Bill Hortz's picture

"Most boutique asset managers have weathered the COVID-19 storm with flying colors." - Dan Sondhelm, Sondhelm Partners

[Recent disruptions in the economy, the markets, and society overall have become a defining challenge to all firm managements across the industry. While rising waves lift all boats, receding waters uncover alarming weaknesses and surprising strengths. In contrast to the ongoing reporting of active asset managers under assault by passive investments and poor relative performance pushing them on a slow march to their demise, boutique managers have been demonstrating strong resilience in the face of this pandemic environment.

A recent survey by Dan Sondhelm of Sondhelm Partners - a firm that helps asset managers attract investors and strengthen brands - decided to dig deeper into the experiences and decisions being made by C-level executives in boutique asset management firms through the COVID-19 pandemic. Entitled “Weathering the Storm – How Boutique Asset Managers Are Adjusting to the New Reality”, the survey compiled answers across a wide range of topics including leadership’s opinions about the state of their business from business development, sales and marketing to client service, staffing, product development and financial stability. Their answers provide a revealing picture of the competitive state of active asset managers which, despite the many death notices that have been written, are very much alive and kicking.]


Hortz: Why did you decide to conduct this survey of boutique asset managers?

Sondhelm: We have always wanted to conduct research that reveals the business development, marketing and client service strengths and challenges among boutique asset managers. The COVID-19 panic and the resulting market gyrations that followed added the opportunity to expand the scope to find out how senior managers also feel about their firms’ financial stability, staffing levels, future product development efforts, and any initiatives to either sell their firm or acquire other firms.

Hortz: How did you go about constructing the survey and determining the questions or areas to cover?

Sondhelm: Our original plan was to focus our questions on business development and marketing. How effective are their salespeople? Is their story and positioning resonating in the marketplace? Do they feel they are doing a good job using virtual communications, content, digital marketing, and PR efforts?

But as we were developing the survey in April, we realized that conducting it at the peak of the pandemic crisis gave us the opportunity to see if they felt that the effectiveness of their business practices had improved or declined over time. That is why we asked them to rate these practices in the current environment while also asking them to retroactively remember how they felt about them in the spring of 2019.

In the end, we received 55 responses from C-level executives at boutique asset managers.

Hortz: What were your key findings from the responses?

Sondhelm: Contrary to what people might think, most boutique firms are not suffering massive outflows or teetering on bankruptcy. While most are not hiring, only 11% are thinking of reducing headcount. Less than one in five need additional cash. And while few firms are seriously considering M&A initiatives, among those that are, a higher number are interested in buying other firms of funds than they are in selling out.

And these firms are not turning the lights out and waiting for conditions to recover. Everyone from portfolio managers to wholesalers are using the current remote working environment to actively reach out to clients and prospects via email, commentaries and blog post, phone calls and video sessions to explain what’s going on in both the markets and in their strategies.

Hortz: Did any of the responses surprise you?

Sondhelm: Given that the market was still down around 25% at the time we conducted the survey, we were surprised that over 50% of respondents said that their firm’s AUM actually increased from spring 2019 to spring 2020. We also thought that a large number of firms would be strapped for cash or laying off people. It turns out that very few are financially hurting right now.

Another unexpected result is the respondents’ confidence in their sales teams. Around 67% feel that their salespeople are doing a good job this year, compared to 55% last year. This ties in with another surprising result: That nearly two thirds feel that, even now, they are doing a good job of generating leads.

Hortz: Any responses or trends you saw that concerned you?

Sondhelm: With on-site visits and conferences curtailed for the immediate future, most firms understand that digital marketing will become the primary means for educating and selling for the immediate future.

Most firms candidly admit that their digital marketing efforts are not where they should be. Less than half believe that their website, email marketing, social media and public relations efforts are particularly effective. And at a time where Zoom sessions and webinars have replaced the usual office lunch-and-learns, only 38% feel that they are using these virtual communication platforms effectively.

Yet, when asked which areas of improvement are at the top of their “to-do” lists, digital marketing and PR did not even make the top 5.

This is understandable, because most smaller firms do not have the time or in-house resources to beef up these efforts on their own. But if they want their voice to be heard in a marketplace that’s getting glutted with digital communications, they need to either shore up their marketing departments or partner with outside marketing firms that can do this work on their behalf.

What do you feel are the most important takeaways or implications from this research?

Sondhelm: Most boutique asset managers have weathered the COVID-19 storm with flying colors. They’ve done this by keeping costs under control, and by aggressively reaching out to clients and prospects to let them know that they’re still here and they’re committed to telling them what’s going on, even if the news isn’t always good. And, they have done this while knowing that their digital marketing and public relations efforts are not what they should be.

Hortz: Any final thoughts would you like to share?

Sondhelm: Nearly three quarters of respondents said they believe that their story is resonating in the marketplace. But few can say how they are actually quantifying these results. Firms might believe that their story is effective because they’re generating more leads or adding AUM, when it’s also possible that their product fills a particular niche that’s in high demand at the moment, like impact and ESG funds. Will their story be as effective when these strategies are out of favor?

In the post-COVID world, selling performance alone is not enough. Skeptical advisors and consultants need to be convinced that alpha is the result of skill, rather than luck. Effective stories need to be supported by proof points provided by portfolio managers, who, more than ever, must step up to the plate to become the “voice” of subject matter expertise within the firm. And since portfolio managers can no longer travel, firms need to improve the frequency and quality of the articles, webinars, conference calls and public relations campaigns needed to keep their story in front of their intended audiences. 


The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors - Pershing, Voya Financial, Ultimus Fund Solutions, Fidelity, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines). For more information click here.


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