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A
PROPOSED BUSINESS PLAN
FOR MARKETING ASSET MANAGEMENT SERVICES
I. INTRODUCTION
The purpose of this proposed business plan is to describe a financial
service model that will allow your firm to serve your successful
clients’ investment needs in a safe, profitable and efficient
way.
This proposed model focuses primarily on your clients that
are successful business owners. However, it can easily be used
to serve professionals, retirees, trust or insurance beneficiaries,
and corporate executives.
This model is primarily intended for investors that have at
least $1 million in liquid assets to be managed. These assets
can include both the client’s personal and retirement
accounts.
II. BASIC ORGANIZATION
Staff
This program will have
a better chance of succeeding if it has the right person
managing it. This person must believe in its future and
have the time, skills and experience to properly build
it. It cannot be a small sidelight of that person’s
day; it must be an important responsibility with proper
incentives provided. This person should also have the
respect of the other partners so they will agree to what
is being recommended.
The roles of the person
in charge of the program will be:
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•
Teacher -- he/she will be in charge of educating
the staff regarding the program. We recommend
inviting competent outsiders to assist in this
area.
• Coordinator
-- he/she will be in charge of arranging meetings
for training, presentations, marketing initiatives
and ongoing updates
on the program.
• Contact
person -- all qualified prospects will be directed
to this person who in turn will assist the referring
employee gather the required information and arrange
the initial meeting. Over time, everyone on the
staff should be able to do this himself/herself
without the intervention of the manager.
• Communicator
-- it will be up to this person to keep clients
and associates informed about this service. Marketing
materials, direct mail and a focused newsletter
should be under the supervision of the manager.
• Motivator
-- as with any new initiative, the staff must
be periodically educated, encouraged and incented
in order to change their traditional behavior.
The successful manager must be able to walk a
fine line between being too intrusive and too
passive.
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Ideally, the project manager should be a partner. This person
should have some financial marketing/selling experience.
We would not recommend hiring an outsider to manage this
function unless there is no one else internally available.
We believe only a partner of the firm will have the credibility,
understanding and ability to lead the staff to success. Once
the program is working well another person may be able to
take it over.
Keeping your fixed costs low should be an important goal,
and therefore you should utilize outside professionals
in the early years of this program.
How much time will this take? As with any new program,
time should be taken to learn what is required to attract
and retain potential clients. Time will be needed to: convince
traditional practitioners to enthusiastically participate;
to do the due diligence in selecting your preferred providers;
to set up your procedures to review the statements of the
investment managers; to prepare periodic reviews of the
progress being made; and, to meet personally with the clients
and managers, at least annually. The time spent will be
profitable only if:
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•
The clients have
substantial assets - we recommend over $1 million in liquid
assets.
• You outsource
all activities that you cannot profitably produce in-house.
• You see the fees
earned from this service extension as only one of the
many benefits that can accrue to you.
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Eventually a Separate Entity
Your Wealth Management Team, once seasoned, should consider
becoming a separate legal entity. Why? Today, your clients
correctly perceive you as professionals with defined areas
of competence. It is difficult to change this perception and
you should not try. It is far more persuasive and safer to
set up a separate, wholly-owned division that provides these
non-traditional services rather than trying to include all
of your services under your “traditional” roof.
By establishing a separate company, your clients can easily
compare what you do and how you are paid with your competitors.
The name of this separate company should include part of your
current name and some form of the term “financial consulting.” By
emphasizing “consulting” you will distinguish yourselves
from all of the product-oriented people competing with you.
It is also important to have a distinctive design for your
communication and collateral pieces to minimize client confusion
between your original firm and the new consulting business.
Boston-law firms that provide both traditional legal services
as well as asset management and trust services have successfully
practiced this concept of separating functions.
III. YOUR TARGETED MARKETS
The ideal prospect has over $1 million in liquid assets to
invest, doesn’t want to manage these assets himself/herself,
is not fully satisfied with the providers that he/she has previously
considered, and wants to have more free time and a greater
sense of financial security.
Business owners are excellent prospects, especially those
that are approaching retirement. At this point they have built
a good portion of their wealth -- a combination of their personal
savings and investments, their retirement trusts and the value
in their businesses. Often they already see your firm as a
trusted adviser and as an integral part of their successful
team.
Initially, we would suggest introducing these new services
primarily to clients who are business owners. Here’s
why:
• First,
they usually have both personal and retirement assets
that need management and do not have the resources
or experience to properly do it themselves.
• Second, they usually are too
busy and do not have the time.
• Third, you already have a business
consulting relationship with them making this new
offering a logical
extension of what you are already doing.
• Fourth, you have a lot of the
information needed to get this new relationship started.
• Finally, and most importantly,
these current clients already trust you and should
be both surprised
and pleased that you now can do more to help them manage
their financial affairs. |
By initially focusing on wealthy business owners, you will
become familiar with your role, the roles of the other professionals
on your team and the basics of participating in this new
venue.
Focusing on business clients also has the greatest chance
of being successful quickly, which in turn should encourage
your more timid partners to introduce their clients to
the program. History has shown that success breeds success,
and it is especially so in this business. However, bear
in mind the downside for approaching these clients is very
modest; they will simply say “no, thank you” if
they are not interested.
If you are seen as a force in helping your clients create
wealth, you should be able to convince them that you are
the best person to help them protect, build and distribute
their wealth. The reason they may not have asked you about
these matters may be due to their lack of knowledge that
you have the skills or interest to assist them. A combination
of timely mailings and personal meetings can persuade them
to consider you as a suitable adviser.
IV. WHAT TO DO ONCE YOU HAVE A QUALIFIED PROSPECT
Here are the basic steps in providing asset management to
your clients:
A. Collect
Essential Information
All that is needed is a current copy
of the client’s
account statements containing their liquid investments,
the cost basis of the securities held in taxable accounts
and a completed Investment Questionnaire (we can provide).
If the client balks due to difficulty getting the cost
information, suggest they send what they already have.
To acquire this information you might
state the following to your client: “I want
to collect this information so that prospective investment
managers can review
it and give you their recommendations for managing
these assets. The information he/she receives will
be held in strict confidence and there is no charge
for their analyses. This second opinion should help
you decide whether or not to continue your current
program or change it.”
B. Prepare an Investment Policy Statement
You might want to prepare an Investment Policy Statement
(IPS) incorporating the information you have assembled.
The client should approve the IPS before it is sent
to the manager(s). We can provide a sample IPS.
C. Select Prospective Money Managers
Identifying suitable investment professionals should
be done carefully. Using old friends, your own adviser
or picking names randomly is ill advised. We can help
you with your selection process.
If you invite well-qualified managers to present,
your chances of securing this business will be substantially
improved. Highly qualified professional managers should
have the skills to gain the confidence of high net
worth prospects. If you want to compete in this environment
you must have the best allies with you.
D.
Meet with the Client and Each Prospective Money Manager
Once the prospective manager(s) have
completed their reviews, set up a date for the presentation(s).
We
recommend that all of the prospective managers come
to your offices for their presentations, preferably
on the same day. The competing firms should be given
at least an hour to present and answer questions. They
should all be given the same information in advance
to avoid accusations of preferential treatment. We
advise scheduling no more than three in one day and
getting the client’s feedback on each presentation
immediately afterwards while it is still fresh in their
mind.
It is important that the client select the
manager. If they ask you for your opinion
say, “They are
all competent; it is up to you to determine the one
in whom you might have the most confidence.” If
the client is required to make the final selection,
there is a greater chance he/she will take ownership
of what happens in the future.
E. Review the Statements
All the client’s statements should
be sent to you for review. Every six months you should
put together
a report that states how well the money manager is
doing.
The portfolio manager should provide
most of the needed information, including a comparison
of how the portfolio’s
investment performance matched suitable indices and
how compliant he/she was in following the conditions
set forth in the IPS. A manager who over years chronically
underperforms reasonable benchmarks should be carefully
scrutinized and an objective verdict rendered. You
and your client should meet at least annually to review
their current goals and guidelines (these can and do
shift as people get older), and to determine a future
course of action. It need not be a tedious or time-consuming
process. The client will look to you for your opinion
and
you should be free to render it. If an alternate manager
is needed, you should assist in the search.
F. Collect the Fees
Today more professionals seem to prefer
billing their clients separately for the value-added
services they
provide. This eliminates the question a client might
have about your objectivity in recommending or judging
the manager’s capabilities. We have no problem
with how you are paid.
G. Arrange Future Meetings
It is our recommendation that all future face-to-face
meetings with you and your client occur at your office,
if possible. It is important that you remain the key
adviser to your client and having the meeting on your
turf allows you to reinforce that message. It is also
important that you be present and involved. Keep in
mind your client is looking to you to determine if
the manager is doing his/her job.
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V. OPERATIONS
It would be a good idea to insist that the manager
hold all securities at an approved custodian/broker and all trades
are executed through such a firm. Here’s why:
• You
will be able to access the data from your PC whenever
you desire. This becomes particularly useful if your
client calls or comes in and wants to see what the
manager is doing, or wants to access the information
from their home.
• You can easily download the
information you need to generate timely reports.
• You can be assured that the
commissions are reasonable. Keep in mind that the
broker/custodian
your client selects should have deeply-discounted commissions,
can deliver monthly statements on time, and are large
enough to provide the needed services. |
VI. POSSIBLE CONCERNS
As you perform your role as adviser, educator, data collector,
meeting arranger, and monitor as described above, you may
have concerns such as these:
• Will
I have to answer my client’s investment-related
questions? No,
you will not have to answer any investment questions.
If the investment manager does not do this
in a timely and acceptable way, then the relationship
with the manager should be reviewed. Your job is to
monitor the portfolio’s progress, not manage
it.
• What might happen
if the markets correct and my client calls because
they have lost money? There
is always the possibility the client might call you,
however, there are decisions you can make beforehand
to minimize the potential damage.
First, listen to the client to make sure poor performance
is really the reason for the complaint. More than likely
the reason is poor communication and/or poor service.
To rectify the situation, we
recommend a meeting be arranged with the manager
where the complaints can
be properly expressed. A competent manager should be
able to respond appropriately, meet your client’s
expectations and create a trusting, personal relationship.
If not, then you should help your client meet and assess
other managers. |
VII. HOW YOUR CLIENTS BENEFIT
• They
have a trusted adviser at the helm of their investment
program, which will give them added security. You have
one asset that no competitor has: YOU.
Most of your clients want you to stay involved in helping
them make
financial and legacy decisions both now and in the
future. While you might only see yourself as having
limited professional qualifications, some of your clients
may see you in a much broader context.
• They have someone
who already knows about them and is well on the
way to understanding their
concerns. You are most likely aware of many
aspects of their personal and business situations including
their retirement plans, other advisers, and how they
think about charities, supporting family members and
their investment proclivities. Outsiders would have
difficulty replicating that. Your client doesn’t
want to go through the hassle of explaining all that
history to someone else.
Long-time clients see you as being objective, trustworthy
and caring. These are values that can and should be
understood and carefully communicated. It is up to
you to let them know that you can do more for them,
specifically helping them with their investment and
trust matters.
• Your client
might save money and avoid errors. You
can become the leader of your clients’ “Wealth
Management Team,” offering a unique experience
by assembling and managing a group of financial professionals
to focus their time and attention to the needs of the
high net worth client. Having the needed professionals
get together at the same time can create a much higher
level of efficiency, decisions can be made quickly
and coordination errors minimized. |
VIII. HOW YOU BENEFIT
• You
can build a closer relationship with your clients
creating greater
loyalty, appreciation and future referrals.
• Additional revenues. It is far easier to offer additional services to
existing clients than acquiring
new clients. This program provides a tremendous opportunity
to leverage your time. The periodic client meetings
can also be used to discuss other services or relevant
accounting/tax/estate planning matters to help you
bill more traditional hours.
• More loyal relationships. Trust is built over
time and after many mutually satisfying experiences.
The more your clients trust you to do these non-traditional
activities the more loyal and receptive they will become.
In today’s highly competitive world loyalty can
be a scarce commodity. The more reliant your client
is on your judgments, your caring, your objectivity,
and professional knowledge the greater chance they
will involve you in a larger range of assignments.
• Referrals. Highly satisfied
clients are your best salespeople. They will be willing
to act as references,
participate in focus groups, and introduce you to friends
and associates.
• Greater job satisfaction. Professionals are
highly motivated to garner clients’ statements
of appreciation. By providing these new services you
will help your clients achieve greater financial security
and more free time. Becoming a client’s trusted
adviser and helping them and their future generations
prosper will allow you to build your own wealth and
achieve some of the highest “highs” available
as a professional. |
We urge you to contact us with any questions before starting
your own program. The reward can well be worth the work involved.
August
2004
Back to Information for Trusted Advisers
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