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Jeff Van WartPhoto credit Scott F Kohn

Jeff Van Wart

Photo credit: Scott F. Kohn

Growing Pains

This Houston advisor wants to bulk up his office, offer more fee-based services and tap high net worth clients. Our industry experts have some tips.

Jeff Van Wart has been in his current practice, King Capital Advisors, for eight years. He makes most of his money from fixed-income institutional work with banks and insurance companies. He wants to bring on more retail advisors and boost his fee-based business.

He has managed portfolios for institutions and also worked as a fixed income analyst before moving to a wirehouse. In 2006, he decided to go out on his own, opening a branch for his new broker-dealer Cantella.

He has four advisors in his Houston-based branch, plus an office manager, who basically have an eat-what-you-kill arrangement, with Van Wart getting a portion of the rep’s production.  He’d like to attract more fee-based advisors which he sees as more stable. 

To that end he moved to a larger space three years ago, and has been searching for the right occupants ever since, working with Cantella’s recruiting office, sending out a monthly email letter to licensed reps in the area, and networking with wholesalers. His ultimate goal: to find advisors with a small existing client roster making in the neighborhood of $100,000 but looking for a bigger payout. 

He’s willing to train a novice, but he’s not crazy about the idea. “My time is limited,” he says.

He also wants to increase his own fee-based business from high net worth accounts. At the moment, he has about 70 retail clients, with approximately $150 million in assets. So far, he’s leveraged contacts at a bank and has been sending out a weekly email to all his clients with market information, golf tips, recipes and other extras. His five most recent clients came from referrals.  

How does he keep the business growing?

Brandon Odell, director of business consulting, The Ensemble Practice

Money is always the first thing advisors look at when they’re switching firms. However, if it’s a smaller broker-dealer, it might be hard to compete on payout.

I would suggest he think of the next tier of services the advisors want.  That’s where he can compete. Many advisors are willing to take a haircut if they’re getting assistance to make their practice bigger and better. You need to create a welcome nest that provides comfort and stability and resources and growth opportunities.

Second is a general sense of loneliness when you’re on your own. You have to figure out so many questions by yourself. The broker-dealer may be able to help you. But if you’re small and especially if the broker-dealer is large, it may not care about you that much.  By affiliating with another firm, you get a sense of belonging.

But he also needs to provide some training or mentoring. His broker-dealer might have some program he can piggyback on. As for his own business, he needs to continue to market to clients who have the investable assets he wants, look to existing accounts for referrals and tap into attorneys and accountants he works with. The more the momentum, the greater will be the expansion. If that’s not fast enough, the other avenue is through mergers and acquisitions.

Matt Lynch, Principal, Tiburon Strategic Advisors

What he’s offering really is a way for advisors to share expenses and get a better payout. But it’s difficult to deliver value to advisors when you have a relatively small branch, especially if he doesn’t want to provide training. And, while he probably could attract advisors who have been pushed out by wirehouses, the risk he’s taking on—it’s not an exciting business model.

He has to make a decision about whether he wants to significantly increase his own practice or build an organization that provides an environment of outstanding service advisors would be attracted to. He can’t do both. The competition is out there providing business development assistance and training or marketing support. 

If he’s going to focus on recruiting fee-based advisors, he should start associating with organizations where these people are, like the local chapter of the FPA, and attend industry meetings where he can interact with the type of advisor he wants to recruit. But he has to be clear about his overall value proposition. He should pinpoint the five or six things advisors need to be successful and how he can deliver them.

In terms of his own business development, the best thing is to leverage existing contacts, perhaps to cultivate attorneys and CPAs for referrals. The insurance organizations he works with might refer clients they’ve done estate planning for. But he also has to look at competitors that are doing well and the service model their clients respond to.  A fee-based business for high net-worth clients requires a different business model.     

Hellen Davis, CEO and co-founder, Indaba Global

Just taking a share of the person’s revenues for sitting in an office is not going to be a good proposition.  He has to be able to put together an attractive value proposition. Look at it from their perspective: If he were them, what would he want?  

People don’t like uncertainty. For that reason, he has to cap it out.  That is, they would do a shared office arrangement, and he would cap the percentage of the business he’d take. 

As important, he has two choices. He can team up with like-minded people. Where that becomes lucrative is in joint work, something he hasn’t talked about. Or, he can have advisors with different specialties working together. In that case, if advisors send a client to him, he would take the lion’s share for what he does best, and the other people would take the lion’s share for what they do best. And maybe there’s a 10 to 20 percent referral fee, up to a certain cap.

If he goes after small producers, one part of the value proposition would be combining them into a group. You can get a very good payout if you work under one umbrella.