Skip navigation
Staying Afloat

Staying Afloat

Creative ways to bring in new business in a tough market.

What else can we do? Are you asking yourself that question more often than you were, say, a year ago? If so, you're in good company. In these times of declining assets, many advisors are pondering the same dilemma: how to bring in more money in a down market. And frequently, their answer is to look for new sources of revenue. As you might expect, that often means trying to increase fees from financial planning work or buying someone else's book of business. But, advisors are also looking beyond the usual strategies, trying everything from targeting a different pool of clients to offering innovative new services. “You can hope and pray the market will come back or you can go figure out a different way to get business,” says Al Martinez, who recently moved to UBS Financial Services from Smith Barney and is trying to win accounts from small college endowments.

Here's a look at how advisors at four practices are trying to branch out — and shore up revenues.

The Old College Try

When Martinez and his partner Christopher Ure switched from Smith Barney to UBS last March, the Boca Raton-based advisors knew they needed to explore new revenue streams. After all, accounts were down an average of 20 percent; assets of about $185 million had declined from $240 million the year before. While they mostly worked with individuals, they'd handled some accounts for small foundations. Why not extend that to target colleges and universities, they thought.

The inspiration came after a conversation Ure had with an uncle-in-law, president of a small liberal arts college. Having followed the Yale investment model used by many institutions, the school's endowment had dropped substantially since the market crash and desperately needed a new source of advice.

Ure and Martinez realized they'd found a potentially lucrative niche: providing small schools with a fresh investment approach and the kind of attention they might not receive elsewhere. “It was no different from the retail client who for one reason or another is unhappy with their advisor,” says Ure. “These endowments are underserved by most wealth management firms.” They decided to target universities and colleges with $50 million to $100 million endowments.

Doing so has required a substantially different sales approach, however. It's generally a lot longer and more complicated than the process needed for the usual retail client. For example, there's a formal request for proposal (RFP) process, which requires multiple meetings. Then, a board of anywhere from eight to 12 people makes the decision. The result: Getting the client on board can take anywhere from three months to a year from start to finish.

For now, the partners have five proposals under consideration. They're hoping the new business will add 30 percent to 50 percent to their gross production and will help grow assets by $100 million over the next 18 months. Says Martinez: “We're looking to diversify our book of business, just as we diversify a client's portfolio.”

Investment Management for the Rest of Us

J. Michael Martin figures his strength is his heavy-duty investment acumen. According to Martin, a former vice president of research at T. Rowe Price and securities analyst at several brokerage firms, a lot of advisors simply don't have his market savvy. And, therein lies the key to his search for new revenue streams.

It all started last December, when an interview with Martin about his investment approach appeared in a business publication. Six months before, concerned about what he saw as an alarming growth in debt as a percentage of GDP, Martin, whose clients are mostly retired or soon-to-retire, had slashed allocations of equities in client portfolios to 10 percent, down from 40 percent to 50 percent. Then, in January, he got a call from a Minneapolis advisor. The man had read the interview and offered a business proposal. While he found Martin's analysis interesting, he didn't feel capable of building a portfolio using that approach on his own. Would Martin be willing to start an outsourcing arrangement, becoming a money manager for his firm's clients?

As it happened, providing such a service was something that Martin had been thinking about. His $240 million in assets had declined about 17 percent in 2008, and he was breaking even for 2009. Outsourcing his investment expertise seemed a logical way to make up for the drop in assets. So he agreed to do it. But when he proposed starting the end of the year, the advisor pressed him to move quicker. “He said, ‘I kind of need it right now,’” says Martin.

Martin agreed, figuring that a new trading platform he'd installed recently would make it easy to automate the process of adding an influx of new clients. Getting them on the system would be another matter, however.

For two months, it was a whirlwind. The two firms used different custodians; they had to work out a legal agreement for clients to sign, as well as the terms of their arrangement; they needed material explaining the investment approach to clients. Finally, in March, Martin started working with the first group of newcomers, who pay a percentage of assets to him; he's handling about half their assets. For now, Martin charges an AUM fee that's “meaningfully less” than the 0.9 percent his regular clients pay. But he thinks he'd charge a smaller amount for a larger firm with more assets. (According to Martin, it's up to the other firm to determine just how to structure their fees with clients who are using the service).

So far, Martin's added about 50 clients with 50 more to go. He's also had inquiries from a couple of other firms interested in doing the same thing. That would require more staff, however. Next step is to hire one or two more advisors over the next two to three months. The bottom line: Ultimately, Martin thinks the new business will boost revenues by 10 percent.

Services for a Changed Mindset

Since the market tanked last fall, clients needs have changed: some want more reassurance; some are less trusting of their advisors; some need to change their savings goals and retirement targets. Late last year, this became a point of inspiration for Paula and Bill Harris, who run WH Cornerstone Investments in Duxbury, Mass., who were searching for new ways to bring in business. Their assets of about $30 million had declined by a little under a third, says Paula Harris.

To address the changing needs of clients, the team came up with two new services. In December, they launched Second Opinion, a program through which they analyze the existing portfolios of non-clients — both do-it-yourselfers and clients of other advisors. “They're not so sure that what they've been doing makes sense for them,” says Harris of these clients. “And they want another opinion.” For that work, they charge a flat fee: The average is $750.

None of their Second Opinion clients have given WH Cornerstone their assets to manage, yet. But, that's not the goal, according to Harris. It's about building a relationship of trust, so that people ask the firm for help in other areas. And that has already begun to happen. Several clients have hired the couple to take a look at their insurance policies, for example.

Their marketing approach has been low-key. “More of a pull than a push,” says Harris. They've written about the service in an e-newsletter that goes to more than 1,000 people. And they've publicized it on Facebook.

The second service, Future Focus, provides three-to-five year financial plans. It had been on the back-burner, but they decided the time was right to make it a priority. The reason: The market crisis, they figured, had shaken up investors' goals and created a new need for short-term planning. “It's not about shooting for when you're 65,” says Harris. “These are mini-plans for how you're going to live your life in the meantime.” They've focused on everything from starting a business to creating a budget.

Like Second Opinion, there's also a flat fee for Future Focus. But it's customized to the particular plan. Harris estimates the two services combined are already goosing revenues by 10 percent to 20 percent.

Money Smarts for New Parents

For Brad Dugdale, the timing was fortuitous. A senior vice president at D.A. Davidson in Coeur d'Alene, Idaho, Dugdale has long had an interest in the importance of financial education and wrote a book on the subject in 2001. Several years ago, as he watched margins drop, he realized it would be a good idea to build a new brand — and developing a reputation as the go-to person for money education seemed a promising way to do it.

So in 2007, he started conducting 401k workshops, walking employees of corporate clients through concepts that would help them become financially successful. He also decided to start a simple financial journal for new parents. It would have three sections: financial milestones — like what the Dow was doing the day the baby was born; instructions for first-time parents about such basics as opening a savings account for a child or buying U.S. savings bonds; and a discussion of the value of saving $1 a day from the time of the baby's birth and other financial fundamentals.

As luck would have it, Dugdale and his six-person team published the $29.95 book, Munny Journey (Munny Journey LLC, 2008), and launched a web site last fall — just in time for the market decline. The team's assets of about $250 million have decreased, although Dugdale didn't specify by how much.

So far, so good. According to Dugdale, he's sold around 3,000 books to two credit unions and the Monetta Young Investors Fund is including the book in financial literacy kits given to children who open an account with them. While Dugdale knows it's a long-shot, he's hoping to sell 1 million copies a year within the next three years. “If we're successful, we can capture a substantial portion of the newborn baby market,” he says, with a chuckle.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.