Advisors discuss whether a client relationship manager is someone they need-or not.

Perhaps the concept of the "Relationship Manager" has been around longer than this, but the first time I saw it spelled out was in the 1999 paper, The Future of the Financial Advisory Business and the Delivery of Advice to the Semi-Affluent Investor, ( by Undiscovered Managers LLC, a mutual fund organization acquired several years ago by JP Morgan.
This report gave, as examples of the use of a relationship manager, several money management firms that established marketing units staffed by professionals who had once themselves managed money but whose job was now to deliver the firms' services to clients as the clients' key contact persons. These relationship managers would head up teams of which portfolio managers would be just one member. In other words, the portfolio manager would not be the point person for the client.
Page 40 of the report states that "a relationship manager's job would include understanding a client's situation, identifying potential needs and marshalling the forces of the organization to construct solutions to those problems. The rest of the team [including the portfolio manager] would provide all the financial advice."
Why not let the lead money manager or, in the case of financial advisory firms, the lead advisor, have the primary relationship with the client? Simple. In a multi-professional organization, he who has the relationship takes the clients with him when he leaves. The study teaches us that developing relationship management personnel is one of the steps to increasing the value of the firm by institutionalizing the firm.
We know some large advisory firms are employing this strategy. For example, Sullivan, Bruyette, Speros & Blayney in McLean, Va., the 40-employee advisory featured in this issue, employs a relationship manager whose function fits very closely the above description. Yet, most firms we talked with do not. The question is ... why not?
Before we answer that, though, what is the predominant organizational structure in many large firms today? It's a team. The constituents of teams from one organization to another may differ, but the team structure is clearly growing in popularity.
In Albion Financial Group of Salt Lake City, the team is headed up by a lead financial advisor who is supported by investment professionals. Albion President John Bird says the investment professional members of the team construct an investment policy with each client under the supervision of the lead financial advisor and, with the support of a paraplanner and operations team, they take responsibility for the client's investment management. "The lead advisor focuses on offering insights and advice to clients, and maintaining the relationships," explains Bird.
Sounds a little like the Undiscovered Managers' definition of a relationship manager, but not quite. The key difference is that Albion's lead advisors work with the clients in a financial planning capacity, whereas a "pure" relationship manager would recognize the clients' needs but leave it to team members to satisfy them. Says Bird, "The reason we do it this way is that we believe our clients want to interact with someone who, at some level, can get their minds around their issues and help craft the solution utilizing the other people and resources of the firm. As a client, I wouldn't want to spend time with a front man who provides no direct value except to say, 'I'll get back to you.' I guess we could say that we do not use relationship managers as described because we want to keep the knowledge close to the client."
Jeff Broadhurst, a sole practitioner whose firm, Broadhurst Financial Advisors, is in Lansdale, Pa., doesn't have the scale for a relationship manager, but nonetheless has strong beliefs about their use: "If I had a larger practice, I would want ten advisor/partners who work directly with clients. There could be support staff to help the advisors, but it wouldn't be some type of hierarchical structure where there is a rain maker, who has just enough contact to "land" the client and then turns him over to the relationship manager while he/she goes out fishing for other new clients. The type of planning we do for our clients requires a close and direct relationship and shouldn't be filtered through a relationship manager."
Ron Roge of R.W. Roge & Co. Inc. in Bohemia, N.Y., is hesitant to use a relationship manager because "if they are good then over time they'll build their own business with clients of the firm. When they leave the firm the clients will leave with them. I think larger firms are better off having a team approach with clients."
What do these different viewpoints tell us? That an advisors' concepts of what a relationship manager is and does is hazy, at best. That's not to say that all advisors, if they had the same understanding of a relationship manager, would rush to restructure their entire organizational hierarchy. But they could make an informed judgment if everyone shared a common definition.
Even the notion that relationship managers are just for larger organizations isn't universally accepted. Greg Zandlo of North East Asset Management in Coon Rapids, Minn., has been a sole principal using part-time help for many years. He considers his sole employee, Michelle Nelson, his relationship manager. Although Nelson does back-office tasks such as preparing new prospect materials, searching out fixed-income opportunities and even answering phones, Zandlo draws on Nelson's extensive experience in customer service to do what's necessary to keep his clients on the books.
Says Nelson, "I give immediate attention to clients' requests and inquiries," something Zandlo couldn't always do when entirely on his own. "Having me in place allows Greg to be out servicing current clients and attracting new ones. And, the succession concept is a big one for clients. Knowing that there is someone here to help them in the event Greg is unable is very comforting and reassuring." Adds Zandlo, "In an emergency, Michelle would be able to provide some continuity until another planner could step in."
So, does Nelson meet the strict definition of a relationship manager? What Zandlo has done that's different from other sole practitioners in having a "right-hand person" is that he's hired with an emphasis on customer service and client confidence, which is certainly a smart business move. But Nelson's undoubtedly valuable contribution isn't exactly that of a relationship manager.
Could advisors bring a (strictly defined) relationship manager into an existing organization, even if they wanted to? Maybe, but not without difficulty. Says Frank Moore of Vintage Financial Services LLC in Ann Arbor, Mich., "Since I built the firm and have brought on nearly all of the clients, it's difficult to not keep working with a lot of them, especially larger clients who expect access to me. Putting a 'relationship manager' between us would likely alienate some clients."
Maybe the concept is simply flawed. In the 1999 Undiscovered Managers report, Mark Hurley, the company's CEO and lead author of the study, borrowed many examples from the money management world. Maybe we're comparing potatoes and tomatoes?
Norm Boone, an industry veteran who runs Mosaic Financial Partners Inc. in San Francisco would probably agree. Says Boone, "If a sales person brings in the business and is to stay involved, they have to be able to add some value. It's hard to know what value they would add in our business if they weren't handling new account paperwork, making investments or doing planning." Like Bird, Boone assembles his staff into teams composed of advisors (relationship managers who both manage the client relationship and develop new business) and associate advisors who, in turn, are assisted by a planning department and an investment department.
Chip Roame, managing principal of Tiburon Strategic Advisors of Tiburon, Calif., known to most advisors as an astute observer of this profession, says, "I think that most advisory firms have figured out that the stand-alone sales person model does not work. More are focused on using marketing to drive leads to relationship managers, who close and then manage the client relationships. Often these relationship managers are supported by a team of people, maybe including more junior financial planners and portfolio managers." In other words, the stand-alone sales person isn't the relationship manager as posited in the Undiscovered Managers report.
Ironically, Roame adds, "I think this is all good, and part of the maturation of the advisor industry, especially in the RIA channel among larger firms of $200-plus million whose key challenge now is institutionalizing what they do." Isn't institutionalization the reason given in the Undiscovered Managers' study for needing a relationship manager, who is part of the firm's marketing unit, at the head of a team of investment and planning professionals?
In the end, it will be each advisory firm owner's job to figure out what organizational structure meets the twin needs of institutionalizing the firm (including protecting against client departures) and providing professional, team-based customer service. A traditional relationship manager may or may not be part of that structure.