Cincinnati-based asset manager Touchstone Investments is strategically repositioning itself for future growth by intensifying its focus on the burgeoning Registered Investment Advisor (RIA) channel and the increasing demand for actively managed Exchange Traded Funds (ETFs). Under the leadership of its new president, Ben Alge, the firm is embracing a vision of independence, technology enablement, and distinctively active investment strategies to navigate the evolving landscape of asset management over the next decade.
Alge, who assumed the presidency, is spearheading an initiative to deepen Touchstone’s engagement with RIAs, a segment of the market characterized by its pursuit of independence and tailored client solutions. This strategic pivot is designed to leverage Touchstone’s expertise in actively managed mutual funds and ETFs, particularly in core areas such as fixed income and international markets, to cater to the specific needs of these advisors and their clients.
The Strategic Embrace of the RIA Channel
The decision to prioritize the RIA market is rooted in a fundamental alignment of values and operational philosophies, according to Alge. "Targeting the RIA market has felt like a very natural extension of who we are," Alge stated. "This market is a great fit for what we do. Advisors don’t go the RIA route by accident – they choose independence because they want to think differently and build something intentional." This inherent alignment, Alge believes, makes Touchstone an attractive partner for advisors who are committed to building bespoke investment portfolios and client relationships.
Touchstone’s approach to serving RIAs has evolved beyond traditional sales tactics. Recognizing that many leading RIAs, especially larger aggregators driving industry consolidation, operate with sophisticated investment frameworks akin to smaller wirehouses, Touchstone has restructured its sales engagement. This recalibration involves not only a revised sales strategy but also a bolstered team dedicated to providing enhanced support across critical coverage points.
Furthermore, Touchstone has invested significantly in its practice management consulting program, a suite of tools developed over more than a decade. These resources are specifically designed to assist advisors in enhancing their efficiency, scalability, and overall growth. Crucially, the program’s data-agnostic nature allows Touchstone to collaborate effectively with RIAs that may lack extensive internal resources for practice management, despite a pronounced need for such support.
The early insights gleaned from this intensified focus on RIAs underscore a clear demand for genuine partnerships rather than transactional vendor relationships. "The early lesson has been clear: RIAs are looking for a true partner, not another vendor," Alge emphasized. "Firms that understand independence, can engage at the right strategic levels and are willing to invest in long-term relationships are the ones that earn trust, and that’s where we’ve been able to make the biggest impact." This philosophy emphasizes a commitment to understanding and supporting the unique aspirations of independent advisors.
The Distinctive Edge of Active Management
Touchstone’s strategic emphasis on "distinctively active" management distinguishes its offerings in a market increasingly influenced by passive strategies. The firm defines its active approach as the deliberate construction of portfolios that diverge intentionally from their benchmarks, with the primary goal of generating alpha and adding tangible value. This approach is seen as a key differentiator for both its mutual funds and ETFs.
The inherent flexibility of active management allows portfolio managers to adapt dynamically to shifting market conditions. This includes the ability to adjust risk exposures, overweight high-conviction investment ideas, and leverage deep expertise within specific market segments. "When a manager has spent years focused on a particular asset class or strategy, that expertise, skill and discipline become meaningful inputs in pursuing the fund’s objectives," Alge explained. For investors seeking outcomes that deviate from market averages, accountability for investment decisions, and robust risk management, actively managed strategies are positioned as powerful tools.
Riding the Wave of Active ETFs
The burgeoning demand for actively managed ETFs represents a significant opportunity for Touchstone, aligning with its core competencies. Advisors are increasingly seeking to harness the structural benefits of ETFs – such as liquidity, transparency, and tax efficiency – without sacrificing the nuanced decision-making capabilities of active portfolio management. This combination has proven to be a compelling proposition.
"We’ve seen strong and growing demand for actively managed ETFs as advisors look for ways to combine the benefits of the ETF structure with the flexibility of active management," Alge noted. The areas generating the most client interest are those where active management can demonstrably add value.
Fixed Income: A Key Growth Area
Fixed income has emerged as a particularly strong area of demand, especially in the current interest rate environment. The ability of active managers to navigate shifting rate landscapes, manage risk effectively, and generate income is highly valued by advisors. Touchstone highlights its three fixed income ETFs as prime examples of strategies designed to meet these needs, facilitating income generation and active risk management for clients. The complexity of global fixed income markets, influenced by central bank policies and geopolitical factors, presents fertile ground for skilled active management. For instance, during periods of rising interest rates, active managers can adjust bond durations and credit quality more nimbly than passive vehicles, potentially mitigating capital losses.
International Markets Re-emerge
Interest in active ETFs focused on international markets has also seen a notable resurgence. After a period where such strategies were less favored, they are regaining traction as investors seek to diversify risk away from domestic equities and tap into global growth opportunities. The tax efficiency of the ETF structure, combined with active management’s potential to navigate diverse economic and political landscapes, offers a welcome refuge and diversification tool for investors. The ability of active managers to conduct on-the-ground research and assess country-specific risks and opportunities is crucial in this segment.
Touchstone’s expansion of its distinctively active philosophy into the ETF space is a direct response to advisor feedback. The firm is committed to delivering high-conviction, thoughtfully managed strategies within a structure that aligns with contemporary portfolio construction practices.
The Future Landscape of Asset Management and Touchstone’s Position
Looking ahead, Alge expresses optimism about the enduring fundamental need for investment management, stating, "At the end of the day, wealth still needs to be invested, and people still need security, income and confidence heading into retirement. That fundamental need isn’t going away." However, he acknowledges that the industry will continue to undergo significant transformations.
Technological Advancements and AI
Technology, particularly artificial intelligence (AI) and the enhanced utilization of data, is poised to reshape how asset managers engage with clients, understand their needs, and deliver superior experiences. Alge anticipates that these advancements will lead to improved investment outcomes and democratize access to financial advice and solutions. The integration of AI in areas like predictive analytics for market trends, personalized financial planning, and automated client communication could significantly enhance efficiency and client satisfaction.
Industry Consolidation and Structural Shifts
The asset management industry is likely to witness continued consolidation. Alongside this, a broader shift towards ETFs and more cost-effective, efficient investment structures is expected. These trends may exert pressure on profit margins, compelling firms to be more deliberate and focused on areas where they can demonstrably add value. This environment favors firms with clear strategic advantages and a proven ability to innovate.
Touchstone’s Enduring Foundation
Despite these industry shifts, Alge is confident in Touchstone’s strategic positioning, built upon a strong foundation. He credits the leadership of Blake Moore and his predecessors for significant advancements in the firm’s capabilities, the expansion of its product suite, and investments in its people. This groundwork has reinforced Touchstone’s core philosophy of avoiding the "ordinary" and striving for exceptional investment solutions.
As president, Alge’s primary objective is to maintain this momentum. His focus remains on supporting the Touchstone team and staying true to the firm’s core strength: delivering distinct, active investment strategies. This includes a commitment to continuous evolution in response to the dynamic industry landscape.
Lessons from the Helm: The Power of Team and Empowerment
Since assuming the presidency last year, Alge has gained a profound understanding of leadership’s evolving demands. "The biggest lesson I’ve learned since becoming president is that the role completely redefines what ‘doing a good job’ means," he shared.
Earlier in his career, Alge’s success was primarily defined by excelling in individual roles and outperforming peers through sheer effort and intellect. While this approach facilitated his advancement, his transition to a leadership position revealed a different paradigm. "Once I stepped into the leadership seat, I’ve realized that the most important thing I can do is choose the right teammates and then empower them to succeed."
Alge now believes that exceptional outcomes are the product of strong team dynamics, mutual trust, and empowerment, rather than individual heroics. "Great outcomes come from great team dynamics, trust and empowerment, not heroics," he stated. The true measure of effective leadership, in his view, is creating an environment where the right people are in place, are given the necessary support, and can achieve success collaboratively. "If you get the right people in the room and give them the support to do their jobs, that’s where you’ll see success. When you see the team succeed without you being in the middle of everything, that’s when you know you’re doing the job right." This philosophy underscores a commitment to fostering a culture of shared success and collective achievement at Touchstone Investments.
