Archive for April, 2010

How to Get Financial Reform on the Right Track

Wednesday, April 28th, 2010

I actually should have entitled this “How Not to Get Financial Reform Right,” but that didn’t sound as good! Most people agree that some reform of the financial services industry is necessary. The extent and details are of course quite controversial. But the only way that any legislation is going to be seen as legitimate is if it is bi-partisan and if it is done carefully – rushing a bill through as is currently being attempted is not in our best interest.

On one side you have the argument made by Christopher Dodd that we are 18 months into this crisis and no significant legislation has passed to prevent another crisis. Good point. On the other, however, the argument is that there is no rush or imminent threat, and that getting it right is the most important thing. The best articulation of this argument I heard was on NPR – it took three to four years following the Great Depression to get significant financial reform legislation reform passed. But those laws, passed in 1933 an 1934, are still in effect today and have proved to be very effective.

Now, I am not arguing that we should wait three or four years, but politics and elections aside, does it have to be done this week? Does the bill have to be 1,300 or so pages? And should the fact that many non-financial companies oppose some of the legislation make everyone think twice before rushing to judgment? For example, as I understand it, curbs on the derivatives markets in the current Senate bill would prevent some chocolate producers from hedging sugar prices, which would in all likelihood raise the price of your favorite candy. I know many people that would be pretty upset about this!

This is only one of many examples of unintended consequences. (I read yesterday that there are upwards of 100 examples of these types of unintended side effects from the bill.) Both sides of the political spectrum in the Senate seem to be negotiating in good faith at this time. Lets let them continue to do so until compromise is reached, or one side stops negotiating in good faith. This bill should not be rushed and it should not be politicized.

I am not being naive – I know that it is being rushed and politicized. It does, however, make me feel better to get it off my chest! Because so many people are frustrated today the attitude of something – some change – is better than nothing – or no change. I strongly disagree with this philosophy and think it creates many unintended longer-term problems.

Differentiating Your Business in the Age of Goldman

Monday, April 26th, 2010

We’ve talked in previous posts about differentiating yourself and protecting your reputation by defining a unique brand (The Importance of YOUR Brand). In addition, in light of all of the publicity today surrounding Goldman Sachs and financial services reform, all of us in the industry must adopt the mantra of “Transparency, Transparency, Transparency.”

When it comes to issues of trust, I firmly believe that if a client or prospect has to ask questions about what you have done to place their interests above your own, or how you are providing complete transparency, then it is too late. The only way to counteract the negative sentiment surrounding “Wall Street” is to proactively raise the trust issue with clients and prospects, to have an opinion and to be consistent in your behaviour.

Take the time to reread our White Paper Transparency = Client Confidence = Client Retention and formulate your own response to today’s events. Then take that message directly to your clients and incorporate it into the beginning of any presentations you make to prospects.

Keep in mind that people like to do business with people who are like them and who share their values. First, your brand should clearly differentiate you from the competition and highlight your unique value-added proposition; this will attract like-minded people to your practice. Once you have shown that you are someone that can be trusted, reinforce this trust by clearly articulating your views on the state of the industry and the steps that you have taken to safeguard your clients. Finally, commitment yourself to open and ongoing communications.

You can’t stop others from acting irresponsibly; but you can protect your clients, your business and your reputation.

Does Rebound Change Marketing Strategy?

Wednesday, April 21st, 2010

Published in Ignites – An Information Service of Money-Media, a Financial Times Company

Written by Andy Klausner, CIMA, CIS, the founder of AK Advisory Partners LLC., a strategic consultancy serving the wealth management industry.

It’s safe to say that most investment managers are certainly feeling better than they were a year ago, as are clients. However, it would be a mistake for firms to emphasize short-term performance over other longer-term changes that they have made in reaction to the financial crisis. I say this for a number of reasons:

• While markets have rebounded, most investors are still down close to 20% from the bull market peak. Happiness is a relative term. Therefore, it’s easy to understand why investors won’t be thrilled with performance that’s still a shadow of fourth quarter 2007 highs.

• Investors are focused on whom they do business with. That means they are interested to know in more detail why a manager performed the way it did and if such performance is repeatable. Investors have also educated themselves as a result of the financial crisis. They will be asking questions that go above and beyond performance. Managers that revise their marketing strategy to focus on the recent positive returns can come off as out-of-touch within this context. But a successful manager will proactively anticipate these questions rather than sit back and see if the client asks them.

• With all of the negative news about the industry over the past year — and certainly in light of the Goldman Sachs news — investors are focused more on issues such as transparency and disclosure. If managers are reevaluating their marketing strategy today, I would encourage them to keep those two latter themes in mind.

• Consider how the growth of social media has impacted the market over past several years. Investors are looking for partners who will address their particular concerns and ask the right questions  — a true partnership. Managers should be pushing out information to clients rather than trying to pull clients in, as was common in the past. This information must be about more than just performance. It has to add value to the client’s business.

Now, I am not saying that performance is not important. Certainly managers have to demonstrate how they have done in relation to their peers and benchmarks. But in today’s world, while this performance is the requisite to remain competitive, it’s not the overriding factor that investors are focused on. After all, there are literally hundreds of good managers out there today to choose from.

What differentiates one manager from another is the ability to add value above and beyond performance, and then to be able to clearly articulate that value to clients and prospects. They also must demonstrate that their organization is solid and has adapted successfully to the events of the past 18 months, and that they are interested in being a true partner with their clients. These are goals to which marketing efforts should be geared.

Top Ten Thoughts on the Goldman Sachs Mess

Monday, April 19th, 2010

I use the word “Mess” intentionally because there is so much noise surrounding the SEC’s actions – the timing of the charges, whether other firms will be charged, etc. In fact, I would venture to guess that few people know what the actual charges are! They just know that another large Wall Street firm is in the news – and not for a good reason.

So here are my thoughts on the matter:

10 – This is not an isolated incident – more dealers such as Goldman Sachs will be charged in the weeks and months to come; I wouldn’t be surprised if Goldman is charged in other cases as well.

9 – The greatest risk to Goldman Sachs is its reputational risk – not whatever fines they have to pay or other actions are filed (by New York Sate for example).

8 – Without passing judgment on Goldman Sachs’ culpability, the firm will survive this, and while they may lose some clients shorter-term, it will not significantly impact their long-term business. But their reputation and standing as an industry icon is diminished, regardless of the eventual outcome.

7 – The timing of these charges is suspect at best – coming in the middle of the financial reform debate and on the same day that the SEC is faulted for its handling of the Stanford Scandal and other cases. The SEC is attempting to revive its reputation and, as mentioned above, this is just the first of many announcements to come.

6 – While few oppose the idea of financial reform, I fear that the public outcry and political posturing will turn the debate and eventual regulation into more than it should be. Adding further bureacracy – as seems likely – is not the answer.

5 – It is not about the level of sophistication of the client – it is about the fiduciary responsibility for full disclosure. In fact, the mantra of our industry must be “Disclosure, Disclosure, Disclosure.”

4 – This and similar cases will demonstrate how little upper management at many firms really understand some of the most sophisticated derivatives products that they are selling – and that in and of itself is pretty scary!

3 – The actions of a few (individuals and firms) will continue to tarnish the reputation of the industry and the “us v. them” argument will continue in the headlines through this and perhaps the next election cycle.

2 – Proactive client service is more important than ever – need I say more?

1 – Did I mention the importance of disclosure?

More Black Eyes For Our Industry

Tuesday, April 13th, 2010

The financial services industry continues to get battered with bad publicity – last week saw the accelerated SEC/FINRA probes of bond funds at Morgan Keegan; today was news about Washington Mutual and their loan profile and a new name to most of us – Hudson Castle – an affiliate used by Lehman Brothers to shift investments off of its books.

The bad press also continues from Washington, where as financial reform is discussed, debated, and televised, the poor judgement and illegal actions of a few reflect poorly on the entire industry.  It is of course not nearly as news-worthy to focus on the vast majority of firms and individuals that don’t break the law. I am not sure about you, but the “Main Street” v “Wall Street” rhetoric has gotten really old!

My purpose here is not defend or judge these actions – but more so, since the tide of public opinion continues to flow against the industry, to suggest briefly how industry participants respond. The majority of industry participants do not engage in illegal activities and truly act in their clients best interest.

In this case the best defensive is offensive. If a client brings up these scandals to you – then it is probably too late. I recommend that you proactively contact clients to discuss the state of the industry and remind them of your standards and values – and remind them why they do business with you.

Clients will appreciate you taking the upfront approach, and being proactive will make you less susceptible to losing clients that for whatever reason begin to question you.

Top Ten Ways to Cross-Market to Grow Assets

Thursday, April 8th, 2010

What are the best ways to deepen the client relationships that you currently have? How can you broaden your relationship with current clients – who should be your best referral sources?

10 – Give away what you used to sell

9 – Become part of your client’s community

8 – Have a consistent and identifiable brand

7 – Make sure that clients understand your value proposition

6 – Communicate, Communicate, Communicate

5 – Survey your clients

4 – Don’t try to be all things to all people

3 – Don’t over-commit

2 –  Listen – don’t talk!

1 – Push don’t pull

The Importance of YOUR Brand

Tuesday, April 6th, 2010

We just released our new White Paper entitled “The Importance of YOUR Brand.” To quote from that paper:

Your brand is much more than a logo or the color of your marketing materials. Your brand is what you are to the marketplace and more importantly to your clients – it is your reputation and the value that you bring to clients and the reason that they do business with you. Viewed in this context, the importance of having an effective brand can’t be overemphasized.
A brand differentiates you from the competition and allows you to present your core value proposition. In fact, your brand and your reputation are interchangeable. You should invest in it and leverage it to grow your business.

Please click here to view the full PDF version.

We would love to hear your feedback.

Trends Affecting Financial Services Professionals

Monday, April 5th, 2010
While the outlook for the general economy is still somewhat uncertain, the performance of the stock market over the past year certainly has investors feeling more confident. 
Almost a year into the stock market’s recovery, several interesting trends have emerged which directly affect financial services professionals:
* Clients now have a year’s worth of data to evaluate their advisors on how they reacted to the financial crisis and if what they are doing for them is working;
* Movement among advisors continues – both those moving within the same channel (wirehouse to wirehouse) and among channels (wire to regional, wire to independent, etc.); and
* Investment management and advisory firms that have lost significant assets have had a year to see if they have been able to successfully adapt operationally and strategically.
The remainder of 2010 will be characterized by CHANGE – unhappy clients seeking new advisors, unhappy advisors seeking new homes and mergers among firms that recognize that they can’t go it alone any longer.
The common denominator among these trends is that to be successful, market participants must clearly articulate their differentiating characteristics – their brand.
Clients thinking of changing advisors need a compelling reason to do so. Merged firms need to articulate the benefits of their new organization. And advisors that have switched firms need to convince clients to move with them. Your brand will influence if you emerge from this environment of change as one of the winners or not.