Four on the floor: Items of interest to RIAs this week

Advisors still saddled with irrationally un-exuberant clients

Three-and-a-half years into the Great Recession, 63% of advisors say market volatility continues to be Topic A in client-initiated conversations over the past three months, according to Russell Investments’ latest quarterly survey of U.S. financial advisors, the Financial Professional Outlook. As a result of recent volatility, 78% of advisors say they have increased their calls to clients, while 52% are having more client meetings and 49% say they are receiving more inbound calls from clients.

RIAs barely grew at all In 2008 and 2009 as advisors spent more time keeping their businesses afloat and hand-holding clients. Advisors remain threatened by those productivity-depleting circumstances, the study shows.

But it does appear that advisors are bridging the giant gap in perception that exists between themselves and their gloomy, nervous-as-cats clients.

Financial advisors are upbeat about capital markets with about 65% saying they’re optimistic but only 9% of advisors say their clients are optimistic, the study shows.

“Interestingly, while advisors are working to help ease investor concerns, their own sentiments remain quite positive − so much so that they are turning their focus to business growth and expansion in the coming year,” says Ryan Parker, managing director, national accounts and business development for Russell’s U.S. advisor-sold business in a statement.

To help prepare clients for the shaky times ahead, advisors need to steer the conversation toward what can be done constructively.

“It can be easy for investors to get caught up in the fluctuations of their portfolios… Advisors must refocus the conversation on what is really important: improving the likelihood of meeting investors’ objectives,” says Parker.

Russell surveyed 300 financial advisors in 132 national, regional and independent advisory firms nationwide.

Despite clients’ ongoing worries, the study shows most advisors aren’t making many changes to clients’ portfolios. In fact, 61% of advisors are making only small tactical changes to portfolios for clients with short investment time horizons and 48% say they’re doing the same for clients with long investment horizons.

Ryan Parker: As advisors work to
ease investor concerns, their own sentiments
remain quite positive − so much
so that they are turning their
focus to business growth and expansion
in the coming year.

Patent spending: Wealthcare unveils its Unified Managed Household program

Wealthcare Capital Management is convinced that affluent clients would rather read an investment statement that tells them when it’s OK to buy a 1968 red soft-top Camaro convertible rather than staring at a generic display of brightly colored pie charts.

In November, Wealthcare officially launched its Unified Managed Household program, which is designed to deliver the firm’s patented wealth management process that’s focused on client goals rather than beating benchmarks.

Wealthcare’s platform is intended to link clients’ investment strategies to specific goals, whether they be convertible cars, jewelry or an antique billiard table.

“The ’68 convertible wasn’t the biggest priority for the client but when he was overfunded, we told him to go buy the it,” says David B. Loeper, president and chief executive officer of Wealthcare Capital Management. “We found one for him on eBay motors in his area. That’s the kind of service that makes us a commodity.”

The Richmond, Va.-based firm gained industry attention earlier this year for its lawsuit against UBS, in which it alleged the wirehouse, enabled by MoneyGuidePro (owned by PIEtech Inc.) had heisted its patented financial planning process. See: David Loeper is taking on UBS but his patent lawsuit is raising alarms in the RIA business.

David Loeper: Even though we haven’t
really launched it, it’s been our
fastest area of growth.

Now it’s pushing that patented program, which the company sees as its fastest growing segment. It’s doing so with the godfather of managed accounts on its board. See: Why exactly Dave Loeper and a Smith Barney/E.F Hutton legend are teaming up.

The company gained its patent on this process in August. They’ve had a small group of advisors who have been beta-testing the product for the past few years.

“Even though we haven’t really launched it, it’s been our fastest area of growth,” says Loeper, pointing out that revenues in this area have grown five-fold since 2009. The company manages $475 million in assets and about $420 million are on this platform.

Right now, there are about 25 advisors using this platform and Loeper hopes to grow that number to 125 in the next year or so.

Vanguard slashes international fee in half

Vanguard has cut its purchase fee on Emerging Markets Stock Index from .50% to .25%. The company says that its decision to reduce costs follows an announcement from Brazil – the second largest country holding of the fund – that it is eliminating a tax on foreign investments in equities and certain fixed-income securities.

With the elimination of Brazil’s 2% tax, which had been in place since 2009, costs associated with the fund are expected to go down and Vanguard is passing on the savings. Brazil represents about 15% of the index.

Vanguard Emerging Markets Stock Index Fund, which seeks to track the MSCI Emerging Markets Index, has $56 billion in net assets, making it the industry’s largest emerging markets fund. It seeks to offer investors a low-cost way to gain equity exposure to 21 emerging markets outside of the United States, including China, Brazil, Korea, Taiwan and India.

FOX gives families the business

Chicago-based Family Office Exchange, is holding a workshop aimed at helping families to establish family offices.

Dubbed “Family Office 101: Creating a Family Office Blueprint,” the workshop will take place in Miami on Feb. 22 to Feb. 23, the networking group for ultra-wealthy families and advisors announced yesterday.

“One of the most frequently asked questions we encounter is, 'How do I go about setting up a family office?’” says Karen D. Neal, managing director of consulting for FOX, in a statement. “Families setting up a family office want to do it right from the start. They want to know the necessary steps to take, the appropriate questions to ask and they don’t want to repeat the same mistakes others have made before them.”

Those who attend the seminar will evaluate their decision to start a family office, explore ownership and structure options and gain a clear picture of the financial services that may be offered by the office and learn about staffing needs.

Experts will explore the complexity of asset ownership, covering investment guidelines and processes to put in place. Also included is a discussion of technology to support family-reporting needs, office policies and procedures, and office budget and allocation of costs.

By the end of the workshop, participants should have the tools in place to create their own roadmap or the first 24 months of a family office start-up, Neal says.

“Family Office 101: Creating a Family Office Blueprint” is open only to wealth owners and family office executives and attendees don’t need to be FOX members.

Here’s the list of workshops that FOX is hosting next year:

“Family Office 101: Creating a Family Office BlueprintTM,” Feb. 22-23, Miami.

“Grantors, Trustees, and Beneficiaries: A New Look at Roles and Responsibilities,” March 27-28, Chicago

“Developing a Business Strategy for Launching a Multi-Family Office,” May 21-22, Chicago (new)

“Strategy for the Family: Getting Started on a Long-Term Plan,” June 6-7, Chicago (new)

“Family Leadership Succession: Developing a Roadmap for Successful Leadership Transition,” Sept. 10-11, Chicago

“Grantors, Trustees, and Beneficiaries: A New Look at Roles and Responsibilities,” Nov. 28-29, New York

For more information, visit www.familyoffice.com/workshops.