One forward-thinking advisor in the Midwest called me this past winter to request exactly that. In less than two months we worked out all the practical arrangements. Now, we manage their clients' portfolios exactly as we do our own clients'; we provide on their own letterhead all the same electronic and print communications that we use in our practice; we have a regular conference call with them; and we give them access to all the daily and quarterly reporting that we have developed. They continue to control the entire client relationship; we have no direct contact with their clients.
This firm had decided that the world is changing and that MPT is not a viable formula for investment success in the evolving environment. We have a long history of success as active managers; now we have become that firm's investment management department. You can imagine how much work this takes off the advisors' desks and how much anxiety it lifts from their shoulders, how much more interesting their client conversations are now that they are doing something about returns. Now, they tell us, they have time for marketing and they have the extra advantage of offering prospective clients our investment performance record, which gives them a certain amount of cachet and uniqueness. From our point of view, the new revenues have provided resources to build depth of bench in our research and trading departments. You gotta love win-wins!
Just Do It
If your revenues are tied to AUM and the erratic markets are creating anxiety for you and your clients, you could just stay the course, keep offering assurances and hope things work out. But if they don't, it might get very quiet around your office. Or, you can get off your duff, take charge and try something new. Business coach Richard Gee (www.richgee.com) says the No. 1 business problem is slow death. "People will just act like nothing is wrong and 'stay the course' while their clients and profits drain away. Figure out what's wrong," he says, "make a list of possible solutions, pick one and, as Nike encourages us, 'Just do it!' "
J. Michael Martin, J.D., CFP, is the chief investment officer at Financial Advantage Inc., Columbia, Md. (www.FinancialAdvantageInc.com)