If you’re a financial advisor with your own practice, you’re more than just an advisor to your clients. You’re also a CEO, an entrepreneur, a marketer and a manager.
Similarly, the asset managers that offer investment products for advisors’ clients are much more than just product providers. In fact, they can work hand in hand with advisors to help them run their businesses better, as well as construct portfolios or models to meet a specific objective for a client—but unfortunately, not many advisors are aware of the depth and breadth of the services offered by asset managers.
Large Firms Serve as Vast Resources for Advisors
Many asset managers offer portfolio construction, analysis and practice-management services in addition to the funds they sell. For example, some asset managers have put together informative educational materials about managing volatility, the benefits of behavioral coaching, and other topics, as well as timely analysis and interpretations of market events, which advisors can use to demonstrate to clients and prospects the added value they provide beyond setting up and managing portfolios.
In addition, larger asset managers run consultancy divisions that specialize in helping independent advisors streamline workflows in order to reduce time spent on certain business processes, including engagement with prospects and clients. The business consultants affiliated with asset managers have served as engaged partners to numerous advisors, and knowledge of what works and what doesn’t is extremely valuable insight for independent advisors looking to grow. Best practices from asset managers’ consultants can save advisors and their associates time on a variety of tasks, such as creating investment proposals and presentations for initial meetings with prospects and preparing for quarterly and annual performance reviews.
These comprise just a portion of the services from asset managers that help advisors formulate ideas that can benefit their clients and overall businesses. When I was an independent advisor, I was a business owner and a relationship manager, but I was also responsible for all the brainstorming—and eventually I realized that if you want to run a business at any scale, you can’t be the only person generating ideas. Asset managers delivered tremendous value for me, and my business, by shouldering some of the responsibility of idea creation.
Let Asset Managers Be Your Firm’s Outsourced Investment Committee
Asset managers didn’t just provide me with insights about running my business—they also helped me come up with investment ideas for clients and prospects.
Very often, when trying to win business from a prospective client, I would anonymize their portfolio and send it out to five well-known and respected asset managers with a simple request: “Please put together your best portfolio for this client.” They gladly compiled proposals, and I would then send the asset-allocation strategies they came up with to the prospect and say, “I had five of the world’s best asset managers look at your portfolio, and this is what they came back with.”
Quite a few times, the response was, “No one’s ever done that for me before.”
The asset managers I reached out to formed, unofficially, an outsourced investment committee for my firm.
Investors generally don’t care who came up with an asset-allocation strategy—they just want to make sure it’s well thought out and strategic, and that someone who knows what they’re talking about has vetted it and can help them understand why it’s the best option for reaching their investment goals. Advisors are fighting for business from investors, but asset managers are fighting for business from advisors, and for the most part, they are more than willing to let advisors leverage their ideas, vet them and bring them to clients.
By making use of this kind of offering, along with experienced consultants and streamlined workflows, advisors can grow their businesses, and run them more efficiently, without hiring additional support staff—or paying third-party portfolio strategists and other providers.
For example, let’s say you want to put together a portfolio for a client or prospect that has a standard deviation under 10 and can achieve an average annual return of 5 percent, suitable for taxable accounts. The research and calculations that go into creating this portfolio could, in my experience, take an advisor between 15 and 20 hours to complete.
Instead of doing it yourself, or hiring another team member to do it, you can leverage asset managers to perform the bulk of the research and calculations for the portfolio, and then present the options for the portfolio to your client in a comprehensive and visually appealing report.
And on top of that, you have an extra 15 to 20 hours to go find new clients and service existing ones.
The advisory business is a tough one to succeed in, no matter how many assets you have under management, which means you need all the assistance you can get. Asset managers provide far more than just investment products—they have developed full-service solutions that can empower you to run your business better. If you don’t take advantage of the broad spectrum of services they offer, then you, and by extension your clients, are missing out on so much.
David Lyon is CEO and founder of Oranj, a Chicago-based provider of digital advice solutions for financial advisors.