... four RIA-world lessons brokers would do well to heed

May 2, 2011 — 5:57 AM UTC by Jeff Spears

1 Comment

Brooke’s Note: Sometimes RIAs and wirehouse brokers share a similar approach to competing with each other in the marketplace: Ignore your competitor in hopes it will go away. In fact this shares many of the same drawbacks as burying your head in the sand. Both sides actually have much to learn from each other. In a sense though, RIAs can learn more from brokers about how to build a business. If sometimes it seems that Merrill Lynch, UBS, Morgan Stanley and Goldman Sachs brokers succeed in spite of their roughed-up brand names, think again. They know marketing and sales because it is demanded of them as part of wirehouse culture. See: FRC report: Merrill Lynch, Morgan Stanley, UBS, Wells Fargo are undergoing a radical transformation to a brighter future.

Pages RIAs should take out of brokers’ playbook

  • Develop a bonafide sales strategy. Independent advisors who are successful at business development make it a core part of the job – and don’t leave it to a business development officer. Partners at the fastest-growing independent advisory firms devoted more than 40% of their time to new client acquisition, according to a Moss Adams survey of advisors. Most successful brokers spend 50% or more of their time on new client development, says the same survey.
  • Improve branding and marketing. Many independents spend little time on marketing. They don’t differentiate their message from other independents or from wirehouse brokers. A PowerPoint or a website just isn’t going to cut it. Merrill Lynch is spending $20 million on an ad campaign to position their brokers as advisors; independents need to up their game significantly as it relates to marketing. See: In a world of Schwab and Merrill, can the CFP Board use $36 million of ads to make planning sexy?
  • Improve lead generation. Call on the same prospects that brokers have traditionally pursued with great success: Entrepreneurs who have just gone through a liquidity event, “money in motion.” (See: Hou-Sear team applies Goldman Sachs marketing approach in second year as RIAs. ) Executives with significant holdings of restricted stock and opinions. Recent liquidity events and pending IPOs for private technology firms such as Facebook, Twitter, LinkedIn, Zynga and Groupon, are a sign that there will soon be more wealthy entrepreneurs in the market for advice. Now that the equity markets have recovered many corporate insiders are considering stock sales that they have postponed for several years because of the market weakness during the financial crisis. See: 10 advisors explain how they build sales without getting 'salesy’.
  • Embrace innovation and elevate visibility. Independents need to consider social networking platforms to help educate clients and differentiate themselves from wirehouse brokers. Facebook, Twitter, and LinkedIn give independents an opportunity to share their perspectives and have an ongoing dialogue with clients. See: How to use LinkedIn to win more business in your niche. A regular blog can explore issues in depth and elevate an advisor’s search ranking in Google and Yahoo!. These platforms are especially relevant to GenXers and GenYers, who are the next wave of wealth creators and inheritors.

Pages brokers should take out of the RIA playbook

  • Provide fee ONLY comprehensive wealth management, not just investment management. Brokers should study for the CFP designation. Brokers have CIMA or CFA, which focus on investment management.
  • Adopt an open architecture for all products and services, including retail banking. New conglomerates are strongly encouraging brokers to “cross-sell” banking products to their investment clients. The financial supermarket idea is an anathema to clients who did not chose their broker to also be their banker. See: Why one Wells Fargo defector had no use for wirehouses, IBDs or the RIA model.
  • Create a business plan that increases your fee based business to greater than 75% of your total revenues. Even RIAs don’t generate 100% of their revenues from fee based clients. Brokers have an advantage here because they are able to generate high non-fee revenues from their brokerage clients making the transition less painful financially.
  • Raise your visibility in the community. RIAs come from a culture that encourages community involvement through board memberships and volunteering. Wall Street does not promote a work-life balance, but it should.

The Bottom Line

RIA’s and brokers don’t believe they can learn from each other, but in my experience both business models have strengths that could be very helpful to the other. Sometimes, guidance comes from unlikely places: I never even thought I needed to ask for directions until I added GPS to my car.

Jeff Spears is CEO and co-founder of Sanctuary Wealth Services LLC. Jeff has over 24 years experience in wealth management as a wealth advisor and a national manager of the wealth management businesses at Montgomery Securities, Bank of America Private Bank, and Presidio Financial Partners LLC.

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Elmer Rich III said:

July 11, 2011 — 11:47 PM UTC

We do this work and we can only say — Amen. However, we would add:

- All these necessary business business development and firm growth processes require as much specialized, technical skill and experience as portfolio management, financial planning and wealth management. We know — we’ve done both.

- This is even more true with the dominance of digital media in business development and firms communications

- Usually, these skills are at the opposite end of the financial professional’s continuum of skills and abilities.

Like everything in financial services, success is a group effort with specialists from all disciplines.

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