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After an avalanche of AUM in 2020-2021, some RIAs are stretched thin on service bandwidth, but the answer is to begin 'productizing'

The word 'product' is anathema to RIAs but the open-ended promise of high touch service isn't sustainable for advisors, and it's also not ideal for the client

Wednesday, November 10, 2021 – 6:55 PM by Guest Columnist Amy Parvaneh
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Amy Parvaneh: 'RIAs need to start embracing the unthinkable by transitioning some of their service offerings to a product.'

Brooke's Note: I always enjoy talking to Amy Parvaneh because she bursts with enthusiasm at the potential she sees for the RIA business. Coming from Goldman Sachs, she is aware of just how much better off clients are with most RIAs. See: How an ex-Goldman superstar asset gatherer in LA is bringing her bazooka to the RIA knife fight But she is also tormented by just how little of Goldman Sach's marketing and organizational discipline the typical RIA brings to bear on their practice. Here she takes a good stab at describing what she means by that and hoping the recent AUM windfall will be the extra prod some advisors need to heed her words.

Most RIAs are are finishing out 2021 on a high note flush with net new assets but on a lower note when it comes to keeping up with the service demands. The business model of high touch service depends too much on them and a few good associates.

There is a way to close this mounting disparity without sacrificing integrity but it requires organizing and marketing the service offering more like a product.

Though "product" in financial advice evokes a high-commission, off-the-rack boondoggle in some cases, there is another way to see it. What makes a 'product' effective is that it has a defined beginning and an end to both the benefit of the buyer and seller.

Most RIA’s set themselves apart from the wirehouse world by promising a comprehensive, all of the above service menu (heck, I’ve seen advisors even coordinate with a client’s wedding caterer to go over the budget for the event and help select the DJ!)

Clients are wowed but may not be sustainable without constant hiring and training. It's a challenge even at the big firms.  Look at Fidelity's unprecedented effort to hire 3,000 people every month until year's end. See: Fidelity Investments pulls out stops on perks to raise headcount by 7,000 -- by hiring 9,000 -- to shrug off labor shortages, escalating wages and call center attrition

Embrace unthinkable

Chris Stanley, Beach Street Legal
Chris Stanley: 'Advisors are generally free to charge a combination of asset-based fees and fixed fees.'

One test for an RIA is to ask: If tomorrow my firm wins five, $10-million clients in one day, can my team handle it as it currently stands?  How about 20, 30 or 50 such opportunities?

If you answered no, then your promise of a bespoke, high-touch boutique wealth management firm is either going to crush your existing team, your clients or your bottom line (from constant hiring) if you don’t start scaling it…ASAP!

RIAs need to start embracing the unthinkable by transitioning some of their service offerings to a "product" with the net effect of delivering much better streamlined service and far better sleep.  

Sizing up skills

"Producticizing" by an RIA is less of a mass-production process than a change of mindset.  I’ve had many advisors tell me 'Yeah, but if we producticize we’re no different than a Vanguard or Betterment.'

It's typically not that black and white.

There’s a happy medium between becoming a Vanguard or a robo-advisor and going all the way to the other side of the spectrum and start asking your team to become wedding planners.  

By cleaning up some of the all-of-the-above service offerings and putting some guardrails around how much time you’re spending on each client and what you’re doing for them, you, your team and ultimately your clients will be happier.  

It will also make it very clear what skills you need to hire for, since it’s hard cloning a teammate who is a CFP but also calls florists and destination venues for brides!

How does producticizing work for a service business?  It has three parts and it requires introspection and quantification of what can be quantified.

Calculating hours

Step one: Start with documenting and tracking how your collective time is being spent.  For many of our larger clients, we’ve literally surveyed their entire team for several weeks to a month to look for patterns and inefficiencies.

How is everyone spending their time? What’s a time suck? What is eating into the day but not really contributing to the firm’s bottom line?  

You, too, can have your team journal what exact services they are providing to which clients and how they are spending their time. (They do keep saying they’re REALLY busy…what exactly are they busy with, especially if working from home?). 

Step two: Analyze what common themes are coming out this survey that are above and beyond investment management.  

For example, do you see trends that your team is constantly on the phone calling your clients’ lawyers and CPA’s to get the estate documents and tax information?

Is the $1-million client getting this same exact service as the $10 million client just because he or she is more needy? (Is the squeaky wheel getting all the grease?)  How many hours is your team spending collectively around this “three-way call process?”

How about concierge services like helping your clients around other tasks, like planning their children's college budget and helping them purchase a new home?  

They may seem like not a big deal and a given for what you do, but have you calculated how many hours your team is spending on them, collectively?

What about all the webinars you put together for your clients?  How many hours are you and your teammates spending putting together the slides and calling your clients with logistics and details about them?

Step 3: Actually give each of those services that you have grouped into themes various product names.  For example, you can producticize “Partner Coordination” as a service that can be measured in time value, bandwidth requirement with a pretty bow tied around it.  

Perhaps “Financial Life Decisions” can be another “product” that falls under your menu of offerings.  All the webinars can fall under the “Client Education” product offering.  And so on.

The end result?  An actual comprehensive list of tangible products that you offer within your firm.

Explaining value

What are the benefits that can come out of this process?

For starters, more sales than simply promising the sun and moon!  Time after time, I find that advisors have a very hard time explaining their value, despite the fact that they are in fact providing all of these services we mentioned before.  

Well, of course it’s hard when you are trying to vocalize “holistic financial planning” but you don’t have concrete menu of digestible items (no pun intended) that come under that umbrella.  

Imagine going into a restaurant and the only menu was “you’ll get full.”  When you go to a restaurant, you get to choose what menu items will make you full (and satisfied).  And if you choose the “chefs tasting menu," you pay a hefty price for that.

Another benefit of this process is possibly more revenue, without having to go get new clients.  

Being able to “upsell” to smaller clients other ancillary charges, such as “Client Education” and “Concierge Services” gives your clients more choices. It also allows them to remain as investment-only if they so choose.  

You can offer these “products” on a complementary basis to the larger clients, creating an element of exclusivity, but they can be premium services that the smaller ones can opt into for aspirational purposes.

Predicting needs

I know what you’re thinking: What about compliance around charging for these outside of AUM fees?  

“Advisors are generally free to charge a combination of asset-based fees and fixed fees so long as (a) the services are bona fide and agreed-to by the client in an advisory agreement, (b) sufficiently described in the Form ADV Part 2A, and (c) when viewed in totality, don't constitute an "unreasonable" fee," says lawyer Chris Stanley, founder of Beach Street Legal in St. Louis. 

The unreasonableness of an aggregate advisory fee is naturally subjective, and unfortunately, certain examiners still try to convert fixed fees into an AUM equivalent for purposes of determining unreasonableness. Itemizing which fees are for which services can help overcome the AUM-fee bias.

And the final benefit of this will be the ability to predict your hiring and training needs.  

It’s hard looking for a professional that can do financial planning while also being a financial therapist.  But if all of a sudden you just get a lot more investment-only clients, you will know you don’t need to hire after all.

The more you can package, quantify and “upsell” your services, the more you can scale your practice.  

Not only will this give you back more of your team’s time--reducing how many new people you need to hire--but it will also allow you to get more clients and service them with the staff you have. 


Amy Parvaneh is principal of Select Advisors Institute in Newport Beach, Calif. 



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