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What lessons can Barron's #1 rated financial advisor teach us?

The practices of Ric Edelman, Ken Fisher and Adam Bold share similar approaches

Monday, August 31, 2009 – 5:08 AM by Elizabeth MacBride
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Ric Edelman: The classic mistake is for an advisor to hire himself.

Good is the enemy of great.
And that is one of the key reasons why we have so little that becomes great. We don’t have great schools because we have good schools. We don’t have great government, principally because we have good government. Few people attain great lives, in large part because it is just so easy to settle for a good life. The vast majority of companies become quite good — and that is their main problem. An excerpt from the opening lines of the bestselling book: “Good to Great” by Jim Collins

In the past few weeks, RIAbiz has interviewed three RIAs who have been able to do what many have tried and failed to accomplish: expand nationally.

Ken Fisher, the world’s largest RIA, has $33 billion under management with most employees clustered in Silicon Valley, Calif. and Camas, Wash.

Adam Bold, who has $4.1 billion in assets under management, founded the Mutual Fund Store and now has 68 franchise and company-owned stores around the nation.

Ric Edelman, with $3.8 billion under management, has a radio show, makes many television appearances and runs seminars. He has a new national expansion plan for major markets, beginning with the New York City area. [Edelman was named #1 independent financial advisor by Barron’s on Saturday.] See: What Ric Edelman is like live on stage

RIAs are well-positioned to grow over the next 20 years as the industry changes, Edelman says, but many investment advisor firms don’t have the right strategies in place.

“Advisors are their own worst enemies,” he says. “They’re not good at operating practices.”

And this self-restricting characteristic is deeply-rooted, Bold says. “RIAs are on their own because they don’t like to work for someone else,” he says. “They have to realize that [managers] are going to make decisions that are different from what they make; they can’t let go.”

Based on our interviews with this trio, and our observations, here are some other lessons we drew:

Building a brand is crucial

In the service business of wealth management, where consumers cannot easily and directly compare one company’s product with another’s, brand-building is key. None of these men wait for referrals.

Fisher is the king of marketing, and has unabashedly embraced everything from direct mail to infomercials. He also has a column in Forbes. Bold and Edelman both have reached out to consumers with radio shows and other consumer education efforts. All three men have positioned themselves as mavericks, suggesting to consumers that they know something about money that the mainstream doesn’t, and that a consumer who trusts their money to Bold and Edelman will join the club of people in-the-know.

Fisher wrote “The Only Three Questions That Count: Investing by Knowing What Others Don’t.” Bold’s latest book is “The Bold Truth About Investing.” Edelman is the author of “The Lies About Money.”

It remains to be seen whether Bold and Edelman can build brands with as much power as Fisher’s. Fisher, who founded his firm in 1979, has been at this for much longer. He also has built a brand around his own proprietary investment advice and a massive equities research organization. His own investment advice is closely tied to his own personality, and that makes it de facto unique – and it’s probably easiest to brand something that’s unique.

Edelman offers propriety portfolios, but considers himself primarily an asset allocator. His branding is built on the image of a “trusted financial advisor.” If you buy services from his company, you get a whole package of advice. Bold, who sells mutual funds, markets quality and convenience.
Whatever your approach to branding, one lesson these three men offer is clear: pursue your vision doggedly.

Different approaches to office space can work

Fisher has only a handful of offices in major cities and can run his direct-mail empire from almost anywhere. Bold franchised his concept right way mostly because he wanted to expand fast enough to build the brand. He’s opened many of his 65-70 stores in secondary markets and doesn’t have a presence in New York City. Edelman, based outside of Washington, D.C., is taking on the major cities first, because his brand is strong in places such as Chicago, Detroit, San Francisco and Miami.

Systemize everything you can

“If a customer goes to the Mutual Fund Store anywhere, the customer experience … is going to be, if not identical, then similar,” Bold says. “And that’s important to me.”
Edelman’s built a host of proprietary software systems, including a program that flags advisors who may not be offering advice strictly in clients’ best interests. He hopes that enables him to monitor what’s happening in the offices he’s opening now. In fact, Edelman pulled back from the idea of expanding via a network of advisors who weren’t employees of his company, but simply paid a fee for his brand and investment advice.
The pull-back didn’t surprise Bold, who says, “that was a bad idea … You don’t know what those advisors are going to sell.”

Hire support staff

Laughingly, Edelman says that he’s seen many advisors answering their own phones. When it comes time to expand, he says, the “classic mistake is for an advisor to hire himself.”

Rather, he says, advisors should seek to create the infrastructure they need to expand. His own firm employs 4-5 support staff for every adviser.
In each of the three companies, there are designated marketers and researchers. Edelman and Bold combine sales and advice in their advisors. Fisher takes separation an extra step: His investment counselors do not sell and his salespeople do not advise.

Focus on a niche

Fisher targets those with assets of more than $500,000 to invest, according to articles. Bold has 28,000 clients with an average of $165,000. Edelman’s sweet spot falls somewhere in between.

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