Archive for the ‘RIA’ Category

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If advisors aren’t being chastised for being too old, they are being dissed for being too young. It’s confusing, but apparently all that is needed to solve the problem is image consulting, according to this Wall Street Journal article.

While I agree that advisors need to present themselves in a manner that is in tune with their client base, odds are that an advisor who is knowledgable, empathetic and truly understands the needs and concerns of that client base will connect with that client base. Lacking those characteristics, no amount of “dressing up” will make up for serious shortcomings.

Most people know when their trusted advisors are genuinely authentic in terms of their interest in them as people — not just as a source of revenue — and know their stuff. If that isn’t the case, those gaps in knowledge or phoniness will be apparent in time, in many cases sooner, rather than later.

The best way to present yourself in an authentic manner is to have deep knowledge of your niche, be confident in your skills and stick to processes that will help your clients be as comfortable as possible. An attitude of respect for clients and your team members, an ongoing openness and search for new knowledge and skills and some humility go far in helping you connect in an ongoing way with clients and potential clients.

After all, they are trusting you with their life savings, placing faith in you that you can help them reach their financial goals. The best financial advisors that I have the privilege to know all exude these characteristics.

Forget about the image consulting — for those advisors who aren’t fiduciaries in the truest sense of the word (if not in fact by industry and regulatory standards) — no amount of lipstick will dress up that pig.

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coke.photoConnecting with potential clients by telling your story in an engaging way through content marketing is the way to go today. It may not be easy to envision exactly how content marketing can work for you or what’s happening in the space. Here are some examples of great content marketing innovation and links to blogs and sites that can help you imagine and explore the boundaries of what you can create for your financial advisory practice via content marketing.

At the American Society of Journalists and Authors Conference last week, I learned about companies that are innovating in this space, including:

  1. Coke: Last Fall, Coke relaunched it’s website as Coca-Cola Journey, a digital magazine. Instead of focusing on static branding and information, the site provides interactive info that tells the story of Coke via a variety of channels including bloggers offering thought leadership and a ton of cool content marketing in a variety of formats from video to social media to infographics. This interview with Ashley Brown, director of digital communications and social media for Coke, published by the Custom Content Council, focuses on Coke’s story and how it is told through the new site. 
  2. IMB: Midsize Insider is a digital interactive content site designed to offer information to small businesses about technology issues that affect them and potential solutions. IBM is not pushing it’s own products and instead has hired thought leadership bloggers in the space and journalists to tell it’s story. The site covers a number of topics in a variety of formats, including mobile, social business, cloud computing, business analytics and security.

Check these sites out and think about what they are doing — they are offering a wide variety of content in different formats. While your financial advisory business isn’t likely to have the ability to match the depth and breadth of these offerings, they are a good example of what can be done and may encourage you to think creatively and outside the box.

stopsignYesterday I explored how a fundamental aspect of content marketing — storytelling — can benefit your financial advisory business. Alas, regardless of how compelling your story is, your efforts to reach your target audience will be stopped dead in their tracks if you can’t get it in front of them.

That’s where distribution comes in. And that’s why, even if you don’t have content ready to distribute, you need to get your distribution channels up and running. Here’s an overview of the major types of distribution channels and why they’re important:

  • Social media: Now that the compliance barriers are falling and more clients and potential clients than ever are on social media channels, there is really no excuse not to be there. That being said, not every channel is for every financial advisor. Some are more friendly to specific audiences and types of marketing than others. Facebook, for example, is a great way to connect with clients on a personal level and find out what their day-to-day concerns are. LinkedIn is the top professional network where you can find out about promotions and job changes. Twitter is the leading issues-oriented platform. There’s nothing wrong with picking one of these and focusing your efforts there for a while before broadening your approach. The one tool you must use, in my opinion, is blogging. More on that next week.
  • Website: To distribute content effectively, your website has to engage visitors and have the infrastructure to support that content. This includes the ability to create landing pages for specific types of content and gather information about visitors who want to read your content. You need someone — whether that is in your office or a contractor outside — who can create landing pages and help you gather the information you collect so that it resides in your client relationship management system (CRM)
  • Search Engine Optimization: Closely related to your website, you need to make it easy for potential clients, influencers and the media to find you. By using keywords and optimizing your site, content and social media, you can make it as painless as possible for people to find you and learn more about what you offer.
  • Email Marketing: Even if you aren’t engaged in content marketing yet, you likely have hundreds of email addresses, if not more, of clients and potential clients. E-mail marketing campaigns using the content you’re going to create are an extremely effective method for engaging with prospects and converting them into clients.

To get ready to engage with prospects via content marketing, do whatever you need to do to get your website upgraded and looking good, even if it’s just updating the copy to make sure it reflects what you do today. Keep tabs on Google analytics to see who is visiting your site when and check various search engine terms to see where you rank. Beef up your social media profiles or at least pick a platform and establish a presence if you aren’t there.

Tomorrow, I’ll continue this series on content marketing with a look at helpful resources.

When an investor affiliates with a new financial advisor, a take it or leave it mandatory arbitration clause is part of the contract. This means that investors must submit any disputes to arbitration run by the financial services industry self-regulating agency, FINRA. 

In arbitration, investors and financial advisors and broker-dealers must submit to their dispute to a panel of arbitrators, a potentially expensive process that circumvents the traditional judicial system. Mandatory binding arbitration has been a sacred cow of the investor-financial advisor relationship for decades.

Until, perhaps, now. The Wall Street Journal reported that federal Securities and Exchange (SEC) Commission Luis Aguilar has called for an end to binding arbitration clauses. Aguilar cites the 2010 Dodd-Frank Act, which authorizes the SEC prohibit or restrict these types of agreements for broker-dealers and investment advisors. 

I started writing about binding arbitration clauses in business to consumer contracts nearly 10 years ago and believe it’s an inherently unfair practice for consumers and investors. I don’t object to arbitration per se, when arbitration contracts are freely entered into by parties with equal power in a relationship, such as in business to business contracts.

But when they are forced on consumers and investors en mass and the consumers and investors have few if any choice but to accept mandatory binding arbitration clauses in a contract, they just aren’t fair. This country was founded with a judicial process meant to provide the maximum amount of fairness to all parties involved. It’s not perfect, but consumers and advisors deserve to have the ability to avail themselves of it to solve disputes.

Instead, investors and advisors are forced into what is essentially a private judicial process with it’s own opaque rules and procedures, where conflicts of interest on the part of arbitrators are difficult, if not impossible to determine and decisions aren’t fully explained and are incredibly difficult to appeal, regardless of the justice of the ultimate verdict.

So I’m with Commission Aguilar: end binding arbitration in investment advisor and broker-dealer to consumer contracts. Now.

Advizent, the once-promising RIA marketing and branding consortium, was shut down last week by founders Steve Lockshin and Charles Goldman, Financial Planning magazine reports. They cited a lack of support from potential members and an unwillingness to take on outside capital as the reasons behind the decision to terminate the venture.

Sources quoted in this article and several others, including in RIABiz and Investment News, cite a number other reasons for the failure, including:

  • Unwillingness of RIAs to cooperate with each other
  • The high level of fees sought by the Consortium
  • Inability to provide a compelling ROI
  • Competition from other marketing and branding efforts
  • Lack of foresight in regarding to branding by RIAs

Advizent sought to create a marketplace that would match consumers with RIA firms, who would be rigorously pre-screened for ethics, compliance, succession planning, strategic planning and other characteristics. Consumers, attracted to the site via national marketing and advertising campaigns, would have been presented with Information about member firms and would have been matched with firms meeting their specific criteria.

I agree with some of the assessment in the articles exploring the reasons for the firm’s demise: for advisors to pony up the type of money that Advizent was seeking in return for a potential fuzzy pay off of consumers being directed to their firms via a website just wasn’t compelling enough. Then, there’s the fact that many advisory firms are far from sold on decent, let along large, budgets for marketing.

Add to the fact that RIAs are independent by nature and may have been wary of what they saw as a cookie cutter solution that didn’t stress individual differentiators enough, and the venture just didn’t have enough support in the industry to get off the ground.

I also believe that the venture ultimately didn’t succeed because this isn’t the best way for RIA firms to differentiate their brands, and RIAs sensed this. As I’ve written previously, in this day and age of fragmentation of the traditional media, advisory firms can best differentiate themselves via thought leadership targeted to a specific ideal client type. Savvy advisors are putting their marketing dollars into these kinds of content marketing campaigns and realize that they can best attract clients that will already meet their criteria — cutting the length and expense of the client acquisition cycle — by stressing their differentiators.

A pitch to the masses (even masses of high net worth investors) via a branded website isn’t what these firms need, and it wasn’t likely to generate enough business for member firms to justify the fees even if it did scale up and garner a decent following among consumers. Selling financial advice is becoming less and less like selling a car or a widget and  Advizent’s nascent offering may have seemed too much like mass selling with too little potential for differentiation for member firms.

The evolution of the financial advisory industry is still in a very early phase. It’s too much like the Wild West for this type of consortium to succeed. The day may come when advisors — and consumers — will be more receptive to this type of branding model, but it’s a ways off.

For decades, the backbone of the financial advisory industry has been small Main Street type practices, where a solo advisor assisted by an employee or two picked investments and handled financial planning for his neighbors and businesses in the community. Many of those advisors were brokers employed by a major wirehouse firm, and there was a lot of pride and strength in that association.

But as Financial Planning Magazine reports this morning, an almost paradoxical trend of getting smaller to get bigger is playing out and will accelerate in the industry during the next five years. This involves more break-away brokers, those who previously were at large wirehouses, going independent and forming their own firms. The most successful of those firms are successfully scaling and growing larger and are poised to continue to do so, gobbling up some smaller players in the process.

These larger firms have the capacity to not only offer the products and services that wealth, savvy clients expect, but also to handle the increased regulatory demands being placed on advisors. The smallest practices, those with $40 or $50 million in assets under management, will be under more pressure as fee pressures, regulatory demands and the appetite for wealth management rises.

Here’s what I see as the implications of these trends:

  1. The smallest firms will need to either scale up and add staff and capacity, be in a better position to be acquired by a large firm needing their expertise or location or risk eventually going out of business — the “Darwinism” the article refers to.
  2. Break-away brokers will have more choices than ever before among service providers who can truly understand their business model and offer the services to help them launch and scale rapidly. Players in this space include High Tower, Dynasty and Securities America, notes the article.
  3. Middle-sized RIAs who aren’t scaling need to embrace this trend or risk getting left in the dust and shrinking rather than growing.
  4. Wirehouses continue to suffer a brain drain that could damage their capacity to attract discerning high net worth clients, as it is getting more and more attractive for the best talent to leave at a time when wirehouse brands inspire less and less trust and struggle with profit margins and staffing.