Trust and respect are essential ingredients in establishing a lasting bond.
What is a symbiotic relationship, and what does it
have to do with you and your practice? The Merriam-Webster's Collegiate
Dictionary defines it as "a relationship between two entities which is
mutually beneficial for the participants of the relationship. A
positive-sum gain from cooperation."
Lasting relationships, whether personal or business, all have one thing in common: Both parties must be willing to work together toward a common goal, respectfully, and with great dedication. Today, the money management process, coupled with the investment consulting process, have become a relationship-driven business. As a result, the advisor/manager relationship is becoming more of a win-win proposition for both parties.
In the past, managers spent much of their time presenting and closing on their "product" to advisors and consultants. Now, with the emphasis on adding value- and relationship building, the majority of their time is spent on identifying needs and delivering value. Advisors, in turn, remain loyal to managers who not only perform in line with the client's policy statement and consistent with their disciplines, but also provide them with practice management and development solutions.
Two basic types of relationships exist: One is between an advisor and the investment manager directly or with the investment management representative (i.e., wholesaler, regional vice presidents, sales and marketing reps, etc.). The other is between the advisor and the firm offering a third-party investment management platform.
Some advisors who choose to have a direct relationship with a manager develop their own "boutique" stable of money managers and do their own due diligence work; others work with managers already on their firm's preferred list, where the due diligence has already been performed, or who are part of the third-party platform. The association is two-pronged: The relationship an advisor has with the marketing executive (or investment management rep) at the money management firm tends to be more qualitative and can add value to the advisor's practice in terms of business development and continuing education, whereas the actual investment manager's value to the relationship is more quantitative and evaluated in terms of staying true to his or her discipline.
Four Keys To A Symbiotic Relationship
Whether the relationship between advisor and manager evolves from either a direct connection with a manager or from an investment consulting platform, several elements must be in place to establish and maintain a symbiotic relationship. The essential elements are service, delivery, practice development and relationship maintenance. Let's take a brief look at each one:
Service: Everybody is a client.
A key differentiating factor in a strong professional relationship is
the commitment to service. It solidifies the relationship, and both
parties work together toward the common goal of meeting the investors'
Advisors should expect the money manager to develop a system for this service, and anticipate and make any changes to the system as the relationship evolves. Additional expectations of all parties should be discussed on the front end, agreed upon, and maintained throughout the relationship. A few necessary items within the service process on both advisors' and managers' agendas should be: number/frequency of phone and/or office contacts; objectives and goals for each contact; keeping communication channels open; and follow-up procedures/action items.
While both parties are getting to know each other through e-mails, phone calls, office visits and at industry conferences, here are some important characteristics both managers and advisors should be seeking in the relationship:
Be passionate about the business.
Have relationship-building skills.
Go the extra mile.
Be available; respond quickly.
Help develop business/refer business.
Admit mistakes; implement appropriate action immediately.
Understand points of view.
Be willing to help each other.
Delivery: A Two-Way Street.
As mentioned above, managing expectations on the part of both the
manager and the advisor is an essential aspect of "delivery." Both
should be direct and up front, and ask what to expect. That way, there
are no misunderstandings in the beginning. There is no such thing as
over-communication. The goal is to go the extra mile in the
relationship. The relationship then becomes a two-way street between
the money manager and the advisor.
Consistency of delivery also is pertinent because the advisor should continue to strive for a high level of confidence with the manager, i.e., no surprises on the investment discipline side of the equation. A tremendous amount of stress exists if a manager deviates from his or her discipline, (i.e., excessive over-or underweighting an area, creating volatility and potential losses.) This type of action creates an unwanted surprise in the relationship, causing confidence in the manager to decline.
Here are a few elements that money managers and advisors should integrate into their systems when working together, thus improving the outcome of the expected delivery:
Manager: understand the advisor's business.
Advisor: understand the manager's process.
Manager: understand what the advisor expects.
Advisor: let the manager know what is needed.
Manager: help the advisor build their business.
Advisor: refer business to manager, when applicable.
Both parties should continue to uphold the vital elements of honesty, integrity and trust, coupled with expertise and knowledge of their respective areas. Investors deserve to have their advisors (and their managers) working together as an ethical team, keeping checks and balances on each other, thus avoiding the likelihood of potential transgressions, no matter how slight.
Practice Development: Just Ask. This is an area that has blossomed into tangible, value-added benefits for advisors. For help in developing new business, advisors can leverage their relationships with money managers. Managers are happy to provide resources that will help advisors capture assets and build a bigger practice. Marketing tools, educational materials for clients, event sponsorship and participation, reference pieces and white papers on their Web sites, training, professional designation assistance, and other such assistance are offered-most as a thank-you for doing business with them, or to encourage any future business.
Relationship Maintenance: Strength-en the Bond. There are a few simple rules to follow in maintaining a symbiotic working relationship:
Be respectful of the partnership.
Set parameters and boundaries.
Remember that consistency is paramount.
Asking for referrals works both ways.
The successful symbiotic relationships that currently exist between advisor and money manager quickly are becoming a vital part of many advisors' practice. Managers are providing crucial assistance in helping the advisor manage and educate clients on risk expectations, volatility and the market in general.
Money managers need to continue to articulate their particular skill or process, and its uniqueness. The advisor, in turn, must grasp what the manager's disciplined process is, and how it adds value for the client. When all parties exhibit professionalism, integrity, respect, honesty, diligence, teamwork, passion and trust on behalf of the investor, then all parties win.
Editor's note: Many thanks to Drew Washburn, VanderHeiden Financial, Centennial, Colo., for his research assistance and insight into these vital relationships.