Business Strategy Issues for Investment Leaders

Last summer and fall Atherton Consulting Group interviewed twenty top leaders in a variety of investment-related businesses (see chart).

Atherton Consulting Group lists the businesses below and desires to respect the confidential nature of these conversations.  As such, we will not attribute specific issues to the organizations unless approved by that organization, or reference the executives interviewed.

  1. Advisor Partners
  2. Bailard
  3. Blue Oak Capital
  4. City National Bank
  5. Comprehensive Financial Management
  6. Dodge & Cox
  7. First Republic Investment Management
  8. Forward Funds
  9. Goldman Sachs Wealth Management
  10. Index Universe
  11. J.P King & Associates
  12. Mercer Consulting
  13. Nelson Capital Management
  14. Osborne Capital Partners
  15. Private Ocean
  16. Sonen Capital
  17. Sterling Stamos
  18. Transamerica Investment Management (most recent firm executive was with)
  19. Wells Fargo Asset Management
  20. WHV


Investment survey breakdown

Investment survey breakdown

The intent of the interviews was to get a sense of the key strategic issues these leaders are working with and, in some cases, struggling with.  Results were highly insightful with the potential for meaningful rethinking and potential reshaping of business models.  We will post the key insights from the interviews over the course of several blog writings.

Certain perspectives arose out of those conversations.

Firms are either moving toward manufacturing of products or distribution.  It is rarer for firms to tackle both these days.  Firms that both manufacture and distribute aren’t totally abandoning their models, but are looking at ways to focus on where they add the highest value – a rethinking of their models.  One example is the increasing use of sub-advisors on investment products (think of Wellington Asset Management, GMO or Acadian).  So what does this mean?  For one, firms have increasingly decided to focus on what they are really good at, instead of trying to do all things well.  While there is certainly debate (due to mixed results) of whether to use sub-advisors or in-house investment teams, in theory this separation practice bodes well for the end consumer (investor) – better investment results with more efficient operations allowing potential for lower costs (or higher profits to investment entities).


As a focused distributor or manufacturer seeking partners, a key challenge is to find groups that have the right cultures and complementary skill sets.  There is a decidedly different skill set involved to be a world class investment manufacturer (investment analysis and judgment, process selection, sourcing best ideas, portfolio construction, risk management) than there is to be a great product distributor (network and business development, problem definition and problem solving, contract negotiations, relationship skills, communication).  Some implications of this are that we may see increased Chief Investment Officer outsourcing (e.g., PIMCO All Asset Fund of Funds using Rob Arnott’s group at Research Affiliates, Mercer taking over the CIO function of DB plans that are winding down).  In other words, you do what you are good at and we’ll do what we are good at.  Firms are taking an increasing perspective that they can’t be all things to all people (with some noted exceptions).


The appeal of increased separation of the investment groups from the distribution groups is also supported by culture differences.  Previous consulting work I have been involved with evaluated the sub-cultures within investment organizations.  There was a clear distinction between the values of the investment and distribution sides of the business.  Investment sub-cultures are characterized by values (in order) of analytic/research, discipline, creativity/innovation, meritocracy, long-term perspective/vision and passion/energy.  These make a lot of sense and align with what I have seen in successful investment organizations.  The flip side to this is that if these are not some of the highest values in the organization, those businesses tend to be “sales” focused.  As a contrast, the top values (in order) of distribution sub-cultures are competitive/win, passion/energy/positive, humor/fun, respect, appreciation, and empowerment.  Effective sales organizations I have seen have a healthy respect for fun, are incredibly competitive (particularly with themselves, but also across the sales group and with outside firms) and display outwardly a positive temperament (cynics tend toward the legal staff).


If the investment and distribution groups are housed in different companies (as in the sub-advisor scenario), the “friction” resulting from cultural differences is likely to be minimized.  If the groups are under the same roof, the resulting “friction” manifests itself in the need for respect, appreciation and empowerment by the sales team from the investment culture – traits not commonly expressed by innately introverted analytical investment types. The keys to success of the separate company investment and distribution functions will be based on real aligned interests between the firms, true competency differences, great trust and respect for the benefits of different cultures.  The point here is to know what you and your partners are good at, have complementary skill sets and competencies, structure an aligned interest relationship and know how to create mutually advantageous collaborations and partnerships.


Future blogs will cover additional timely and impactful themes surfaced during our interviews last year, including alignment of interest issues, the state of innovation in the industry and individual firms, technology strategies, the impact of regulatory compliance changes and what these all mean for investment and wealth management leadership.   We hope you enjoyed our initial blog post.  E-mail if you want to discuss how we can help you with strategy and leadership development, including performance-focused executive coaching.

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