Schwab names a $1.1 billion RIA in Iowa as 'best,' but the story behind the Zero Alpha firm's growth is better
Foster Group mined one of the few reliably wealthy groups in the corn belt -- doctors -- and uses unconventional employee benefits like European-length vacations
November 16, 2012 — 4:27 AM UTC by Lisa Shidler
A $1.1 billion RIA in Iowa caught the eye of Schwab Advisor Services for top honors at its annual conference, but the little-known firm has been capturing the interest of doctors in the Midwest for years.
On Thursday, the San Francisco-based custodian presented Des Moines, Iowa-based Foster Group Inc. with its Best-In-Business IMPACT award, recognizing the firm’s excellence in the business of independent financial advice. See: Three suddenly-bigger RIAs explain what sparked the growth.
Founded in 1989 by Jerry Foster, 57, the firm signed on with Schwab in 1992. By 1994, the RIA’s entire business had switched to fee-only with no commission assets. Foster has 840 clients in 38 states. Of those, more than half — about 450 clients — are physicians, and the RIA has crafted a strong niche offering advice to clients who have sold their businesses to hospitals.
“We were just in the right place in the right time,” says Foster. “I met a client who said that many physicians needed advisors.” Now that he’s built such a strong firm, he spends most of his time building the business. The firm has had organic growth since the start, but Foster s keeping his eyes open for opportunities to grow in larger increments..
“We’re trying to grow very strategically with control and we don’t want to get too ahead of ourselves with inorganic growth. But it’s on the radar screen.”
Foster was also a founding member of the well-known Zero Alpha Group, a consortium of nine giant RIAs. See: Why a pair of Zero Alpha RIAs are combining and out-and-out avoiding roll-ups and private-equity money.
In addition, Glassman Wealth Services LLC of McLean, Va., was awarded the Pacesetter IMPACT Award and Sullivan Bruyette Speros & Blaney Inc,, also of McLean, received the Trailblazer IMPACT award, which recognizes entrepreneurial spirit. Schwab makes a donation of $15,000 to a charity of the winners’ choice. (We wrote about Barry Glassman’s breakaway from Royal Alliance in: New RIA with a Royal touch.)
!http://www.riabiz.com/i/17738284/b(The Foster Group, flanked by Schwab executives Bernie Clark (l.) and Walter Bettinger (r.) claims its Best-in-Business IMPACT award.)!
“This year’s winners represent a breed of advisors who demonstrate a similar philosophy of unwavering client service and support,” said Bernie Clark, executive vice president and head of Schwab Advisor Services.
The winners were selected by a group of judges, including Julie Littlechild, president of Advisor IMPACT; Sean R. Walters, executive director and CEO of the Investment Management Consultants Association and Thomas R. Robinson, managing director for education at the CFA Institute.
The Best-in-Business Award is given to an RIA that has been in business 10 years or more and has a track record of growth and excellence.
Confusing time for docs
Foster positions itself as the authority in the medical field and has been lauded by the American Medical Association for its work with doctors. The company partners with associations such as the Iowa Medical Society and the Nebraska Medical Association.
Foster also completes surveys of its clients directly, and recently conducted its largest survey — of 12,000 medical professionals.
“If there are two doctors in Iowa talking about investments, our name would most likely come up,” says Foster. “We’ve never had to advertise in Des Moines, because we haven’t needed to.”
Physicians need advice these days, especially as their businesses have been dramatically changing in recent years, says Mark Stadtlander, president of the Foster Group.
“In the past 20 years, we’ve seen doctors roll away from hospitals and into their own groups. There’s a lot of movement, and now we’re seeing many hospitals buying these medical practices,” says Stadtlander.
The firm makes it a point to participate actively in local and statewide medical groups. It is a member of the Iowa Health Care Collaborative. “Physicians are trying to figure out so many things now, and we’ve made significant investments of time and money to further the cause,” he adds. See: Top 10 ways financial advisers can 'market smarter’ — and enjoy it more in 2012.
In-house referral network
The company has bolstered its referrals from its physician clients, but its own employees are among its biggest cheerleaders.
“We realized we needed to start creating a culture of business development with all of our staff,” Foster says. “We’re trying to get them to realize they can ask for referrals without being salesy.” See: 10 advisors explain how they build sales without getting 'salesy’.
Right now, nine out of every 10 clients come in the doors from word-of-mouth referrals. Currently, the bulk of the client growth stems from employees. From the firm’s administrative staff to its traders, it has brought on many new clients. One trader alone has brought on eight.
Foster believes the employees are driving the firm’s growth because they’re happy with the RIA’s culture, which includes six weeks’ paid time off in addition to nine paid holidays.
“Our whole team believes we’re there to truly change people’s lives,” Foster says. “We put our money where our mouth is.”
“Foster Group thinks about the bigger picture in every decision, an approach that clients clearly appreciate,” Clark said.
As the firm grew, Foster says, it was struggling to streamline all of its business processes. Rather than outsourcing, it built the solutions itself.
Last fall, the firm formed Orchestrate LLC, a legally separate company that is owned by a group of investors in Foster Group. Its technology application, dubbed ProcessComposer, is offered through the SalesForce App Exchange that has been used by a number of firms including wirehouses and other RIAs. See: Schwab and Advent Software forge historic agreement — mostly for the good of Black Diamond users for now.
The process was launched to help craft workflow processes for everything from bringing new employees on staff to addressing changes for clients to compliance details.
Foster says this company was set up because it became clear his firm needed to be as efficient as possible as it continued to grow. “In order to manage this type of firm, you have to think about processes and efficiencies and make sure quality control doesn’t go down,” he says. “In order to achieve growth, we realized we needed these types of workflows.”
Foster says other firms in the industry are clamoring for such automated solutions.
“A lot of people in the industry say there’s nothing like it,” Foster says. He points out that firms such as Orion Advisor Services LLC have even adopted this product.
The product starts at $10 a month and can go up to $25 a month per user, depending on the types of services advisors are seeking.
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