their competitors' when it comes to managing and selling investment products. Now the Spectrem Group, San Francisco, an investment management consulting firm, wants to change that. The company has designed a program intended to give investment managers at banks the hard facts about all their retirement-service competitors - and where they stand relative to their rivals. The program will be expanded in the next 18 to 24 months to cover such other investment areas as mutual fund complexes and trust businesses. "A lot of times, people are just shooting in the dark" in their efforts to assess their performance relative to the competition, said Amy J. Errett, Spectrem's chairman. The software program, called Spectrem Source, contains proprietary information such as banks' revenues and expenses regarding employee benefit programs they offer to their customers. Eight clients have supplied their data to Spectrem to get the benchmarking program off the ground. They include Midlantic, NBD, Bisys, Federated Investors, Bankers Trust, and Wells Fargo. The American Bankers Association has endorsed the benchmarking program because of the growing need expressed by its member banks to compare their profits. Many banks make educated guesses on what other investment managers are doing. "Retirement services is such a huge asset-gathering opportunity that people you never thought would be in this business are," she said. Spectrem works with clients who want to know exactly what their competitors are doing, and seeks to give them a clear idea without compromising confidentiality, she added. "The biggest challenge of a product like this is preserving data integrity and protecting client information," Ms. Errett said. Spectrem Source gives blended averages of at least four samples within a peer group. The program can display basic figures ranging from expense ratios to such arcane details as the number of full-time-equivalent employees per retirement plan managed. The numbers are presented in a bar graph that breaks the client's figures out against the average of a peer group. It also shows "best of class" figures, like most assets under management, without disclosing the name of the company that achieved them. Marlene L. Olshan, Spectrem's consulting director who runs the Source program out of Philadelphia, says it goes beyond what most people know about their competitors. "We are literally going down to the nit and gnat level," Ms. Olshan said. By figuring out where a bank lines up against competitors, it can opt to either differentiate its cost structure or conform it. Ms. Olshan said clients could, for example, use the information to justify an increase in staff. Another comparison that can be made is how profitability can be affected by using an outside record keeper. In addition, performance data collected by Spectrem Source can be used by vendors to banks' mutual fund programs to help in their marketing pitches. "One client recently bought it as a sales tool, because it allows them to cite a third-party objective source," said Ms. Olshan.
Access to authoritative analysis and perspective and our data-driven report series.
No credit card required. Complete access to articles, breaking news and industry data.
Have an account? Sign In