Logo Power

Zara is getting a lot of press for its new logo. If by some chance you haven’t seen the hailstorm of negative attention, you may want to Google it to see what all the hubbub is about. Or just search#zaralogo where you can find some truly funny and entertaining comments. We won’t join in on the Zara logo bashing, but now is a good time to discuss why companies change their logos in the first place.

Mergers and acquisitions

This one seems fairly obvious. If a company, in one way or another, joins another company, do they retain one name/logo and eliminate the other? Is one brand clearly the acquirer and/or does one brand have stronger brand equity? Often times, the merging of two or more firms creates the opportunity for a new name, resulting in the need for a new logo. The new entity hopefully offers something fresh and different to consumers, and a new name and logo are a great way to express that excitement.

The times, they are a changin’

For some companies, if their positioning strongly references and leverages their heritage and longevity, then the look of an old legacy logo is probably appropriate. Think John Deere, Coca-Cola and Johnson & Johnson, where their logos have been tweaked (the deer in the John Deere logo now leaps instead of landing, for instance), but essentially remain true to the original. General Electric is one of the oldest logos still in use, but, perhaps now is a good time for it to consider updating its logo to better express current business lines. Sherwin Williams’ logo has been in use for well over 100 years, and designers and branding specialists have been calling for a logo redesign for years. What some see as blood dripping over the earth hardly seems in line with all the elegant and inspiring sample projects they share. If a logo feels outdated and no longer represents the core mission of a company, then it’s time for a redo. 



Deciding to appeal to another market, such as high-net-worth or ultra-high-net-worth customers, may require an updated logo that appeals to that market or an altogether different name, logo and brand. Going up or down market has the potential of confusing a target audience and diluting the current brand, so a new logo and brand may be the right solution.

Moving Toward Market Dominance

Continuing to honor of the passing of index fund champion, Jack Bogle, we would like to point out the likelihood of an upcoming milestone. Sometime this year, or the beginning of 2020, investments in passive domestic equity mutual funds and ETFs will outstrip those in actively managed mutual funds for the first time ever.

The chart below tells the story. Twenty years ago, actively managed domestic equity funds hit $2.3 trillion in total assets, over 10 times the amount in passive. But as active funds suffered severe downturns in the market crashes of 2000 and 2008, assets in passive funds continued to grow fairly steadily. By November of last year, assets in domestic equity index products had pretty much closed the gap. 

In recent years, the spread in net new cash flows between passive and active has increased dramatically. If this trend continues, passive assets will move ahead in the next 12-15 months.

Perhaps more importantly, it does not appear that the relative growth advantage of passive is likely to end soon, suggesting that this type of investing will more securely establish itself as the core of the majority of investors’ portfolios.   

Jack Bogle’s Legacy

Much has been written this past week about Jack Bogle, who passed away on January 16, 2019, and his achievements. In addition to founding fund giant, Vanguard, he has been credited with practically inventing indexed mutual funds. A few years ago, Warren Buffett credited him with saving investors tens of billions of dollars over time.

This led to the question of how much Bogle may really have saved investors. According to our calculations, Mr. Buffett may have understated the amount significantly. According to Morningstar, net assets in index mutual funds as of November 2018 stood at just over $3.5 trillion, while balances of ETFs were about $2.1 trillion. Average costs for index mutual funds are about nine basis points. For ETFs, they are about 21 basis points. So the all-in costs are:

The difference in costs in one year alone ($44.34 – $7.68 billion) is more than $36 billion. Imagine how much this would have added up to over Bogle’s career!

This leaves out the question of performance, of course, but does prove that a significant portion of investors strongly believe in the index fund concept. This is in sharp contrast to when Jack Bogle launched the First Index Investment Trust (now the Vanguard S&P 500 Fund) in 1975, known at the time as “Bogle’s Folly.” Let’s take a moment to honor the memory of a true investment management visionary. 

The Callan Periodic Table Turns 20

Callan recently published its 20th Anniversary Edition of The Callan Periodic Table of Investment Returns. This chart has become ubiquitous as an illustration for the case for diversification and is widely used in marketing, particularly with individuals. The chart shows annual returns for an array of major asset classes, ranked from best performing for the year to worst performing. It was created by Jay Kloepfer, Executive Vice President and Director of Capital Markets Research at Callan Associates.

Every picture tells a story

The Callan Periodic Table communicates the risk of concentrating in one asset class and makes the case for diversification. “The enduring appeal of the table is its ability to be understood at a glance,” says Kloepfer. “And once you’ve seen and absorbed it, you can refer to it again and again. New insights still come to me even 20 years later!” As you look across the years and asset classes, which are color coded, it’s easy to see that the top performer one year typically reverts to the mean and is often one of the lower performing within a year or two. This holds true across asset classes, capitalizations and geography. Also clear is the wide range in absolute terms of what top and bottom performance means from year to year, with top returns ranging from 78.51% in 2009 (Emerging Market Equity) to 1.38% in 2015 (Large Cap Equity). Also compelling on the downside is the fact that the worst returns range from +4.33% in 2006 (U.S. Fixed Income) to -53.33% in 2008 (Emerging Markets Equity; note in both 2007 and 2009 it was the top performer).

Cash was king in 2018

Returns in 2018 were notable for a few reasons:

○ For the first time in the history of the table, Cash Equivalents was the best-performing asset class, returning 1.87%
○ This means, given the forecasted inflation rate range for 2018, investors essentially kept up with the cost of living
○ Except for U.S. Fixed Income, which had a return of 0.01%, essentially flat for the year, all other indices tracked in the chart had negative returns, which is the first time this has happened in the 20-year history of the chart

Given the potential for continued volatility in 2019, we anticipate the Callan Periodic Table will be a particularly useful and widely-used tool for advisors this year.

Tech Goes Front Office

We draw attention to the chart below, taken from the latest Financial Planning technology survey of financial advisors. The findings are indicative of the ongoing shift in the focus of advisors from tech as a back and middle office solution, to tech as a facilitator of the (increasingly digital) advisor-client relationship.

CRM, Financial Planning and Client Portal are top-used tools

Together, these three areas support the advisor in defining and delivering a richer and more meaningful client experience. 
• CRM takes the lead as the core operating system, coordinating, facilitating and informing advisor-client interactions. 
• Financial planning software helps determine clients’ needs, set the plan for delivery of the appropriate products and services, monitor and report on results. 
• The client portal gives the client a window into their financial condition while enabling an enhanced and ongoing digital interaction between the client and the advisor.

Fundamental shift to client interaction-focused tools

We expect the shift in focus to “front office” technologies to continue.
• CRM systems will be more deeply integrated with key information sources including portfolio management/aggregation systems and, on the client side, financial planning applications. 
• Financial planning applications will become more collaborative, including ways to gather and input data over time and more interactive, providing ongoing analysis and reporting on status changes, goal realization and other value-added information. 

Client portals will become more user-friendly, offering omni-platform access and more options for two-way advisor-client communications.

Another New Year and New Words of the Year

We couldn’t let the New Year ring in without a follow up to our previous words of the year (WOTY) post to let you know of Merriam-Webster and Cambridge Dictionary’s recently announced WOTY.

Liberty and JUSTICE for all

Merriam-Webster anointed “justice” as its 2018 word of the year. Varied in meaning and something we seek, the word was a top lookup on last year, up 74% compared to 2017. Merriam-Webster cites the year’s big news stories, centered around justice, as the driver. According to Merriam-Webster, “the concept of justice was at the center of many national debates in the past year: racial justice, social justice, criminal justice, economic justice” and used frequently during the Supreme Court Justice confirmation hearing in 2018.

My phone, my phone, where is my phone?

On the lighter side (maybe?!), Cambridge Dictionary’s People’s Word of 2018 is “nomophobia,” described as “the fear of being without or unable to use your mobile phone.” Dictionary blog readers, social media followers and fans chose the word from a shortlist selected by Cambridge Dictionary editors. Nomophobia is a blended word comprised of syllables from “no mobile phone phobia.” Although not a truly scientific phobia, we’ve all witnessed it first-hand. The word originated in a 2008 UK Post Office report, then made its way into the UK media and has since gone global.

Words are powerful tools that can reflect the times ─ and these two new WOTY are no exception.

Relax with the Pantone Color of the Year

As you may or may not already know, the Pantone Color of the Year is Living Coral. According to the Pantone Color Institute, the color was chosen because it is “vibrant yet mellow…Living Coral embraces us with warmth and nourishment to provide comfort and buoyancy in our continually shifting environment.” The color really is relaxing, friendly and pleasant. As they say, a picture is worth a thousand words, so sit back, take a minute out of your day and immerse yourself in Living Coral. Enjoy!

Goodbye 2018, Hello 2019

At Optima Group, it feels like the year raced by at breakneck speed. We hope everyone has an opportunity to relax and spend time with family and friends over the holiday season, and we wish you the best in 2019. We’d like to express our continued appreciation and gratitude for the relationships we have with our clients and colleagues and look forward to continuing to work together in the coming year.

As we look to the year ahead, we have been thinking about what key themes for 2019 and beyond might be important for wealth and asset management. Based on questions we have been asked, developments we see in the industry and our own research, here are some trends and thoughts we’d like to share:

○  Increased use of social media for wealth and asset managers

○  Communication is critical with volatile markets potentially ahead

○  Focus on advisor added value

○  Continued deal flow and consolidation among wealth RIAs

Social media – it’s not just for retail anymore

In a highly regulated industry, wealth and asset managers have been slow to embrace social media, often using it primarily as a recruiting tool. In the last few years, this has changed and more firms are recognizing the importance of social media as part of an integrated marketing plan to help in the sales process and as part of ongoing client communications. According to a survey of advisors by Putnam Investments, The Social Advisor 5.0, in 2017, 86% of advisors reported social media activity helped them win clients and 88% said social media has changed their relationship with their clients. A 2016 study by PwC indicates that institutional asset managers are moving in the same direction. For both individual and institutional, social media is becoming an integral part of a comprehensive marketing plan.

When times are tough, don’t “ghost” your clients

The term ghosting is defined by Oxford Dictionary online as “The practice of ending a personal relationship with someone by suddenly and without explanation withdrawing from all communications.” During the financial crisis, many financial firms, with nothing positive to say, ceased communications with their clients to the detriment of relationships. We urge firms to remember that when the going gets tough, this is precisely when your clients most want to hear from you and know that you are keeping a close eye on the markets and their money.

For everything you do      

Similarly, with markets flat or down, now is the perfect time to remind clients of the value you add and how that also translates into dollars saved or gained. This includes tax guidance, wealth planning, understanding what your client is trying to accomplish and constructing a portfolio designed to help them achieve their goals, disciplined rebalancing and helping them avoid potentially costly and reactive moves that can detract from performance. The value of this advice can be substantial, according to “Putting a value on your value: Quantifying Vanguard Advisor’s Alpha.”

Let’s make a deal

2018 looks set to be a banner year for wealth management deals, with a forecast of 183 total deals for all of 2018, according to Q3 2018 data from Echelon Partners, driven largely by interest from consolidators and private equity investors leading to continued breakaway activity. This marks the sixth straight record year, and the same drivers are expected to continue to be in play in 2019. Many RIAs seek to realize liquidity and put a business succession plan in place given the late stage of the economic cycle, although rising interest rates could slow deals down as financing costs increase.

Here a thought, there a thought, everywhere a thought

Standing out in a positive way in the world of wealth and asset management isn’t easy. We take it as a given that standing out in a bad way is not a goal any manager is pursuing, but with increased commoditization, market volatility and other challenges, it may seem that positive differentiation is like finding the elusive needle in the haystack.

Won’t get fooled again

Managers appear to have learned a lesson from the Financial Crisis period. During that time, some firms, reluctant to face their clients when things were going badly, chose to go “radio silent.” Those firms that did bite the bullet, however, and communicated with their clients, even if the message was that they were adhering to their long-term strategic allocation (i.e., “doing nothing”) benefitted from increased client confidence and retention. Expanding communications have taken various forms, reflecting the different client/prospect preference for consumption, including email, social media, videos, webinars, events and other touchpoints.

Thought leadership front and center

Perhaps the most explicit manifestation of this trend is the next generation of website development, where thought leadership is beginning to take top billing in placement and amount of real estate. For example, UBS’ Wealth Management website, perhaps the most extreme example of this trend, is virtually all thought leadership from the top to the bottom of the website, with only the nav bars in the header and the footer leading directly to product/solutions information and the ability in a right hand column to find an advisor. The offerings include:

○  2019 Outlook

○  Insights from Global Wealth Management Head and CIO and ability to follow them on LinkedIn

○  Podcasts

○  Videos

○  General and niche (business owners, women, etc.) specific insights

○  UBS publications (Investor Watch)

○  Market perspectives

○  Asset class and ESG perspectives

○  Press releases

Other major wealth managers that do a good job of highlighting thought leadership include Morgan Stanley, BNY Mellon and Deutsche Bank. On the asset management side, firms such as PIMCO and BlackRock have long been proponents of thought leadership promotion.

A trend that’s here to stay

We anticipate that firms will continue to seek to differentiate themselves through communications and thought leadership, and their use of multiple media and short sound bites of key points represents the most effective way to reach a busy and easily distracted audience.

Lessons Learned from When Harvard Beat Yale 29-29

Source: THE GAME: Harvard, Yale, and America in 1968, by George Howe Colt, Scribner, 2018

This past month marks 50 years since Harvard beat Yale 29-29 in an epic football battle of unbeatens. For Harvard, it’s a celebratory anniversary. For Yale- well, never mind. Yale was heavily favored, with one of the best offenses the Ivy League had ever seen. But as its vaunted offense watched helplessly on the sidelines, Harvard scored 16 unanswered points in the final 42 seconds to seal the, well, victory (moral and psychological that is, if not in actual score). In a headline that remains one of the most memorable in college sports history, The Harvard Crimson trumpeted “Harvard Beats Yale, 29-29.”

In the stands at The Game (as it is called by the faithful) to end all The Games sat 14-year-old and future Harvard alum George Howe Colt, who has written a splendid recollection titled THE GAME: Harvard, Yale, and America in 1968. From his book and from eyewitness accounts, here are some takeaways that are still highly relevant today:

Prepare for the improbable. After Harvard scored a touchdown and a two-point conversion to narrow the gap to eight points, they had only 40 seconds to do it again – which meant executing an onside kick. But because no opponent had ever been within a touchdown this late in a game, Yale had never practiced how to field them. So, despite entreaties from to populate the lineup with sure-handed ends and backs, the Yale coach put in a lineup for a conventional kickoff. Sure enough, the squib kick (defined by Merriam Webster as “a kickoff in football in which the ball bounces along the ground”) bounced off the chest of a lineman and was promptly recovered by Harvard.

Inspire from the heart but lead with your head. On the Yale bench in the waning minutes were several seniors who needed modest playing time to be assured of their varsity letter. Yale Coach Cozza, tough-minded enough to be the winningest coach in Ivy League history, also had a big heart. He could have kept those seniors benched until victory was 100% assured, but he put them in, and they were no match for Harvard’s starters, who were now playing as if possessed.

Always give 100%. With less than three minutes to go in the game and Yale with the ball, every Harvard player thought they were headed for defeat, but they continued to hit, and run, and execute as if victory was within their grasp. Many years later, Yale and Dallas Cowboy star running back Calvin Hill proclaimed, “I was never in any game where the hitting was that hard.”

Believe in yourself. When Frank Champi came in with Harvard down 22-0 to replace starting Harvard quarterback George Lalich, even the sportswriters had to go to their programs to find out who #27 was. Lightly used the entire season, he was hardly a leader and a seemingly unlikely replacement. But he and his coach knew he had a cannon for an arm. Despite near-paralyzing nerves before going in, he became serene and supremely confident, and everyone in the huddle knew it. History will record he picked apart the Yale defense on his way to contributing directly to most of the yards and all 16 points in the final two minutes of play.