Archive for July, 2012

AK In The News: Are Small Portfolio Accounts Worth Pursuing?

Thursday, July 19th, 2012

I was asked to write an opinion piece for Fundfire (A Financial Times Service) on the question of whether it makes sense for advisors to seek smaller accounts as a business-building strategy. This comes in the wake of LPL Financial’s decision to lower the minimums in its model wealth portfolios to $25,000.

While one of the great things about being an advisor is that you can build your business any way that you want, and I have usually shied away from a small account strategy, I have come around to believe that you can be successful with such a strategy – if you build your business the right way.

There are two general principles that advisors should keep in mind when developing an asset-gathering strategy:

  • Always act in clients’ best interests; and
  • Focus on building a profitable and sustainable business.

If advisors consider both factors, they should be able to determine which clientele is best for them.

Now, having said this, and firmly believing that each advisor ultimately needs to set his or her own direction, and understanding and accepting that advisors can make a good living servicing a large number of small accounts, my bias still rests with a larger minimum built around a top-notch service organization that emphasizes a differentiating value proposition.

This leads to long-term, stable and profitable client relationships and a healthy, thriving business.

Contact me if you want me to send you the entire opinion piece.

AK In The News: Brokers Have Affiliated-Fund Bias

Monday, July 16th, 2012

I was asked to comment last week on a poll in Ignites (A Financial Times Service) on how common in-house bias is in the industry. The question came in the wake of allegations by former JP Morgan advisors that they were pressured to use proprietary funds in the face of better performing and less expensive alternatives.

(I blogged about this a few weeks ago – The Danger of Selling Proprietary Products – posted on July 5th)

While the poll results indicated that most respondents said that bias is very common, which I agree with, what was surprising to me was that the poll also seemed to indicate that advisors/brokers tend to favor these funds. I strongly disagree with this assessment.

To quote from the article, and in keeping with my previous post:

“Andy Klausner, founder or strategic consultancy AK Advisory Partners, says the Ignites poll results are surprising given the wealth management industry’s emphasis on selecting best-of-breed money managers, as opposed to the firm’s proprietary products . “I don’t think it is true” that brokers favor in-house products, he says, “I think the reality is that most advisors don’t want any perception of conflict of interest.

However, it would be naive to think that there is no pressure put on advisors. Recently it was JP Morgan, and last year there were questions about Merrill Lynch selling Bank of America banking products.” Klausner says. “But if advisors feel pressure, they should stand up for themselves. Advisors should always be proactively showing clients how they come up with the recommendations that they make.””

What do you think?

It’s All About Your Clients

Friday, July 13th, 2012

This is the title of our third quarter Unlocking Real Value newsletter. Given today’s economic, financial and political uncertainty, there isn’t a better time to focus on your client relationships and reinforce in their minds why they hired you in the first place. Let them hear from you, lest they focus on the negative press about JP Morgan, which has indirectly tarnished all of us who work in the industry.

Our newsletter focuses on two of our White Papers that can help you in this endeavor:

Click here to download the newsletter, or click on either of the links above to download a White Paper.

Take advantage of the usual summer lull to fine-tune your menu of offerings and your client servicing strategy. Make sure that you’re giving your clients what they want – or someone else will.

The Danger Of Selling Proprietary Products

Thursday, July 5th, 2012

When it rains it usually pours, but the last thing that JP Morgan needed was more bad press this past week, not only in industry publications but the New York Times as well. A number of former financial advisors claim that they were encouraged to favor JP Morgan’s own products even when there were better-performing and/or cheaper options available.

The issue of selling proprietary v. non-proprietary products goes deeper than JP Morgan however, and had been around for years. As an example, last year’s internal disagreement that became public at Bank of America/Merrill Lynch over whether or not pressure was, and should be, put on advisors to sell bank products to clients.

This latest focus on JP Morgan is bad timing for financial advisors – coming at a time of continuing anti-Wall Street sentiment and an investing environment where returns are hard to get. In football, they call it piling on!

(I’m going to focus here on how advisors should react to this ongoing stream of bad press. I’m not going to pass judgement on JP Morgan and others for their actions. Undoubtedly, pressure exists within certain financial institutions to sell proprietary products; one would have to be naive to assume otherwise. But the burden falls on advisors as well to resist this pressure; there is enough blame on all sides to go around.)

So what should advisors do? As with any potentially negative issue, they need to get in front of this one and proactively demonstrate to their clients that they always act in their best interest.

For advisors that have sold proprietary products, I suggest that you devise a plan to show clients how the investments that you have recommended to them made sense for, and fit into, their portfolios. Talk to them before they start asking questions. Take responsibility for your actions and don’t blame the company or anyone else for putting pressure on you – that’s a sure way to lose credibility.

If you haven’t sold proprietary products, discuss this issue with clients as well, because if you don’t, they will wonder about your motives (sad but true in the world we live in). Whether individually or through your social media outlets, reiterate how you work with clients and how your process is unbiased and your product choices holistic rather than profit-driven.

You have to and should defend your choices – why not turn it into a positive?