Archive for January, 2014

Our Newest White Paper: Refresh And Extend Your Brand

Tuesday, January 28th, 2014

It’s a new year, and while many of you are probably like me and no longer make New Year’s resolutions (which we wouldn’t have kept anyway), the kick-off to a new year is a great time to think about how to refresh and extend your brand. Sure, we all talk about doing our planning at the end of the year, but in reality, the period between Thanksgiving and January 1st usually turns out to be pretty unproductive.

Come January, however, everyone seems to be more focused. So it’s not too late to make some changes to your business that will not only help you grow in the long run, but also still have an impact this year.

What Is Your Brand? Before we talk about refreshing you brand, it’s important to understand what your brand is – because it’s 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’s your reputation and the value that you bring to clients and the reason that they do business with you

An effective brand will:

  • Associate you with a value-added service;
  • Distinguish you from other market participants; and
  • Be viewed as being meaningful and beneficial.

Click here to download the entire White Paper.

AK In The News: The War Between B/Ds And RIAs Is A False Rivalry

Wednesday, January 22nd, 2014

(The following opinion piece written by me appeared last week in Financial Advisor IQ (A Financial Times Service):

One of the most discussed issues in the financial-services industry over the past few years has been the competition for advisors between traditional broker-dealers (wirehouses and regionals) and independents or RIAs. Everyone is speculating over which type of sponsor firm will be the ultimate winner.

Last year reaffirmed the position I have held for a long time — namely, that it’s a false rivalry. Each group is now well positioned to succeed. Sure, the market share of each type will fluctuate, and some observers will see any gains as one business model’s victory over another. But we have come a long way since the midst of the financial crisis, when many traditional B/Ds changed ownership and the very existence of some was in question.

Over the past few years, traditional B/Ds have made a pretty miraculous comeback, while independents and RIAs have simultaneously seen impressive growth. The bad press aimed at the wirehouses has largely dissipated, as has a lot of the investor anger targeted at them. According to InvestmentNews’s 2013 year-end ranking of firms that were the biggest beneficiaries of advisor moves during the year (as measured by net new AUM), the top five firms were Wells Fargo Advisors  (adding $7.6 billion in assets) , UBS ($5 billion) Raymond James ($3.1 billion), Baird ($2.3 billion) and LPL Financial  ($2.3 billion). Quite a diverse group, don’t you think?

So rather than ask whether one business model will dominate, I think the more important question is: How does each firm position itself to be as successful as possible? The real winners will be those that make their advisors the most productive, not necessarily those that become biggest.

Let’s first talk about the traditional B/Ds. Advisors in these organizations typically rely 100% on their firms to provide office essentials, investment products, training, due diligence, reporting, etc. In general, these firms are also very restrictive in what advisors can do that might be considered “outside the box.” Individual websites and marketing materials are discouraged, for example, with guidelines so limiting that many advisors decide not to bother.

While some advisors find that atmosphere too restrictive, others like the comfort of showing up at an office where all the infrastructure is in place. It’s a good environment for those who want to serve clients more than they want to run a business.

As to the difference between the wirehouses and the regionals, I think it’s fair to say that advisors at the regional firms often have a greater ability to influence strategy — for example, via product offerings. Upper management and product heads tend to be closer to advisors at the regionals, especially the larger producers. Compared with a wirehouse FA, an advisor at a regional can be a bigger fish in a smaller pond.

Advisors who want to participate actively in running and building a business are generally more likely to join an independent B/D or an RIA. They certainly have more freedom, but they have to worry about things like office space and health insurance. Most advisors in this world tend to be a little more entrepreneurial.

Within these broad generalizations, the firms that will be successful are those that offer the services their advisors need to grow AUM. For independents, that means providing the best support team to help advisors organize their businesses when they first join. For traditional B/Ds, it means offering new and innovative product choices and trying to keep compliance as business-friendly as possible. These are the firms that will wind up with the most satisfied and productive teams, regardless of their business model.


The Keys To Client Retention

Wednesday, January 15th, 2014

Retaining clients is one of the most important components of a successful advisory practice. After all, there are costs associated with obtaining new clients, and to lose them results in not only lost revenue, but makes the entire endeavor a waste of time.

PriceMetrix, a practice management software and data services company, just released a new study on client retention. I like the company’s work and find it very credible, in part based on the size of their database, which encompasses 7 million investors, 500 million transactions and nearly 40,000 financial advisors.

The study concluded that advisors who retained 95% of their clients during the period 2010-2013 increased total assets under management (AUM) by 25%, while those who retained 80% increased assets by just 12%. Growth and success are definitely related to client retention.

Some of the  key takeaways from the study include:

  • The most critical years of a relationship are years two through four. The first year of relationships is often viewed as a honeymoon period, and retention was found to be 95%. But retention dropped dramatically overall in years 2-4 to just 74%. Advisors should demonstrate – or reprove – their value added to clients around the first anniversary as part of their standard client servicing practices.
  • Advisors with larger client households do better than those managing less than $250,000. The average household with $100,000 in assets has an 87% retention rate, while the average retention rate for $500,000 households is 94%. In this case, size does matter.
  • Pricing matters. The moral of the story here is not to price either too low, because clients will not see your value-added, nor too high, because as we all know, no one likes high fees. The optimal pricing range was found to be between 1.0% and 1.5% of revenue on assets (ROA).
  • Fee-based accounts are slightly more likely to stay than transactional accounts (91% v. 89%), but hybrid households – which include both fee-based and transactional accounts – are the most likely to stay at 95%. This result is very interesting and somewhat contradicts the trend toward fee-based business (and managed accounts). Perhaps the best strategy when trying to convert clients to fee-based business is to suggest they keep  their current accounts rather than necessarily replace them.
  • Advisors who have multiple retirement accounts with a household are much more likely to keep the relationship. The retention rate of clients with no retirement accounts is 85%, one retirement account 86% – but 94% for those with multiple retirement accounts.
  • Older clients are far more likely than younger clients to stay with their advisors. 30 year old clients were found in the study to have an 82% retention rate, 40 year olds an 87% retention rate and 50 year olds a 90% retention rate. This is not completely surprising given everything we know about todays’ younger generation. But it does indicate that advisors should diversify their books by age in order to keep stability.

I think these are all important points to keep in mind. I wouldn’t necessarily recommend changing your marketing strategy because of the study, but it should influence the way you talk to clients, how you treat current clients and provide some points on how you can fine tune what you do.