How Smaller Managers Can Be Selected for Wealth Management Platforms

Greg Luken of Luken Investment Analytics on How Smaller Players Can Compete for Shelf Space in an Era of Increased Market Volatility and Economic Disruption

Janeesa Hollingshead, Senior Editor, Wealth Solutions Report

“Scale-driven consolidation” is a nearly constant term that can be found in every investment banking pitch deck that is focused on facilitating deals between asset managers or between asset managers and private equity firms seeking to do a roll-up play.

This is especially the case for third-party asset managers who rely on capturing a spot on the wealth management platforms of broker-dealers and larger RIA firms in order to sell their investment solutions to retail investors via financial advisors.

And when the economy is growing on a consistent and predictable trajectory year over year, it becomes very easy to stake your value proposition entirely on size and scale.

But when we enter much more volatile market and economic conditions, there can be a unique opening for smaller and more nimble third-party managers to effectively compete for space on wealth management platforms.

Smart Diversification

Consider Luken Investment Analytics, founded in 1999 by financial advisor-turned-asset manager, Greg Luken.

Based in Brentwood, Tennessee, the mission of Luken Investment Analytics is to create a better investment experience by making diversification smarter. Central to the firm’s approach is the use of mathematics to identify trends and build model investment portfolios and manage separate accounts.

The firm, which serves as the subadvisor for the Smart Diversification Fund (SMDFX), has over $400 million in assets under advisement through its investment models, as well as $180 million in direct SMAs and $30 million via the Smart Diversification Fund.

While small in comparison to the broader asset management space, Luken Investment Analytics has experienced especially strong growth in recent years, with big picture market and economic circumstances driving accelerated interest in the firm’s strategies.

“Growing strong as interest in smarter diversification rises.”

Today, Luken Investment Analytics is on the wealth management platforms of LPL Financial, Harbor Investments, Pershing, Schwab, TD Ameritrade as well as multiple independent RIA firms across the country.

WSR caught up with Greg Luken to discuss how smaller asset managers can maximize their chances of being selected by wealth management platforms and more effectively drive engagement with financial advisors in today’s environment.

WSR:  What are wealth management platform gatekeepers looking for when they are selecting third-party asset managers – And how can smaller players stand out?

Luken:  I can’t speak for the industry at large, but in our experience, it all comes down to two key factors: relationship and conviction. 

Financial advisors talk about the importance of relationships, especially in terms of doing what they say they’ll do, being responsive, producing results and being committed to their clients’ success.

Wealth management platform gatekeepers are looking for these same attributes from asset managers.

As a smaller shop, we provide access and financial advisors seem to connect with that, which is important.  There’s a sense that we’re all on the same mission. 

But there’s also a sense that we are all connected to the process and the objective of helping the advisor’s end client.  

Platform gatekeepers want to know that the asset managers they choose have a demonstrated commitment to helping their financial advisors be successful by creating a great service experience for the advisors’ clients. 

Part of how we demonstrate this commitment is the fact that we eat our own cooking – everyone at the firm – and platform gatekeepers and financial advisors we work with know that.

Next, when it comes to conviction, many financial advisors don’t want to follow the herd, and platform gatekeepers know that. 

When what you do is often counterintuitive or non-mainstream, you need the rationale and conviction to stand behind it. That can be a powerful differentiating factor as well.

WSR:  Getting onto a wealth management platform is just part of the battle.  How can small to mid-sized asset managers most effectively capture the attention and interest of financial advisors once they are on a platform?

Luken:  I can’t say I know the definitive answer to that, but I wish I did! 

I do know, however, that results are extremely important – Asset managers have to deliver.

Financial advisors have plenty of choices of shops where they can get a fund in every conceivable category.  Third-party asset management is, without question, a very crowded space.

Here’s what’s worked for us when it comes to driving attention and interest from financial advisors once we’re on their wealth management platform:

First, we stick to our specialty.  Second, we provide a concise narrative that connects with what the advisor – and the advisor’s clients – are ultimately trying to accomplish.  And third, we are all about being clear, responsive, candid and brutally honest. 

And focusing on these three items has paid more dividends in terms of financial advisor engagement than anything else could have.

WSR:  What are the most challenging industry trends today for third-party asset managers?

Luken:  One of the most challenging industry trends is that there is a higher hurdle today for new products, even from established providers. 

Some broker-dealers and RIA firms won’t even look at adding a new product with less than half a billion in assets. 

“I just don’t see you crossing the size hurdle.”

Unfortunately, this can have the unintended consequences of restricting access, avoiding innovation and moving more people towards average solutions with average outcomes. 

Additionally, due diligence reviews are taking astronomically longer now than in the past because of disruptions and mergers in the industry and lingering effects of the pandemic. 

But on some level, much of this is understandable – Because it’s part of what firms do to avoid risk.

WSR:  What are the top attributes of actively managed funds that platform gatekeepers and financial advisors are prioritizing in this environment? 

Luken:  The top attributes that platform gatekeepers and financial advisors pay attention to when looking at actively managed funds are results and costs.  And, of these two factors, results rule. 

At the end of the day, financial advisors are looking for ways to address the behavioral finance aspects of all of our lives, clients and advisors. 

Financial advisors want to align their clients with investment vehicles that enable clients to sufficiently participate in the upward phases of the markets and minimize participation in the downtrends.

Advisors know this is an important part of their ability to get their clients to stay on track with a solid plan, regardless of where the markets are at any snapshot in time.

March of 2020 and the resultant market swings brought all of this into very clear focus.  Having investment solutions that can address up and down markets is mission critical. 

WSR:  Are passive / indexed mutual funds or ETFs increasingly irrelevant, given the broader macro trends at play?  Why or why not?

Luken:  In our view, this shouldn’t be an “either or” debate.  Passive funds are not going away, and they are essential, especially today. 

Asset allocation is the biggest and most important lever to pull when it comes to a client’s investment results. 

And passive funds allow active managers, like us, to work efficiently and effectively. 

Why?  Well, let’s start with the fact that – with a passive fund – you know what you’re getting…and what you’re not getting.

Greg Luken, Founder, Luken Investment Analytics

And that’s where active management comes into play, including active management of passive funds.  This, in our world view, is essential because passive allocation alone can never effectively manage risk.

WSR:  If you had to go on a cross-country tour with a musical band of some kind, what band would you choose and why?

Luken:  This is an easy one.  It would be either the Remedies or Monsters of Yacht, both excellent Nashville bands. 

It’d be a blast because I was in a band with some of these guys and did a cross-country tour back in the day.  We could do a reunion tour, except I’d miss my day job too much!

Janeesa Hollingshead, Senior Editor of Wealth Solutions Report, can be reached at

Related Posts

Sign Up for Our Newsletters

Sign Up for Our Newsletters