September 2008
Who are the Champions?
What separates the best advisors from the rest
By Maya Ivanova,
Research Analyst (AdvisorBenchmarking.com)
Last month, the 2008 Beijing Olympics not only witnessed new athletic speed records, it also set television records by attracting 214 million American viewers over 17 days--making it the most watched event in U.S. television history. Mesmerized by the best athletes in the world, we watched with bated breath to see if 41-year old Dara Torres still had it. If Michael Phelps could be the winningest athlete in Olympic history. If Usain Bolt was the fastest man. As I watched, I wondered how many of us are inspired by these remarkable athletes. How many kids wonder if down the road they could be another Nastia Liukin or Shawn Johnson or even Michael Phelps?”
So why were we all glued to our TV sets? Likely for two reasons: Because we were watching the best of the best and because there’s so much to learn from them. Just as athletes can refine their abilities by watching Olympians, advisors can apply “training tips” from the highest-ranked advisory firms to improve their own businesses.
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More on Practice Management
B/D or RIA? How to Decide for Yourself
The investment advisory industry has become a complex labyrinth of “contractual models” and “platforms” that advisors are supposed to navigate in order to discover how to best build and manage their practices. The various combinations of technologies, investment services, operations, and regulations are constantly packaged and repackaged in different forms and under different names by custodians, clearing firms, broker/dealers, and third-party turnkey managers. Sometimes this process creates much needed solutions that serve advisors and their clients. Just as often, it seem, it also results in unnecessarily complex infrastructures resembling a “toll booth” where a third party positions itself in the middle of the business and charges for the right to pass. As a result, advisors struggle to determine which model is best for them. Should they be with a broker/dealer or have an RIA? Should they consider a hybrid model? What kind of broker/dealer should they join? Which RIA should they use—their own, their broker/dealer’s, or the turnkey asset manager’s?
B/D or RIA? The Case for the Flexible B/D
The financial services industry has changed radically in the past 20 years. By foreseeing the rise of fee business and building a model to accommodate it, the firm of which I serve now as founder and chairman, Cambridge Investment Research, was able to ride the wave of that change. We grew from $500,000 in revenues 15 years ago to over $250 million in revenues today by leveraging one really good idea: being the fee business experts in the independent broker/dealer space. Rep advisors can accomplish a similar outcome in the next 10 to 20 years if they see the industry clearly and build the right model. But how can you find your “Blue Ocean Strategy,” as W. Chan Kim and Renée Mauborgne described in their book of the same name (Harvard Business School Press, 2005), in that uncertain future—one that separates you from the competition and makes growing your business easier and more fun and rewarding?
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Practice Essential
The financial advisory industry has changed dramatically over the past two decades. Close examination of the RIA market reveals a vibrant industry with a compounded annual growth rate of 12% in AUM over the past five years. But with growth comes increased competition: everyone wants a piece of the pie. This can make the hunt for the very best clients challenging. To sustain healthy growth and find new business, advisors will need to work harder. To find and keep good clients you need to communicate, educate, and communicate again—by asking for referrals from existing clients.
Also at InvestmentAdvisor.com
Phased Retirement Realities
More employers are interested in phased retirement programs as more American workers decide to put off a full-fledged retirement and opt to work part time instead. However, legal and regulatory impediments must be worked out before such programs can proliferate.
U.S. Places Fannie Mae and Freddie Mac Into Conservatorship
On Sunday, Sep. 7, Treasury Secretary Henry Paulson announced that the Treasury Department, in collaboration with the Federal Reserve and the new independent regulator, the Federal Housing Finance Agency (FHFA), had moved to place into conservatorship Fannie Mae and Freddie Mac, the troubled government-sponsored enterprises (GSEs) that have been under pressure due to the housing credit crisis. FHFA Director Jim Lockhart said in a separate announcement that in an effort to “restore the balance between safety and soundness and mission, FHFA has placed Fannie Mae and Freddie Mac into conservatorship,” which he defined as a “statutory process designed to stabilize a troubled institution with the objective of returning the entities to normal business operations." FHFA will act as the conservator to operate the GSEs until they are stabilized.