Archive for July, 2010

Social Media and the Financial Services Industry

Thursday, July 29th, 2010

Needless to say, I am a believer in the important role that social media has in helping to build a financial services business; it has helped me in my practice tremendously. I reviewed the best book that I have read on the topic – The Digital Handshake by Paul Chaney – in this blog on March 13th. I still think you should read the book for a great overview of the many social media outlets that are available and how they might be relevant to your particular business.

For those that are ready to jump in though, I wanted to introduce an exciting new online resource called Jarupa. Jarupa offers online courses in learning WordPress, Email Marketing, Social Media, Search Engine Optimization and much more. Click here to learn more about Jarupa. Now – for purposes of full disclosure – Jarupa is the brainchild of Angela Nielsen, a strategic partner with AK in Zenith Creative Group.

Take a look for yourself – investing a few hours of your time in an on-line class is the quickest way to make social media work for you!

RIAs and Social Media – The “Truth” According To Some

Monday, July 26th, 2010

To use social media or not to use social media – that has become one of today’s most commonly asked questions among RIAs. I fall into the affirmative camp  – social media can be a great tool to accomplish any number of goals – growing your business, staying in contact with clients, etc.

A new study by Pershing-Aite yielded some interesting results on this topic. While the results of the study are interesting, I need to caution readers that the survey included only 144 financial advisors. Of those 144, 1/3 were from firms with greater than $1billion under management, 37% were from firms with less than $100 million and the remainder were in the middle. 55% of the respondents were hybrid advisors; 45% were fee-only advisors. A nice – but small mix of advisors. Some of the key takeaways from the article are:

1- Advisors using social media had growth rates of revenues, AUM and clients averaging 19% over the three categories, while those that don’t averaged only 6% growth in the three categories.

2- The fastest growers were big marketers in general, thus social media was only one component of their overall marketing plan; the above results may therefore be overstated (a victory for active marketing overall if not social media in particular!).

3- The biggest practices (as measured by assets) were not the biggest users of social media.

4- 43% of the respondents used social media (LinkedIn, Facebook, Twitter, blogs, etc.) professionally (67% personally).

5- LinkedIn was the most popular means of social media used, following by Facebook, Twitter and then blogs. (I am a bit surprised that blogs did not score higher, although they do require a larger time commitment).

6- One in five surveyed said that they increased revenues and fees because of their use of social media. Most (42%) said they used social media primarily as a way to reach new prospects, followed by increasing awareness of their practice, differentiation themselves and then increasing revenues.

7- The primary reason cited for not using social media was compliance, followed by regulatory concerns and negative publicity.

Overall, these results are interesting and not surprising. The jury remains out for many Advisors as to the benefit of using social media. The positive of this reluctance by some is that it makes those advisors that do use social media stick out that much more!

Strong Websites Drive Sales for Investment Managers

Wednesday, July 21st, 2010

Today’s article in Ignites – Strong Websites Drive Sales: Study – highlights a recent survey of 536 financial advisors by kasina; these advisors spanned all channels. The results indicate that the quality of an investment manager’s website affects product decisions by advisors – particularly among higher-end advisors. If I were an investment manager, I would take these results to heart.

The survey, entitled “What Advisors Do Online 2010” had a number of interesting conclusions:

1- Advisors in the top 10% of assets spent the most time online each week; in particular, the majority of these advisors visited the sites for news and commentary.

2- For all advisors, the main information sought was pricing, performance and product-specific information, followed by news and commentary.

3- 68% of respondents said that they shared this information with clients (investors).

4- 77.5% of these advisors use social media in some way in their businesses.

So lesson number one from this article for investment managers is that advisors do find value in their websites. But the article goes further to point out that it is important that all of the components of a manager’s marketing efforts work together to be most effective. For example, wholesalers should encourage advisors to look at the website for information rather than view the website as internal competition that might make the advisor more reluctant to spend time with him or her.

Finally, the article mentions the important of the design and ease of use of the website – because reality says that if an advisor goes to a manager’s website and it is hard to navigate or it takes a long time to get the information that they want, they will 1) go to a competitors website; and 2) they will never come back! One good rule of thumb that is pointed out is the two click rule – it should never take more than two clicks to get information of interest.

To summarize, this article has some interesting implications for investment managers. Advisors are willing to use websites for information, integrating marketing efforts are effective and not to be overlooked is the functionality of the website – ease of use is key!

Wirehouses Lure Back Some Indie Brokers

Monday, July 19th, 2010

Wirehouses Lure Back Some Indie Brokers is the title of an interesting piece in today’s FundFire. The article highlights the story of a few advisors that have gone back to wirehouses after testing the waters as an independent – in some cases for many years. The reasons given for the moves back to wirehouses range from having to spend too much time running the business – thus reducing client-facing time – to the attractive and often times new banking offerings of some of the wirehouses (given mergers over the past few years).

Do these examples signal a reverse of the trend that we have seen over the past few years? I don’t believe so. I think that this article illustrates what we have been saying for some time – going independent is not for everyone. The reasons cited for returning to wirehouses are the very reasons that some wirehouse advisors will – or should – never go independent in the first place.

Independents run their own businesses. They go very quickly from advisors with a book of clients to business owners with drastically increased responsibilities. For some advisors, the move is a good one; for others, it’s not. This article could have just as easily focused on a few examples of independents that decided to join wirehouses and then regretted the decision.

The important lesson here for all advisors is that making any move is important enough that it should not be done without extensive research and introspection. There is no right or wrong answer – some people thrive at wirehouses while others thrive as independents. But it’s very difficult to ask clients to move more than once – so my advice is to take your time making the decision – over-analyze if necessary – because making two moves is more than twice as hard as making one move.

Advisors and the Fiduciary Standard (and Other Things on Their Minds)

Monday, July 12th, 2010

A survey of financial advisors in Today’ FundFire, entitled Falling Comp, Poor, Management Rattle Advisors, yielded some interesting results. The headline and initial focus of the article is concern over reduced compensation and the feeling by advisors that their companies were being poorly managed. Given that the majority of the respondents were from wirehouses, neither concern is surprising.

It’s also not surprising that wirehouse advisors felt that management was too concerned with the bottom line at the expense of investing in the future growth of the business. I have blogged previously my thoughts on how cuts in sales assistants, for example, were short-sighted.

But what I found to be the most interesting part of the survey was near the bottom of the article. Only 10% of the respondents, when asked what the greatest challenge facing the industry was, answered the fiduciary standard and other regulatory reform. This is both surprising and not surprising.

This low percentage is surprising given the large amount of attention regulatory reform has been getting in the press. Perhaps many of the respondents were 1) focusing on the fact that the currently proposed regulation is not too negative for broker/dealers overall; and 2) that the fiduciary standard is not currently part of the regulation unless a six month study by the SEC results in some further action (perhaps this also reflects the fact that not many people have confidence that the SEC will actually do anything!).

Why the results were not surprising to me is that many Advisors at wirehouses feel that even though they are not currently held to the fiduciary standard, they themselves do act like fiduciaries, and therefore even if the standard becomes law, it will not significantly affect them or their personal business. My guess is that they also feel that the broker/dealers themselves will have to make the majority of the adjustments. This view is naive, however, because if the standard were mandated, it would affect the products most advisors would be able to sell (as revenue-sharing would disappear), and it would greatly affect how broker/dealers are run in general. There would most definitely be a trickle down effect onto individual advisors.

Perhaps management of the wirehouses should spend some time over the next six months (assuming the legislation is passed) educating their advisors on the issue so that they can become advocates for their companies and their position on the issue. The odds still favor no fiduciary standard for broker/dealers in the foreseeable future; but why take the chance?

Creating a Compelling Client Experience

Thursday, July 8th, 2010

I’ve just finished a new White Paper entitled Creating a Compelling Client Experience, which was part of our third quarter Unlocking Real Value eNewsletter.

Given what has gone on in the markets over the past few months, many people are saying to themselves “Oh No, Not Again!” Personally, I think the odds of a double-dip recession have increased, as it has become evident that the economy is still struggling.

Yesterday’s market rally not withstanding, I think we are in for some rough times in the short-term. Let me emphasize short-term. As I have been saying for the past two years, the answer to the “Oh No…” is “This Too Shall Pass.”

Regardless of what happens this quarter, or next quarter, we are all in business for the long-term. And the challenge is to continually distinguish ourselves in our businesses. That’s the goal of the White Paper – it presents ideas for creating a client experience that will distinguish you from the competition – in any market environment.

Enjoy the paper and please let me know what you think.

What Have You Done For Me Lately?

Tuesday, July 6th, 2010

What Have You Done For Me Lately? Articulating your value as a financial advisor is more complex after two years of market turmoil. And more necessary. By Marie Swift – Printed July 1, 2010 in Financial Planning Magazine.

Almost two years have passed since the financial markets cratered in 2008. You may have been shaken, but if you’re reading this, you survived. Your clients regained at least part of their losses. They may have learned a few tough lessons about risk, trust and patience. And they appreciate you for holding their hands through the worst. They’ll be your clients forever. Or will they?

Do your clients understand the true value of what you do? It’s an important question, especially now that volatility appears to have returned to the markets. Are you sure your clients aren’t wondering why they’re paying you a percentage of their assets-and losing money? Again? Is losing less than the S&P a sufficient measure of your worth?

The clients are restless. Client service and retention are still Job One. Your best defense may be to make sure that you’re articulating the value of the various services you perform.

“No doubt about it, 2010 will be characterized by the word change-clients seeking new advisors, advisors seeking new homes and mergers among firms that recognize that they can’t go it alone any longer,” says Andrew Klausner, founder and principal of AK Advisory Partners, a brand creation and marketing firm in Boston. “The common denominator among these trends, and the need we see, is that to be successful, advisors must clearly articulate their differentiating characteristics-their brand. Merged firms need to articulate the benefits of their new organization, and advisors who have switched firms need to convince clients to move with them.”


“There are lots of underserved clients,” says Chip Roame, founder and managing partner of Tiburon Strategic Advisors in Tiburon, Calif. “And while they may have been unhappy for a while, they were probably unwilling to move until now, because they were too scared. In addition, clients are aging, so we are going to see some account consolidation.”

Tiburon’s research shows that traditional full-service brokerage firms and banks are losing market share to independent advisors and, gulp, discount brokers. But contrary to popular assertions, he says, clients are not leaving wirehouses and banks en masse and running to independents.

One reason: It is easier and more tempting than ever for clients to go it alone. There is a wealth of information online via discount brokers (such as Vanguard, E*Trade and Schwab) and specialty online services (such as Financial Engines, Smart 401(k), Balanced Zone Investing and Folio Investing).

“Now that people have recovered from 18 months of seemingly endless bad news, they may be looking at you and the value you provide,” Roame says. “Clients now have a year’s worth of data to evaluate their advisors on how they reacted to the financial crisis and whether what they are doing for them is working. 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 crisis was one of those near-death experiences,” says Bob Veres, publisher of Inside Information. “The best advisors have been quick to communicate to their clients things like, ‘I’m going to be here worrying for you,’ and ‘I’ll see you through.’ They have built closer personal relationships,” Veres says.

The most important service the client needs? According to Veres, it’s hand-holding: “Someone who’s adaptable enough to help with personal life planning issues and put together a well-organized portfolio, who’s a good communicator, who can help them understand what insurance to buy. Someone with deep knowledge who can quarterback the entire process.” But clients have to recognize this multifaceted expertise-which means you have to make it part of everything you do.

Sue Stevens, founder of Stevens Wealth Management in Deerfield, Ill., and author of Put Your Money Where Your Heart Is, agrees with Veres. “At the end of the day, clients are looking for peace of mind,” she says. “It’s especially true when there’s a lot of volatility and uncertainty. Anything we can do as advisors to keep things calm is valued.”

She continues, “So we are very clear in laying out expectations. We’ve boiled our investment policy statements down to two pages; they are plain English and simple to understand. We update them every year and talk about them so that people know what to expect. Then if the market is volatile, we can say, ‘Look, we’re still within the parameters you were comfortable with,’ and generally that helps.”

Stevens also puts a lot of emphasis on deep diversification. She builds portfolios with 18 different asset classes; each one has a purpose in the portfolio. She goes through that individually, with each client, in the annual review. She also writes a monthly newsletter called Radiant Wealth.

“Stepped-up communications help clients understand what they are getting-the goal being peace of mind,” Stevens says. The firm recently upgraded its website, adding a client vault-something that’s become more important for today’s mobile clients. “It’s part of our value proposition when we talk to prospective clients,” says Stevens, who also rolled out two new tools last year: The Financial Bridge Binder, which helps clients organize their important information and documents, and a Personal Score Card, a life goal report card of sorts.

“It’s amazing how a simple tool can reassure people,” Stevens observes. “We try to make everything as visual as possible because a lot of people respond to that. They like colorful communications, they like simplicity and there’s a lot of giggling when I tell them this is their report card. So I think it adds a little bit of lightness to everything.”


Client retention may boil down to building trust, but the worst way to get anyone’s trust is to demand it directly. “The more you tell people, ‘Trust me,’ the more they won’t,” says Mark Tibergien, CEO of Pershing Advisor Solutions in Jersey City, N.J.

Even if you’re completely honest, don’t expect that to come across as obvious. You have to show, not tell, that you’re aboveboard, Tibergien continues. “Demonstrate the control processes, showing that you provide protection for your clients. Are you using an independent custodian? Are you affiliated with a well-known broker-dealer? Explain to your client whose interests are being served and how you’re compensated.”

Beyond your honesty, Tibergien adds, is the issue of your competence. You need to get across your expertise, not only the training that helped you become a financial advisor but also what you do for continuing education.

“My recommendation is a Rights and Responsibilities Manifesto,” Tibergien says. “This is a document you hand to clients, which explains both the expectations they should have about your performance and the responsibilities they have to meet.”

Stevens demonstrated her commitment to a transparent practice by writing a piece to her clients that described the rigors involved in completing the firm’s annual compliance review. “I talked about how the process helps us be better advisors. I also mentioned that the SEC will be checking independently with the custodian and possibly with our clients to make sure that the balances all tie up. It’s unnerving for the client to get a call from the SEC. The right thing to do is tell the client, ‘The SEC has a new rule, and you may hear from them. That doesn’t mean anything’s wrong, it just means they are trying to be more diligent.’ I try to communicate any time I can set expectations.”


Of course, trust is not only about how you communicate-although that’s certainly important. Scandal has tarnished so many distinguished Wall Street names that branding has become problematical; why not go with advice from some blog or a financial news show, since you aren’t going to get a fair shake from the big guys anyway?

It’s actually a fair question, and one an advisor should be prepared to answer. Financial advisors can provide what websites, news shows and Suze Orman can’t: customized wisdom. According to Blaine Aikin, CEO of fiduciary training center fi360, “Professional advice, the kind people value enough to pay for, cannot be commoditized. Advice is personal. It requires a relationship of implicit trust.” For him, problems begin when advice becomes intermingled with product sales, muddying the waters of what exactly advisors are offering.

Today advisors have to work harder than ever to show they are competent professionals and not just salespeople. “Competence is best demonstrated by professional designations and newsworthy accomplishments in the field, such as published works, public speaking experience and professional awards,” Aiken says. “Good judgment is evidenced by a compelling depiction of the processes the advisor uses to develop sound recommendations and by impeccable references to attest to the efficacy of these processes.”


With all the changes in the way the public is approaching financial advice, smart advisors have not been standing still. They’ve been working to grow and change with the new environment. “They are not so much reinventing themselves as continually improving,” Tibergien says. “These intellectually curious advisors ask themselves, ‘How can I better serve my clients?'” They display high integrity mixed with humility.

They also have a sense of history. Many of them have been in this business for years and have seen many changes. Individual advisors are holding one another to higher standards. “Anyone who has been around this business has seen the quality of the craft improve,” Tibergien says.

This may be in line with what Aikin sees-an evolution of fiduciary status, often embraced by high-end RIAs. He sees two kinds of fiduciary advisors today: the true, or what he calls “avowed,” fiduciary and the “functional fiduciary”-the advisor who provides ancillary advice without formally accepting fiduciary status. This kind of advisor is generally associated with a broker-dealer or insurance company. He or she is technically operating under the fair dealing or suitability standard. In these situations, by statute, advice provided is incidental to the advisor’s product sales role.

It is with this kind of advisor-the functional fiduciary-that Aikin sees radical change, as regulators, professional associations and the investing public push all advisors to become more accountable. In addition to regulatory change, there has to be cultural change as companies make the shift from a sales culture to an investor culture that makes clients’ interests paramount.

Aikin is optimistic about the advisors, if not the companies themselves. “The functional fiduciaries in the field are tired of being depicted as greedy salespeople,” he says. Indeed, Aikin sees a significant migration of top representatives to the RIA world. “They see that the future of advice is fiduciary, and they don’t want to be the last to adapt.”

If Aikin sees the moves as a big external change, George Kinder, founder of The Kinder Institute of Life Planning in Littleton, Mass., sees them as result of internal changes too. He’s seen advisors think about how they can deepen their relationships, improve their skills and deliver what clients want. “These past years have led to a lot of soul searching,” Kinder says.

All of these thoughts, of course, lead back to a discussion of value. What are clients getting from their advisors? What do advisors expect their clients to get? And is it more a matter of reality or perception?

Tibergien says the answer comes from listening. “You have to define value in terms of outcome you agree upon at the start of the engagement,” he says. “Let’s say you have a client who comes to you worried about being able to afford to retire or pay a child’s college tuition. You can characterize your value in terms of filling those objectives. But if they say, ‘I’m concerned about independence’ and you’re just talking about financial return, you’re missing the message.”

Aikin believes investors have taken a major turn in how they approach money management. “The financial crisis opened investors’ eyes to the fact that prognosticators of performance are of questionable value in long-term investing and serious financial planning. Most people will recognize value when they see it.”

So what’s an advisor to do? Not run away from the uncertainty, but embrace it: Aikin believes advisors can offer a message that will resonate with investors if they say, “I can’t predict what the economy and markets are going to do, but I can give you certainty about the sound approach we are going to take in working together to meet your financial objectives.”


All of this-a sense of value, the issues of trust and the historical understanding of investor attitudes-leads to your first meeting with a prospect. You never get a second chance to make a first impression. So what can you ask your prospect in order to start on the right foot in today’s environment?

“Broad, open-ended questions show that you really care,” says Kinder, who suggests these two key queries: Is there any thing urgent you need to talk about? If we were to work together over a period of time, what would you like to have happen? Kinder also stresses that how you deliver these questions is important. “Don’t leap in with spreadsheets. Pause after each question and leave several moments for them to say something else. Ask if they’re sure they’re done.” Follow verbal cues. For example, if they then answer, “No, not really,” that means a lot more is coming.

Steve Saenz, managing partner of Advisor Solutions Network in Atlanta, says the purpose of opening questions is to try to understand prospects’ relationship with money. What does money mean: A yardstick of how they’re doing in life? Flexibility and freedom? Creating a legacy? “You have to get to that understanding,” Saenz says.”


So how do you get clear on your value? Peter Boland, senior director of marketing at BlackRock iShares explains it this way: “You may think your appeal is your investment philosophy or service offering, but it’s probably a human quality you don’t realize you have.”

To find the key to your differentiation, Boland suggests talking to your loyal clients a couple of times a week for a few weeks. “In time, you’ll start to pick up on their language, rather than your own-and that’s where you’ll find the keys,” he says.

Now look inward, Boland continues. “Ask yourself: ‘Why am I doing this? Why do I like it?’ The journey in your mind and your client’s is, ‘What do I stand for?’ What part of that resonates with clients? Then meld those together.”

Stevens says the biggest value advisors bring stems from their critical thinking. “The ability to keep a clear head and to think things through, that’s why a client hires us-because we can think critically in completely new situations.”

 Marie Swift is founder and president of Impact Communications in Leawood, Kan.