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How one charmed referral set Michael Chasnoff on the path to $900 million of AUM

The power of PR and positive press proved to be the afterburners for Truepoint

Wednesday, November 23, 2011 – 4:02 PM by Steven Garmhausen
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Michael Chasnoff: We always say we are independent and we encourage Fidelity to continue to improve. This relationship can continue, but it's not a permanent relationship.

Name: Michael Chasnoff, principal and CEO of Truepoint Inc.

Location: Cincinnati

AUM: $902 million

Years in the business: 25

Fee-only pioneer Truepoint, Inc. is a testament to the power of networking and positive press. After a rough first couple of years, Michael Chasnoff’s firm caught some serious wind in its sails thanks to a dream referral and a dream endorsement. Today, it’s a $900 million, 15-advisor powerhouse. Chasnoff, a former NAPFA chairman, can be found on Barron’s list of the top 100 independent advisors (No. 87 for 2011), and his biggest problem is finding enough advisor talent to accommodate the firm’s growth.

Steve Garmhausen: You started your advisory career as part of an insurance company [a general agency of General American Life Insurance Co.] Tell us about that.

Michael Chasnoff: That agency wanted to provide investment management services, and they wanted to bring on an outside investment professional. I was offered the job, and we talked about the concept of providing financial planning along with investment management services. That got me started in Cincinnati. I worked at that agency for five years building a financial planning and investment management firm. We did fairly well, from 1985 to 1990, which included the 1987 crash. Following that crash, the principals of the insurance group lost a little bit of their excitement for financial planning and investment management.

I was able buy out that financial planning and investment management function and create my own firm in 1990. Leaving that organization, it became very clear to me that there would be a better way to serve clients than in a fee and commission environment. So I determined that the appropriate approach for my future and this business was to go fee-only.

That was at a time when fee-only financial planning and investment management services were quite rare. I decided to help promote fee-only investment management in Cincinnati, and began serving a niche in this market that was truly underserved.

So how did your firm, with its unusual approach, eventually break out?

We struggled for two-plus years. We did all the things we thought would be necessary to become successful: Focusing on creating great client experiences, writing white papers, submitting them to major personal finance publications, becoming active in industry leadership; I became the local financial planning chapter president and ultimately the national chairman of NAPFA.

I worked closely with tax and estate planning professionals in our community. Ultimately it was a referral from one of the advisors I’d introduced myself to: He referred me to a client who today is one of our largest clients, even after 21-plus years. It took that one client to get us over the hump.

And you’ve benefited from some very favorable press as well.

In 1994, Truepoint was nominated to participate in Worth Magazine's best financial advisors survey, and we made the list of the top 60. I think being named in that list provided further recognition among other members in the financial press. Jane Bryant Quinn wrote an important column on full disclosure and reviewing financial advisors’ disclosure documents. She wrote a powerful piece where she interviewed a client of ours who had taken on the task of surveying the advisors in Columbus, Ohio, all the way to Cincinnati; very few were willing to share their ADV’s with him as a consumer. Of course our practice was to provide it upon the initial request for information about our firm. And we wrote it so it would be easy to understand. He shared that with Jane Bryant Quinn and she wrote a very favorable article, effectively endorsing our firm—which further catapulted our firm in the region.

From 1994 forward, we experienced rapid growth—we doubled in clients and tripled in assets, and we added a number of associates. After that strong growth from 1994 to 1997, we’ve continued to grow in the 20% to 25% range year to year.

Over the past few years, you’ve developed a family office brand and another brand called Truepoint Financial. Can you tell us about the latter?

We had to make a decision on how to best service our legacy client relationships, where those relationships were in a retirement income-distribution mode. They were no longer adding to those portfolios, and meanwhile we were growing at a 20% to 25% rate so their balances relative to the clientele who were coming in were smaller in value. We wanted to make sure their service experience continued to be at an exceptionally high level.

We created a specific service offering with a dedicated individual committed to serving that group of clients. We created a slightly different pricing structure because the depth and breadth of services was not as great as under our Truepoint Capital service offering. That has been quite a success for us.

For the many people who are looking primarily for investment management service and having a relationship with a [certified financial planner] that can answer ad hoc financial questions and provide guidance throughout the year, that’s an effective service model. Whereas [the core offering] Truepoint Capital clients have more complexity in their financial lives, and that requires that essentially we have to create a team of financial professionals in our firm to work together on their behalf.

What’s your biggest challenge looking ahead?

We are focused on continuing to grow our firm at a rate of 20% or better. That requires that we continue to not only bring on new clients, but bring on new employees. If we grow between 20% and 25% per year, in four to five years, we will have doubled our assets under management, and most likely the revenues. The challenge is bringing on the right people to be part of the team. This organization has a unique culture of team orientation; it’s a serve-the-client-first mantra, and that’s not the way everyone who comes and knocks on our door for a job is wired.

What’s your growth strategy?

You have to maintain the high client-satisfaction levels that result in client referrals. But if we only focus on client referrals, we could be the best-kept secret in the field. We have a formal business development committee that focuses first and foremost on activity that allows us to interact with clients beyond just financial accounts. We want to do some social events, deepen relationships not only with clients but preferred provider relationships, maybe [with] centers of influence and other allied professionals. That’s a unique initiative in that space. We are doing activities in special niche market areas, we are doing a seminar this Thursday for Procter & Gamble [Co.] employees who are contemplating retirement or considering taking early retirement packages, and providing education around the decisions those individuals need to make.

I’ll admit we are financial professionals, not natural salespeople, and that might be good thing. However, we are working with consultants to improve our capabilities in harvesting referrals from our clients, so we’re looking at improving our skills in the way we communicate so that we can foster ever more client referrals in the future.

What was your best day as an advisor?

Probably the best was when we were two and a half years into the business and struggling. We finally got that breakthrough client, who went on to give us many valuable referrals. That made a big difference for our future.

What was your worst day as an advisor?

Back in late 2007, when we recognized what was going on in the economics of our industry. It was pretty clear that we were going to have to downsize our shop. We eliminated two positions late in 2007, and that was the first time we’d had to let people go.

Which custodian do you use, and why?

We started off as Charles Schwab clients, but switched. I had a client who said: “I had a bad experience at a Charles Schwab retail location here in Cincinnati.” I walked over to the Fidelity shop, and we had a very positive experience there. I started investing [through] the Fidelity offering, and that was probably in 1995 or 1996. We found the experience to be a very favorable one. At that time, Charles Schwab was going through a major growth cycle and having some major service challenges. Fidelity brought us on, and we just had a very strong, positive service relationship with them, and that has continued to grow and expand over the years. Steve [Condon, managing director] and I have both been on Fidelity’s advisor council, and been engaging in helping Fidelity provide a better service model to its client group. It’s been a good relationship. But we always say we are independent and we encourage Fidelity to continue to improve. This relationship can continue, but it’s not a permanent relationship, so we’re always looking out for what would be the best platform for us to operate [under] and serve our clients.

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Mentioned in this article:

Truepoint Inc.

Top Executive: Michael J. Chasnoff

Maria Marsala

Maria Marsala

November 26, 2011 — 10:28 PM

An excellent “case study” 1) how marketing and networking efforts do take time when you prefer the “non-pushy” way of doing business and put clients first. 2) how knowing your strengths and weaknesses can assist a company in brining on specialized consultants who can help strengthen a company.

Maria Marsala

Maria Marsala

November 26, 2011 — 10:28 PM

An excellent “case study” 1) how marketing and networking efforts do take time when you prefer the “non-pushy” way of doing business and put clients first. 2) how knowing your strengths and weaknesses can assist a company in bringing on specialized consultants to help strengthen a company.

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