Not much romantic about call center-based advisors but under banners like Vanguard, Fisher Investments or Merrill Edge, they are a force to be reckoned with

September 12, 2014 — 5:06 AM UTC by Brooke Southall


Brooke’s Note: This article was spawned out of my efforts to prepare for the upcoming RIABiz webinar on Swimming With the New Competitive Sharks. The robo-advisors are still a paper threat but there is a whole world of new advisors that are winning assets and creating scalable, sustainable businesses. I am calling one big chunk of this new group “phono-advisors” for reasons detailed below. The webinar will look at the new competition from wirehouses moving to at least pseudo-goal-based investing, OSJs with exploding numbers of reps or TAMPs that have dedicated reps. These are mainstream, Main Street offerings that try to capture the essence of RIAs in a market where the consumer is still plenty confused. The webinar will show how RIAs still mostly hold all the cards but that they still need to play them with the competition in mind to be most effective in their sales and marketing efforts.

In the early years, the Tiburon CEO Summit was held about 24 floors up in a mid-sized gray high-rise in the financial district of San Francisco in the Paul Hastings law offices.

RIA business executive star power was plentiful but the comments made by guest panelists and speakers often had a cardboard quality. This was the early 2000s and I recall lots of SMA zealots and IBD chiefs tossing their well-rehearsed dogma at the crowd.

But one man sporting a tweed jacket, a practiced nonchalance and black hair that could withstand hurricane-force winds eschewed conventional thought and delivered his comments in a concise, hard-hitting, even acerbic style.

That person was Ken Fisher. See: Ken Fisher keeps expanding his $42 billion RIA empire despite UHNW head winds.

He tossed branch offices, Lion’s Club referrals, in-person meeting, fancy degrees, subtle advertising out the window as means for success. Even then Fisher had assets in the tens of billions and lived in one of the great mansions of Silicon Valley.

Call centers in the forest

At first, Fisher had two giant call centers — one at his house and another in San Mateo, Calif. Then, to demonstrate even more definitively his disdain for swank locations, he cut down some trees and built call centers in the middle of a forest outside Portland, Ore. See: The world’s largest RIA takes the cult-on-the-hill to the Washington state woods.

But the general consensus of the people in the CEO Summit room was that Fisher was — for all his success — a clear exception that proved the rule of how to conduct business. Having faceless phone relationships was hardly a model worth imitating. See: One thought for advisors with stagnant practices: Pick up the telephone!.

Fast forward to 2014 and arguably the phono-advisor is entering a sort of Golden Age as call centers full of faceless financial advisors are cropping up like credit card servicing centers in India.

Billions and billions

The three leaders in this movement — Merrill Edge, Schwab Private Client and Vanguard Personal Advisor Services — come from three different channels: bank/wirehouse, former discount broker and index fund maker.

Depending on your asset- and chattel-counting methods, Merrill Edge has 1,000 call-center workers and $100 billion of assets; Schwab has $60 billion of assets and 500 call-center people; and Vanguard has about 250 people looking after clients with $30 billion. See: How Vanguard Group’s robo-countering effort got to $1.3 billion of AUM so easily and why its future seems bright.

A single call-center person, paid maybe $100, can oversee $100 million or so. If those $100-million assets generate $750,000 to $1 million in fees, you can see how this model might work. See: The amazing success of Merrill Edge and why some legacy Merrill brokers think it’s eating their seed crop.

Newcomers, quick leavers

An upstart in this realm is Personal Capital Corp., which has raised $54 million from six investors in six rounds and is headquartered in Redwood City, Calif. Its new private-client unit charges a .79% annual fee up to $3 million invested. Its asset haul, $750 million, is pedestrian either by the measure of classic RIAs or the so-called robo-advisors that it is often confused with.

Other advisors who can hardly ignore the stubborn practicality of phone centers include Ric Edelman, who recently announced he is scaling back on rolling out Edelman Financial branches in favor of serving more accounts by phone. See: How Ric Edelman manages to bring on 4,500 new clients each year by force of personality while diminishing key-man risk at the same time.

NestWise and BloombergBlack were basically pretty “phono” and from what could be seen they were doing OK in their start-up phases and were taken out as matters of corporate remorse. See: A departing NestWise advisor tells what he learned from the whole experience. See: A departing NestWise advisor tells what he learned from the whole experience.

Up the food chain

So what exactly has happened in the past few years to cause companies big and small to dust off this pink-collar-style approach to financial advice?

Necessity. There’s a world of affluent investors who were previously shark food for desperate, low-end stockbrokers who were happy to make a meal of any asset.

Wirehouses have done away with these advisors as both uneconomic and lawsuit-inviting.

Call centers invite less legal exposure and can be marketed effectively.

This all happens as technology arrives on the scene that can assist and strengthen the call center advisors’ efforts. Between CRM software, web portals and personality training on how to be friendlier than a CFA, they are off to the races. Employers have a bigger labor pool because the job isn’t so demanding and these people can be put in low-cost-of-living locales like Fisher’s woods where they can be supervised easily and where a paycheck goes much further.

Bell tones

So what about the robo-advisors?

A generous totaling of their assets has them at about $3 billion of “managed” assets — about 1% or less of the cumulative phono-advisor haul. That would be bad enough but robo-advisors come into the market with such a level of reticence that they haven’t dared ask to be paid. Wealthfront continues to find new classes of clientele to give its services away to — most recently as a corporate benefit to technology workers with less than $100,000 invested. It did something similar for professional football players. See: Online RIAs will mostly fail — and here are 10 reasons why.

I mention Wealthfront not to pick on it, but because it is the cream of this automated crop thus far in attracting assets as it nears $2 billion. See: Wealthfront raises a cool $20 million from VCs to pursue a big slice of a $1 trillion market.

The big danger of robo-advisors to classic RIAs isn’t that it will outperform or outgrow classic RIAs.

But there is a danger that they will dazzle RIAs with their automated footwork just enough so that RIAs take their eyes off the real competitors — namely cost-effective, branded, medium-but-controlled quality offerings that deploy people by using technology invented by Alexander Graham Bell.

Share your thoughts and opinions with the author or other readers.


Bill Winterberg said:

September 12, 2014 — 3:04 PM UTC

Brooke, you might have been joking about “phono-advisors,” but it’s actually a real thing.

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Brooke Southall said:

September 12, 2014 — 5:11 PM UTC


That is too funny. Right in my backyard.



Dan Warburton said:

September 12, 2014 — 8:27 PM UTC

Really enjoyed the article Brooke.

Bill, that site sure looks like a parody. Does Orion Software now actually provide “phono-advice” or are they just having a lot of fun with the “phono-advisor” concept?


Scott Horton said:

September 12, 2014 — 9:27 PM UTC

Hmm, couldn’t find their ADV.


Dan Warburton said:

September 12, 2014 — 11:51 PM UTC

Looking more closely, I have to say that personally I can’t wait to get a pair of their “special PhonoAdvisor-branded glasses”. Brilliant.


Marie Swift said:

September 14, 2014 — 5:37 AM UTC

Interesting … yesterday the url went to a site that I, too, thought was an “Onion-like” spoof. Just now (twice) when I clicked the link in Bill Winterberg’s post, it redirects to a WordPress site owned by Coastal Advisors (but the content has been moved behind a log in wall):


Jud Mackrill said:

September 15, 2014 — 2:54 AM UTC

Glad you guys enjoyed the parody. Just having some fun during our Fuse weekend. Lots of really cool real stuff came out of the weekend and it’s well worth following the #fuseutah hashtag on twitter.

Note: coastal capital is a faux advisory firm used in demos and is in no way a real advisor


Jack Waymire said:

September 15, 2014 — 11:05 PM UTC

Please note the big phono advisors are brand names (Merrill, Vanguard, Schwab) or they have a substantial presence on the Internet – for example Ken Fisher and his Forbes relationship. There are numerous advisory firms that are evolving into the Robo/Phono business models. Their success will be impacted by credibility that can be validated on the Internet. If they are invisible on the Internet they will be limited to boiler room-like operations.

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