MetLife is making new inroads with what some call the “mass retail” investor segment. Six months after launching a platform that welcomes clients with as little as $10,000 to invest, the MetLife Broker-Dealer Group has accumulated $160 million in AUM on that platform, says Jeffrey Wilk, vice president of Investment and Advisory Product Management.
The automated platform, called Fund Management Services (FMS), is a mutual fund wrap that lets advisors and their clients choose risk tolerance levels that dictate an asset allocation formula. That formula can, in turn, be used to select funds for an investor’s account. Rebalancing occurs at least once a year. “It really is about leveraging technology. We simply could not afford to do it in anything other than an automated solution,” Wilk says. The platform automates certain time-consuming paperwork processes: a feature called eApp warehouses business forms in an electronic warehouse. The client fee is 1 percent of assets.
Today, the FMS platform has about 6,300 accounts with average assets of about $30,000. Wilk says MetLife hopes it will draw these mass retail clients--those with less than $100,000 to invest--into its fold, expecting that they will eventually grow large enough to warrant entry into its Wealth Management Services platform. With $6 billion in assets and about 30,000 accounts, WMS offers more hands-on service to those with $100,000 or more to invest.
MetLife introduced FMS last August to advisors at its four b/d affiliates: MetLife Securities, New England Securities, Tower Square Securities, and Walnut Street Securities. Lockwood Advisors, an affiliate of BNY Mellon’s Pershing, manages some of the FMS portfolio models.
Automated systems offer some cost control advantages, says Sean Cunniff, research director for brokerage and wealth management at TowerGroup. Take account registration forms, for example. “One of the big challenges is you get an application on paper and it’s not in good order. So you have to mail it back, and the client fills it out. Sometimes it comes back and it’s still wrong, so you have to mail it out again. Sometimes the people get so frustrated they don’t bother mailing it in, so you’ve incurred a lot of cost,” Cunniff says.
But no matter how much cost-savings you can squeeze out of an account with technology, a $10,000 minimum investment means a very thin profit margin, industry observers say. Tim Welsh, president and founder of Nexus Strategy, says many financial advisors typically set a minimum investment at $250,000; that’s a good floor because minimum costs to serve an account can run around $3,000. Some insurance companies like to cross-sell other products to investors, but it’s a strategy that doesn’t always work well, says Welsh, who sees the Bank of America/Merrill Lynch merger as an example. “Those advisors are not paid to do the mortgages; they’re paid to do investing. The cross-selling has failed across the board,” Welsh says.
The low-minimum accounts could still be profitable if the volume of business is high enough, says Bing Waldert, an analyst at Cerulli Associates. “We do see that that insurance advisor has more clients than other advisors. I think it’s trying to work with more less-wealthy clients in a scalable fashion. And it’s additive. Having a turnkey program might present the advisor with a sale he might not otherwise make,” Waldert says.