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Branch openings at The Mutual Fund Store ground to a virtual halt

Pipeline of new franchisees starting to fill for 2010

Wednesday, August 26, 2009 – 7:31 PM by Brooke Southall
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Adam Bold: We've found a world where people are in cash.

The economic slowdown has all but stopped The Mutual Fund Store’s geographic expansion but it is adding new clients in droves.

The Overland Park, Kan. company saw its accounts jump from 20,000 in August of last year to 27,000 today, a 35% leap, according to its founder, Adam Bold, a former Smith Barney broker.

The Mutual Fund Store, which manages about $4.2 billion of assets, has both franchises and company stores run by registered investment advisors. The average client account is $165,000, Bold says. The company has a footprint in 60 cities, all of which have investors who listen to his talk radio show on investing. Leads from those shows are funneled to Mutual Fund Store RIAs in the local areas.

Despite these successes, MFS placed a de facto moratorium on store openings in the past year.

It resumed growth this month with the opening of a new location in Madison, Wis. bringing to 68 its number of locations. I t was the first one to open since 2008.

Madison was an exceptional case, Bold says. Investors in that area were familiar with him because he broadcasts his radio show from nearby Milwaukee. Bold believes that this gives him a critical mass of leads to support the new store.

Good conscience

Bold says he couldn’t sell franchises “in good conscience” in the first half of the year but that the market for his stores began to turn around in June. He’s now rapidly filling his pipeline with new franchisees. “For 2010, our business plan calls for 10 to 12 new store openings,” he says.

Bold adds that he’s been in a holding pattern since June despite improving market conditions because it takes six months to get a store open. Selling a franchise in early summer would result in a franchisee opening into the teeth of the holiday season — a challenging time to gather assets

Bold says that he takes this cautious approach because Mutual Fund Stores need to hit the ground running. It takes with substantial revenues to cover high fixed overhead. Getting off to a strong start has been dicey in the past year’s market environment.

“In normal circumstances, we can take [new assets] from brokerage firms, from 401(k) rollovers and the self-directors,” he says. “Now we’ve found a world where people are in cash.”

People are in cash because they are nervous about losing what’s left of their nest egg. In that atmospere, Bold’s client retention rate dropped to 96% over the winter, though it more recently recovered to historical levels of 99%.

Bold pulled out the stops to retain clients. Traditionally, Bold would only send an e-mail or two each month to clients with commentary and investment strategy.

He upped that e-mailing rate to two or three messages per week.

His other strategy was to provide the RIAs who run his offices with prepared answers .

“My advisors took the [client] calls because they knew what they were going to say,” he says.

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