycle model to assist investment advisors in matching their current distribution characteristics with potential opportunities. This allows managers to tactically develop their distribution plans to align with where they are within the cycle, along with associated opportunities. NLD has identified four phases in the distribution cycle: Raising Capital, Emerging Manager, Growing Manager, and Established Partners. Each distribution phase has distinct characteristics, challenges, and opportunities.


Elements of successful distribution
Each element of successful distribution has inherent costs. NLD has created a summary of these potential costs and questions to consider as advisors develop their distribution strategies. “Understanding the True Cost of Mutual Fund Distribution” will cover the three elements of successful distribution strategies:

  1. Product Placement
  2. Active Sales & Marketing
  3. Tracking Capabilities


Product Placement

All non-direct investors purchase mutual funds through an intermediary provider: custodian, broker-dealer, bank, trust, or third party asset management program. To better fit the individual end client’s needs, intermediary firms may offer a variety of programs with multiple investment vehicles through either a commission or fee-based structure. Understanding the product placement requirements and the cost of such platforms is the first step in planning for successful distribution.

As investment advisors assess each firm’s goals and platform wish list, they should consider the potential access fees for all intermediaries. There is a common misconception regarding product shelf space. Some people believe that more platform availability equates to more opportunity for potential sales success. This may be true in some cases, but only with a combination of other sales and marketing efforts. The reality is that more placement will also mean higher costs. Unfortunately, there is not a magic number of platforms the fund should be on. Advisors should thoroughly consider the wish list and right size the opportunity to meet the current growth cycle, making adjustments as the fund grows.

There are typically two types of onboarding fees that an intermediary may require; fees for due diligence review and on-going platform maintenance fees.

Due Diligence Fees – Intermediaries may charge an upfront, one time due diligence fee for the review of a mutual fund for potential product placement. This is normally a hard dollar cost determined prior to reviewing a fund. Paying this fee does not guarantee the fund will be approved. (Investment manager expense)

Platform Maintenance Fees – Intermediaries may charge the mutual fund an ongoing annual fee. The annual fee is normally a fixed rate which covers expenses associated with fund maintenance. The maintenance fee may cover on-going CUSIP administration and review. Fee ranges vary across intermediaries. Some charge a per CUSIP fee at a fixed cost with a minimum monthly or annual fee at the fund level, irrespective of asset levels. (May be an investment manager expense, some exceptions may apply)

Intermediary operational expenses may have a broad definition across the target market landscape. Operational expenses may cover the intermediary’s administration and maintenance of client accounts, which may entail various client communication and fund transactions.

 Shareholder Servicing Fee – Shareholder servicing fees typically apply to custodians and self-clearing firms and may include, but are not limited to, client communication, such as, delivering fund prospectuses, proxy materials, SAIs, educational publications, and other fund information. In addition, servicing may include direct client support via telephone for wire transfers, when applicable. (Fund expense, with potential differences billable to the investment manager)

Networking Fees – Networking operational services provide mutual fund account reconciliation and dividend processing at the client account level. This service has three reporting types, to be agreed upon with the intermediary. Centralized connectivity across intermediaries may require fund/SERV participation. Networking services are typically charged annually for each shareholder account. (Fund expense, with potential differences billable to the investment manager)

Sub-accounting and Administrative Services (may be referred to as “Omnibus”) – Sub-accounting services are meant to provide a uniform and efficient trading and reconciliation process for platforms with accounts across multiple disciplines and funds. This structure seeks to minimize transaction cost, allowing for block trading and execution across fund account holders. Centralized connectivity across broker-dealers may require an Omni/SERV subscription. (Fund expenses, with potential differences billable to the investment manager)

Consult the transfer agent and intermediary relationship on the various options to best suit current and future needs.

Cost associated with certain sales and marketing activities may be paid as a fund expense. Intermediaries may have program/platform fees and or revenue share cost associated with mutual fund support that are not paid by the fund. Advisors should work with their relationship manager to discuss which activities are not covered.

12b-1 Fees – These fees are used to pay for expenses associated with mutual fund distribution. This includes, but not limited to, fees paid for marketing and selling fund shares. Such costs could include compensating individuals or organizations who sell fund shares, advertising and designing, printing, and mailing sales literature to potential investors. Certain 12b-1 fee plans may include “shareholder service fees,” which pay for servicing, such as organizations responding to investor inquiries on their investments. (Included in the fund’s expense ratio)

Platform Partnership Fee – Intermediaries may have optional and/or qualifying sales and marketing partnership programs that may support meeting and conference sponsorship, access to branches for educational and marketing promotions, and receipt of supplemental sales data. Fees can be in addition to, or standalone from the revenue share fees. (Hard dollars billed directly to the investment advisor)

Revenue Share – Revenue sharing payments are in addition to 12b-1 fees and other operational expenses, disclosed in the fund prospectus. Intermediaries may require revenue share and is at the sole discretion of the intermediary. The fees may be associated with sales and assets under management, and may be in addition to, or standalone from the platform partnership fees. (Basis points billed directly to the investment advisor)

Questions Advisors Should Consider

  • How many intermediary platforms do you wish to have your fund available on?
  • What are the individual costs of each platform? Do you have enough demand at the specific intermediary to justify the expense?
  • Do you desire additional sales and marketing intermediary partnerships, such as home office access? If so, what is the cost per intermediary?
  • Do you have the marketing resources to support partnership relationships?

Disclaimer: The fees and the underlying services are subject to change at the intermediaries’ discretion.

Northern Lights Distributors, LLC, member FINRA/SIPC


7264 GFS-4/5/2017


Not Just Cornfields

Content provided by Kostya Etus, CFA, Portfolio Manager


I recently watched a fairly new documentary titled, “Becoming Warren Buffett” on HBO. It was a good production, but there was one thing that kept eating away at me. Every few scenes, the film showed corn fields as far as the eye could see. That doesn’t really help the stereotype that everyone in Nebraska is a farmer and that we ride horses and tractors to work.

There are many small, rural towns in Nebraska (another great movie, titled “Nebraska,” which is directed by Omaha native Alexander Payne, beautifully depicts life in a small Nebraska town). But, Omaha is not one of them. Omaha has close to half a million people in the city limits and almost a million in the metro area, making it one of the largest metro populations in the Midwest and ranked in the top 100 in the country.

One factor that sets Omaha apart is the city is very spread out, so the population density is quite low. This is the reason Omaha is sometimes referred to as the “biggest small city.” It also allows Omaha to have many coveted per-capita stats:

  • One of the highest number of millionaires and billionaires per capita. Billionaires include Ameritrade founder Joe Ricketts, Walter Scott of construction giant Peter Kiewit, and, of course, the second richest man in the world, Berkshire Hathaway founder and CEO Warren Buffett.
  • One of the highest number of Fortune 500 and 1000 companies per capita. Fortune 500 names include: Berkshire Hathaway, Union Pacific, Peter Kiewit, and Mutual of Omaha (ConAgra Foods recently moved its headquarters to Chicago), and the Fortune 1000 list includes: Valmont Industries, TD Ameritrade, West Corporation, and Werner Enterprises.
  • Last, but not least, one of the highest number of restaurants and bars per capita.

Omaha has also ranked among the top in many polls, including most affordable and most business-friendly city, best place to live and work, and best place to raise a family. And let’s not forget one of the main attractions, the Henry Doorly Zoo, which is considered, and often ranked, the best zoo in the world. That’s right, the world! So if you’re still wondering why anyone would visit Omaha, let me enlighten you:

  • Omaha is home to one of the most enjoyable college sports events, the College World Series (CWS). The population of Omaha seems to double come mid-June as the CWS gets underway. Baseball fans from all over the country come to enjoy the tournament in a new stadium built right next to downtown Omaha. Thousands of people flock to the area to enjoy all-day tailgating and experience the local area in the week-long event.
  • In early May, value investors from around the world make a pilgrimage to the see the Oracle of Omaha, Warren Buffett, and hear his words of wisdom. Berkshire Hathaway’s annual shareholder meeting is held at a convention center in downtown Omaha, but the festivities spread throughout the city. Local businesses owned by Berkshire, including Nebraska Furniture Mart and Borsheims Fine Jewelry, offer great discounts for shareholders. All that is required to attend is ownership of one share. (Since the 50/1 stock split in 2010 for B shares, it has become a lot easier to gain entry).
  • If you have seen the movie “Yes Man” with Jim Carrey then you know coming to a Husker football game is a must. The whole state seems to converge on Lincoln (about an hour’s drive from Omaha) on game day, and Memorial Stadium becomes the third-largest city in the state (cell phones have been known to stop working due to the population overload). With a lack of professional teams in the area, the love, pride, and loyalty for the Huskers are unmatched. Yes, Husker fans are notoriously gracious and the entire state bleeds Husker red. Game day is an experience like no other. Miles of tailgating all around the stadium leads up to one of the most intense moments as you enter the stadium, experience the iconic tunnel walk, and surround yourself in a sea of red.

So the next time you think of Omaha as just cornfields, do the city a favor and think again.



Kevin Hesselbirg Named CEO of The Gemini Companies

Andrew Rogers to Resign After Ensuring a Successful Leadership Transition

HAUPPAUGE, N.Y., April 6, 2017 /PRNewswire/ — The Gemini Companies (“Gemini”) have appointed Kevin Hesselbirg as CEO. Mr. Hesselbirg will take over the role previously held by Andrew Rogers, who has resigned from the position after more than 16 years with the firm. Mr. Rogers will continue working at Gemini in an advisory capacity to ensure a smooth transition.

“Kevin shares The Gemini Companies’ commitment to partnering with clients to achieve their goals and challenge the status quo. I look forward to working with him to implement a smooth, seamless transition for the benefit of our clients and employees,” said Mr. Rogers.

“The Gemini Companies have become vital partners to their investment manager clients as a result of Andrew’s vision and dedication. We wish Andrew the best of luck in his future endeavors,” said Jon Baum, Executive Chair of the Board for NorthStar Financial Services Group, LLC. “We are confident that under Kevin’s leadership, The Gemini Companies will continue providing excellent service to their clients and achieve new levels of success.”

Mr. Hesselbirg will be based at Gemini’s headquarters in Hauppauge, N.Y. He is an experienced leader of growth-oriented technology and tech-enabled service organizations within the financial services sector, including Ernst & Young, OpenLink Financial, and Primatics Financial. At OpenLink Financial, a leading software developer of financial and energy trading and risk management solutions, he began as Chief Financial Officer and later earned promotions to Chief Operations Officer and CEO. During his 12-year tenure at OpenLink, Mr. Hesselbirg helped establish the company as the clear market leader in its industry, servicing a world-class customer base with approximately 30,000 users spread across 500 global firms. He grew the company from less than $20 million in revenue and 100 professionals to over $325 million in revenue and a global team of over 1,250 professionals.

Most recently, Mr. Hesselbirg served as CEO of Primatics Financial, which was purchased by SS&C in 2016. He has subsequently advised various private equity organizations, including TA Associates, on financial services investments. He also serves as an Entrepreneur in Residence at Hofstra University.

“I am very impressed with The Gemini Companies’ leadership team and comprehensive solutions,” said Mr. Hesselbirg. “I am eager to work with my new colleagues, our existing clients, and future prospects. Together, I hope to continue expanding our offerings and service capabilities through innovative solutions that enable clients to meet the ever-changing challenges associated with increased competition and regulation, so clients can focus on growing their assets under management and expanding their investment offerings.”


7273 GFS-4/6/2017



Orion Weekly: Orion Social Launches in 4 Days

The new Orion Social launches this upcoming Monday, but we're letting you in on the announcement early. Watch today's Weekly to learn more.

The post Orion Weekly: Orion Social Launches in 4 Days appeared first on Orion Advisor Services.