Research: Some advisors still consider T. Rowe Price primarily as a direct shop. Why isn’t that the case any more?
Cammack: To give you a perspective on our presence in the marketplace, we have a very large sub-advisory group that has about $40 billion in assets we manage for other companies, and in addition we have a very large presence in the 401(k) business where are funds are available to distributors, banks and broker-dealers who are offering packaged programs using our architecture. Then we have what we’d call our wealth management service group for trusts, RIAs and broker-dealer wrap accounts. So when we began to build out our service capabilities to advisors 10 years ago, we had an idea of how to do it.
I wasn’t initially hired to solicit intermediary business, but was instead managing the high-net-worth group. Prior to that, I was a practicing CFP for 10 years, so I really understood the evolution of the advice delivery element in the industry and philosophically felt that was the right way to go. So I convinced the firm to pursue that marketplace because there was an emerging fiduciary-based component that complemented (and complements) our values and the way we manage money.
And this doesn’t compete with your traditional retail operation?
We’re certainly not going to forsake the direct business! We don’t see any conflicts between the direct business and what we do to support advisors who have customers who are more inclined to delegate more to the advisor. There’s a large advisory marketplace that is evolving; we see it as an emerging institutional marketplace with professional buyers picking funds based on due diligence. We think it’s a better service model for the consumer and will continue to do what we can to support the emergence of that fee-based advisory model. And then you have an old legacy distribution model that we have not entered and do not intend to enter.
We’re no longer necessarily a threat to the advisor or broker-dealer; we’re simply effective at researching how people think about their money. If I could go back to school, it would be to get a Ph.D. in cognitive psychology and behavioral economics. We’re willing to share that to improve the outcomes that our intermediary partners can create for their relationships. In fact, we think our direct customer service capability has gone from having been a liability at one time to a benefit very few firms still have. It’s a competitive advantage, and the information we’ve collected about the marketplace can be redesigned for the advisor.
Who’s selling your funds?
We seem to have two types as the supply chain reorganizes. In the first group, we have relationships with large corporations that have groups within the home office charged with the responsibility of creating managed solutions. And in the second group, we have advisors doing this on their own, and these tend to be high-end producers at broker-dealers or boutique shops; they could be RIAs. The commonality is that all the people we work through are not selecting T. Rowe Price on a one-off basis.