Biography - THayes Consulting



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Todd Hayes Westby

Founder, CEO

T Hayes Consulting, LLC

Biographical Brief

Todd began his career in Financial Services in 1984. Since then, he has held sales, marketing and sales management positions with several top tier mutual fund, closed-end fund and exchange-traded-fund firms distributing through broker dealers and RIA intermediaries and banks in the U.S.

He was on the leading edge of the international investment theme in the early ‘90’s, as a member of the sales team that launched several global fund firsts including, the largest Global Telecommunications Fund, the largest Global Health Care Fund and the largest Emerging Market Debt Fund.

Todd was on the cutting edge of the ETF business, where as a manager in 2000, he played a significant role in the development of sales strategy and held a ring-side seat to the launch of the iShares family of exchange-traded-funds, the largest, most successful launch of it’s kind in U.S. history. He helped launch the largest family of fundamentally weighted, Exchange-Traded-Funds with WisdomTree Asset Management in 2006.

He has witnessed first hand the key factors leading to several great successes, as well as, the factors that destroyed or hobbled great asset management firms, some controllable, some not. It is a career that provides a unique perspective on the distribution of financial products through the broker-dealers and registered investment advisors in the United States.

The following pages provide a detailed look at Mr. Westby’s career, adding color and texture to his experiences.

Biographical Detail

Todd grew up in Wayne, IL, a small town about 30 miles west of Chicago, IL. One of six children, he worked his way through Illinois State University and graduated with a B.S. degree in Marketing in 1980. As an officer in the University’s American Marketing Association chapter, he received awards for helping to build it into one of the largest chapters in the U.S.

Fortune 500 Foundation

Todd joined Caterpillar Tractor Co. in 1981 at their world headquarters in Peoria, Il, at the time, the largest manufacturer of heavy equipment in the world, a Fortune 500 company and rated by Dunn & Bradstreet as one of the top 10 best managed businesses in the U.S. Todd completed the company’s Sales & Marketing Management training program and worked in Product & Market Development where he conducted fleet production cost-analysis, computer simulations and equipment investment analysis.

The early ‘80’s were a challenging time for U.S. businesses. Unemployment was near 10%, inflation and interest rates were at all time highs, the number of banks on the FDIC problem list had risen to 320, thrift institutions were hovering on insolvency and the global economy was struggling. It was extremely challenging for U.S. multi-nationals competing with Japan, Inc. The Japanese manufacturers were revolutionizing production and quality controls, the government was creating a soft regulatory climate and artificially suppressing the Yen to give Japan, Inc. even greater advantage in the global market place. Paul Volcker, Chairman of the U.S. Federal Reserve had raised rates to slow inflation, which resulted in the tremendous strength of the U.S. dollar. For exporters like Caterpillar, it meant price differentials of more than 25% simply due to currency.

One of the few bright spots for the heavy equipment industry was in mining. Caterpillar, with the new D10 tractor, large off-highway trucks, loaders and excavators was the largest global supplier of equipment to the industry. High oil prices were creating high demand for the exploration of alternatives such as oil shale on the western slopes in Colorado and tar sands in Canada and as a result, high demand for the equipment to extract these resources. New regulations were limiting mining companies from blasting and causing them to look at new technologies like ripping rock with the D10. Todd worked on production studies and equipment investment analysis in both areas.

The time at Caterpillar was invaluable to understanding the global market place, the operations of one of the world’s best companies, the importance of currencies on sales and earnings in a global business, the sales process for a highly sophisticated, complex product line and the strength of brand, reputation and support in a challenging climate.

Joining the Mutual Fund Renaissance Of The Early 1980’s

The high interest rates of the late seventies and early eighties lead to explosive growth in the money market assets. A fund industry with assets of roughly $50 billion in 1970 exploded to nearly $250 billion at the end of 1981, with the vast majority of those assets in money market funds. With inflation seemingly under control, an economy beginning to recover, changing regulations and favorable demographic trends, the stage was set for a revival in the broader mutual fund industry.

In 1984, Todd joined Van Kampen Merritt a leading sponsor of tax-free Unit Investment Trusts sold primarily through a network of regional broker dealer firms around the country. The firm had just been acquired by Xerox Financial Services and was embarking on a rapid expansion plan, adding sales representatives throughout the country. Westby joined the team as a Regional VP out of the corporate office in Philadelphia, PA and covered Regional broker-dealers throughout the Mid-Atlantic. The company quickly expanded into the burgeoning mutual fund market leading the way with its U.S. GNMA fund. During the next several years, VKM would introduce Corporate High Yield Funds, Municipal Bond Funds, Equity Funds, Closed-end Funds and a Prime Rate Income Fund, a fund investing in the Senior Secured Loans of highly leveraged, lower quality companies. VKM had a very strong sales culture that produced many of the industry’s sales leaders. Members of the sales team Westby started with went on to become senior sales executives for American Funds, Dreyfus, Fidelity Lord Abbott, Morgan Stanley and Putnam.

The Client’s Point Of View

In 1989, Todd moved into a management role on the client side when he was recruited to be a mutual fund marketing manager for Wheat First Butcher and Singer, a regional broker dealer embarking on an aggressive plan to build a National firm to compete with the wirehouses. Here he was one of the “gatekeepers” who helped determine what companies were allowed into the branch network. He designed marketing campaigns for the branch system, interacted with mutual fund company home offices and participated in new fund launches. During his time here, Mr. Westby attended the MFS Roundtable for Fund Executives and numerous Mutual Fund companies’ due diligence meetings including American Funds, MFS, Kemper and Federated. The time spent here provided Todd with a client’s view of the various mutual fund organizations and the challenges faced by the broker dealer firms and their advisors.

Early Into Explosive Growth Of Global Investing

The fall of the Berlin Wall in October of 1989, along with academic studies, suggesting international investing could reduce risk in a portfolio, ignited a frenzy in international investing. During his due diligence for an international fund campaign in 1990, Todd visited a small global money management firm owned by the Bank of Lichtenstein- G.T. Global. The firm had few assets, but topped the performance charts with 6 of the top 10 international funds, the best marketing in the industry, an intellectually stimulating story, young, aggressive management, plugged in to the National Broker Dealers and the firms’ sales were growing exponentially.

Subsequent to his visit, G.T. asked Westby to join their sales team covering the Mid-Atlantic region. The firms’ rapid sales growth continued and in a very short period, the small start-up would challenge Templeton and American Funds, companies with greater assets and long, well established track records, for leadership in the race to raise international assets. The next several years included numerous industry firsts for G.T. including the extremely successful Global Telecommunications & Healthcare Funds, Latin America Growth Fund, Emerging Market Debt Fund and more. The successes were mixed with the Mexican Peso devaluation, inconsistent fund performance issues and the ensuing fall from grace. The sales team went from a red carpet reception in the branch offices to a closed-door policy in many cases. G.T. merged with institutional money manager Chancellor Capital and was sold to Invesco in 1998.

The G.T. years were loaded with lessons on challenging the status quo, introducing new, complex products and creating powerful, aggressive sales and marketing campaigns. They included lessons on competitive complacency, the cost of inconsistent performance, the cost of poor product positioning, the importance of proper organizational balance and effective takeover tactics.

Organization In Transition

The Invesco takeover provided the G.T. Global sales team new opportunities. Some took management jobs with PIMCO, Franklin and Fidelity. Todd accepted a position as Eastern Sales Manager with Nuveen; a firm widely recognized as the leader in tax-free municipal bond products.

The company was built around tax-free unit investment trusts, expanded into tax-free mutual funds and did a very big business in leveraged tax-free closed-end funds. Nuveen had recently embarked on a very aggressive growth plan. They acquired Flagship Mutual Funds- primarily a tax-free mutual fund manager, Rittenhouse Asset Management- a fast growing separate account manager and were simultaneously, rapidly expanding their Unit Investment Trust business into equity-oriented products.

Nuveen needed to expand beyond tax-free products to grow. The question was how to do it effectively and profitably and very important-how do you transition your brand in the mind of the Financial Advisor? What Nuveen was attempting was no small undertaking!

Each of the major Broker Dealer firms was selling these various products in their branches and there was a market for each, but with whom and how does a sales team cover them? Financial Advisors have a variety of different business models, but most, out of necessity choose to select a money management firm for a particular expertise or product and build relationships with firm sales representatives accordingly.

Nuveen decided to attack the challenge with three separate sales teams representing four different types of products geared toward a variety of business models. The teams worked independently which meant 3-4 sales people from Nuveen converging on the broker dealer branches and competing with each other.

Not long after Westby joined, a new management team was brought in and moved to put their mark on the transition, he found himself looking for a new position. It was a tough pill to take, but a great learning experience in a short period of time. In retrospect, it could not have been a better situation for Todd since it positioned him for a role as Eastern Sales Manager and National Accounts Manager for the Broker Dealer business with the iShares ETF start-up being undertaken by Barclays Global Investors, a $750 billion institutional index manager trying to break into the intermediated market place.

The Grand ETF Experiment

Todd joined Barclays Global Investors in spring of 2000 only months before they planned to launch a family of Exchange Traded Index Funds. BGI’s plan was a very, very gutsy one. They were trying to enter a market committed to and dominated by active managers, a market they had tried to penetrate in the past with only modest success, with a product that had achieved only modest success since its’ inception seven years earlier. They were committing huge dollars, requiring huge sales to justify the investment and were launching in the face of a collapsing stock market. The strategy was totally vulnerable to an attack by Vanguard or State Street Global Advisors - key competitors. There was a long list of reasons why the plan should have failed. Instead, it turned into one of the great successes in money management history. The iShares business would go from a start-up in 2000 to one of the top three fund firms in terms of assets raised in 2006!

As a member of the intermediary sales management team, Todd helped develop and implement the sales strategy for the Broker Dealer business. The plan of attack required a good deal of creativity, finesse, flexibility, focus and persistence. The team’s primary focus was on the top Broker Dealers, at the time, Merrill Lynch, Salomon Smith Barney, Morgan Stanley, PaineWebber, Prudential Securities and A. G. Edwards.

In 2000, ETFs were a product with no home at these firms. SPY and QQQ, well-established ETFs were handled by the options desks and were not widely used by Financial Advisors. The SPDR sector ETFs, a joint venture between Merrill Lynch and State Street were adrift with little focus.

Westby’s first challenge was to obtain some home office support for the product allowing access to the branch offices. Without this, the Broker Dealer effort was virtually dead on arrival. This proved more difficult than anticipated. Despite the fact BGI was one of the top 5 institutional client’s for several of these firms, they were very reluctant to promote indexing- a low margin product they had competed against for decades. Little by little, Todd and the team got help from a variety of interested parties, building support and providing the sales team cover. He avoided the traditional gatekeepers and aligned with equity sales desks and fee-based platforms. Support came from the Equity Sales Desk and Research at one firm and the Discretionary Fee-based Platform at another. Firm by firm, the partnerships were built and strengthened.

The breadth and composition of the product line enabled BGI to positioning iShares as a set of tools for implementing individual strategies, align and synchronize with each of the Broker Dealers’ home office asset allocation models or sector strategies. This in turn reduced the threat of indexing, created a shared focus, and stronger bonds. At the Financial Advisor level, the product line could integrate with virtually any FA business model.

The Broker Dealer firms soon began to recognize that indexing using the iShares in their fee-based platforms was in fact, profitable, helped reduce risk and helped retain and gain assets they might otherwise have lost. The strategy provided a very efficient, scaleable business model and enabled them to compete very effectively with the Registered Investment Advisors who were early adopters of indexing and the iShares offering.

The iShares experience provided Todd with unique insight to the entire Broker Dealer organizations including capital markets, key account relations, national sales, research and the different fee-based platforms. The experience demonstrated the importance of strategy, product positioning, the building of a great brand, messaging and client focus. It was a once in a lifetime opportunity to participate in and observe the introduction of a game-changing product!

Can Lightening Strike Twice?

In 2006, WisdomTree Asset Management, a small start-up with several high profile players, was staffing up to enter the ETF market. The legendary hedge fund manager, Michael Steinhardt served as Chairman, Professor Jeremy Siegel from the University of Pennsylvania Wharton School and Arthur Levitt, the former Chairman of the Securities and Exchange Commission served as Sr. Advisors.

WisdomTree had developed a new line of fundamentally weighted indexes using dividend weighting. The importance of dividends to long-term performance was an idea widely discussed in the industry and championed by Professor Siegel for years. The back-tested models showed the methodology delivered better performance with less risk across a broad cross section of markets around the world.

A former iShares colleague recruited Westby to WisdomTree. It was a gamble, but with a celebrity list of players and an intellectually intriguing concept, a calculated one. Todd developed and implemented sales strategy and quarterbacked the creation and implementation of a fully integrated CRM. He trained, managed and evaluated the intermediary sales team and oversaw the internal sales desk.

The WisdomTree plan was fairly straightforward, take the success of the iShares strategy and introduce fundamentally weighted indexing with Wall Street celebrities.

In July of 2006, WisdomTree launched the largest family of fundamentally weighted ETFs in the world. It was also, the largest single day ETF launch in NYSE history. The initial buzz and reception on the street was very strong. In Q1 2007, WisdomTree ETFs accounted for 15% of ETF flows. Performance was strong across the product line and with in 2 years WisdomTree went from virtual non-existence to a top 10 ETF firm with assets of $4.6 billion. It looked like lightning might strike twice.

The team conducted over a hundred meetings for top Broker Dealers and RIAs around the country with Professor Siegel, Mr. Steinhardt and Arthur Levitt including the Barron’s Winners Circle, Schwab Impact and the National IMCA meetings.

The strategy was working well with a few exceptions:

• ETF competition was ramping up, creating more noise in the market place.

• iShares now controlled over 50% market share - Advisors and home offices were essentially married to them and not anxious to divorce and take a new bride/groom.

• Unlike most of the iShares, State Street Global Advisors and Vanguard, ETFs, the WisdomTree ETFs did not fit neatly into asset allocation models used through out the industry. Hence, the use as core holdings was limited both at the retail level and the institutional level.

• WisdomTree index methodologies employed across the product line meant the ETFs were overweight in financial stocks. When the bad news started to hit financial stocks, the WisdomTree ETFs were quick to feel the pain and sales came to a halt.

The time here provided a great comparison of two successful ETF start-ups. Both had very credible backing. Both used several of the same iShares managers with very similar sales strategies. Both had similar sized sales/support teams. Both were introducing new products. Both leveraged existing brands to create their own. All this and yet the results were significantly different.

Todd left WisdomTree in September of 2008 as senior management scaled back to deal with the unfolding financial crisis.

Consulting from experience

Todd currently serves as CEO of T Hayes Consulting, LLC. A consulting practice designed to help clients distributing products through or doing business with the major Broker Dealers and the Registered Investment Advisor community, to better understand the market place and the key business drivers, opportunities and challenges they face.

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