WealthManagement Magazine

Advisors Who Crave Advice

For Darcy Bhatia, there's no such thing as too much good advice. Once a month, Bhatia, a partner at Highmount Capital, a three-year-old New York-based multifamily office and wealth management firm, meets for three hours with a group of 17 other members of the Women's Presidents Organization. Its members, all working in different industries, meet to discuss business issues facing their companies. Every

For Darcy Bhatia, there's no such thing as too much good advice. Once a month, Bhatia, a partner at Highmount Capital, a three-year-old New York-based multifamily office and wealth management firm, meets for three hours with a group of 17 other members of the Women's Presidents Organization. Its members, all working in different industries, meet to discuss business issues facing their companies. Every few weeks, Bhatia also gets together with one of 10 experts in related fields to toss around ideas, and she's starting to meet with adult children of clients, to pick their brains about services she can offer. “Outsiders give you a unique perspective,” Bhatia says. “I assumed everyone ran their businesses this way.”

No one has all the answers. So, many financial advisors are putting together tailor-made groups of trusted counselors, people able to provide everything from management basics to industry insights. “Everyone needs a brain reserve,” says Hellen Davis, a business coach in Treasure Island, Fla. Besides dispensing good advice, counselors often can turn into useful referral sources, as well.

As Bhatia has found out, there are many ways to build a board of advisors. If you're looking for help running a business, you can sign on with a group of other small business owners to discuss issues. But if you're looking for feedback from clients, then you can form a group to do that. Or, you can do both.

However you do it, creating an advisory board can land you a trove of insights you'd never have been able to get on your own. Mark Connell, an registered investment advisor who owns Lochinvar VII firm in Plano, Texas, for example, recently asked for help during a meeting of his five-person board, which includes professionals running their own companies. The question: how to get his biggest accounts to refer a larger number of prospects to him. They came up with a solution — holding informal get-togethers for top clients and their friends. That netted him six clients in a matter of a few months.

Building a board is not without risk. With the wrong advisory board, at best you waste your time, at worst you lose good accounts. So, you need to understand the ins and outs of forming your own brain trust before you plunge in. Here are a few approaches:

Client Advisors

As the name suggests, with this approach you pinpoint a number of clients to act as advisors. Generally, you want top accounts, those who understand your typical clients. But, more than that, you also should look for clients with expertise in areas you or your staff lack. Fred Cyprys, managing partner of Cypress Financial Consultants in Rochester, N.Y., part of AXA Advisors, for example, included in his group of advisors an entrepreneur who built a business worth $15 million in five years. Cyprys wanted to draw on the man's knowledge of how to grow and manage a business successfully. What he learned was that he needed to develop a strategy and stick to it. The mentor also taught Cyprys that, in order to have his business run smoothly, he should figure out what he did best, then delegate the other tasks to his employees.

Choose advisors based on the expertise the clients can offer — not the strength of your personal relationships. Cyprys says he originally used what he calls “the buddy approach” and ended up with people who didn't add anything to the mix. Don't worry if you feel you aren't chummy with your choices. “Clients tend to be flattered that you asked,” says Cyprys.

Since your clients are probably busy, don't try to meet too often. Steve Sanduski, managing partner of Peak Productions, in Omaha, Neb., a training firm connected to Carson Wealth Management, suggests gathering two times a year for half a day at first, then, after a few years, dropping the frequency to once a year. All meetings require a formal agenda. In the beginning, suggests Sanduski, lay out the ground rules for discussion — that clients should feel free not to hold back, for example, or whether you'll use Robert's Rules of Order. After that, you'll probably want to steer the discussions towards specific issues you're facing — anything from new products or services you're thinking of introducing to your Christmas party plans. One advisor discovered that his clients were dismayed to learn he planned to include someone from the Salvation Army at the next holiday event, according to Sanduski, because they'd feel compelled to contribute. The advisor dropped the plan.

You also can meet one-on-one, instead of in a group. Lloyd Williams, a Dawsonville, Ga., executive coach specializing in financial advisors, who once ran his own firm, is a case in point. He generally got together privately with select clients, talking to them about specific issues relating to their expertise. When he was wrestling with compensation questions, for example, he called on a client who had been the head of human resources for a major company. The client showed him a form for computing compensation. “It was exactly the document I needed,” says Williams. “I could have tried for years and never come up with something that good on my own.”

How many clients do you need, and how long should their tenure last? That's a particularly important issue if you want to hold formal meetings. You don't want too many, so people feel comfortable speaking. Too few, and you won't have a representative sampling of your client base. Generally, anywhere from three to 10 should work. Tenure should be two years, according to Sanduski, so you have a continual flow of new people and ideas.

As part of the process you also want to glean insights into how your clients view your services and how you can improve. Sanduski recalls finding out that three members of his advisory board at Carson Wealth Management didn't realize that it offered tax services. So, the company revamped its method for advertising those services, starting a separate division and playing it up in the newsletter.

The big pitfall with the approach, of course, is the potential for alienating a client if you don't like his or her advice. What's more, clients sometimes try to exert too much control. Williams recalls someone who refused to leave a rep's board of advisors after the two-year limit. The rep finally had to ask him to leave — and lost the account.

Business Advisors

These are groups of small business owners in noncompeting markets who meet regularly to discuss everything from strategy to employee morale. You can find one through an organization like the Young President's Organization or the President's Resource Organization, which is specifically aimed at helping people set up such groups.

Eric Brotman, who runs Brotman Financial in Timonium, Md., simply launched his own. About 10 years ago, early in his career, he decided to start a group for other up-and-coming professionals and business owners. His first step, he figured, would be to team up with a lawyer, who then could find other group members. So, he sent out about 900 letters to lawyers in the area. Over a six-month period, he went to lunch with the 50 or so respondents. Then, after he selected the best fit, the two of them invited about 30 other acquaintances to join and, eventually, put together a group of about 13 people.

Your choice of appropriate members will most likely depend on how established a practice you have. In the beginning, Brotman wanted “a young professional group of people just getting started,” he says. Hellen Davis suggests you only look for veterans, people in business for at least 10 years and are worth at least $1 million, who “genuinely want to help people,” she says.

While groups usually meet once a month for two to three hours, Davis recommends getting together less frequently, say, once a quarter, since people are usually too busy to come more often. At some point during each meeting, the group will focus on a particular member, discussing a specific problem he or she is facing. Connell emails the rest of the group a one-page synopsis of the issue about a week before the meeting, so everyone is prepared.

At the same time, it's not uncommon for the problem you expect to discuss to turn out not to be the one that's actually considered. Connell recalls one member who came to discuss a strategy of high sales and low margins. The group identified a more potentially effective approach — focusing on what was making the most profit, instead.

Confiding in Other Advisors

A board comprised of fellow financial advisors might at first seem insane: Why would I want to confide in my rivals? Advocates for this tack say competitive pressures don't usually get in the way, as long as no one names specific clients. With these groups, you can discuss nitty-gritty industry issues specific to the financial services industry.

Williams, for example, recalls an advisor who had been introduced to a client worth $50 million, but had never dealt with an account that large. The members of his group, some of whom had worked with ultra-wealthy clients, gave him tips for how to approach the individual. He got the account.

You can benefit not just by posing a specific problem to a group of peers, but by also learning how other people have successfully handled areas you want to learn more about. For the past two years, Cyprys has participated in a group set up by AXA Advisors for producers in the top 15 independent firms. At each two-day meeting, members make presentations on topics related to their areas of strength. Cyprys has talked about his firm's marketing approach, while another firm with strong financial management know-how discussed such matters as how to value a practice and how to design an equitable revenue-sharing arrangement.

Who should you ask to join? Davis suggests people earning at least $100,000 and who have been in business for at least five years. “Otherwise, they're not going to be able to come up with those great ideas,” she says.

Allied Professionals

With this approach, you tap the expertise of attorneys, accountants, pension administrators and other experts with useful professional expertise. Your objective: to create a platform of gurus to call on when dealing with issues you or your staff don't know about. Also, your clients can call on these experts as needed. Williams, for example, gathered a group of about 20 professionals who agreed to meet with his clients for free, at least for the first visit. He once beat out three major national firms for a big contract “because of the caliber of my advisory board,” he says.

If you're an up-and-comer, you probably want to focus on experts from firms of a similar size. So, avoid the biggest law firm in town. Also, be prepared to spend as long as a year pinpointing experts, approaching them and finalizing your group. You also don't need to meet formally. Bhatia, for example, gets together one-on-one with her selected experts, who are all people with knowledge of areas she feels she needs help in. She's making a big push into offering services aimed at educating the children of high-net-worth families about how to handle their wealth, so she's particularly keen on working with experts in that area.

Williams also recommends something he calls a “personal advisory board.” In his case that meant four mentors, with whom he met with every quarter. He would ask them, for example, whether a new marketing campaign had a high enough level of integrity. Says Williams: “They served as my own personal compliance department.”

Chances are, we all could use one of those.

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