The Financial Advisor Symposium in Las Vegas focused on practice growth strategies.

    While the world that lies ahead for investment advisors is filled with even greater growth than the industry has experienced to date, the 800 advisors and countless financial services executives who came to the third annual Financial Advisor Symposium in Las Vegas discovered that refining growth, and the service and marketing strategies that build it, can boost their profitability even further.
    The conference, presented by Financial Advisor magazine and Intershow Productions in late April, kicked off with Russ Prince and Hannah Shaw Grove, principals of Prince & Associates, leading a general session devoted to the best practices of the 1,200 top advisors in the nation. Most of these advisors work with affluent clients, and they tend to gather financial information in painstaking detail so they can devise customized solutions for wealthy families, Prince explained.
    While the financial services industry defines clients by their investable assets, the affluent tend to measure their finances by their net worth. Prince estimated that there were about 721,000 families with net worths of more than $10 million.
    But these well-heeled folks are demanding, and expect a lot from their advisors. "Client loyalty goes down with income," Prince said. "You taught your clients diversification. The richest clients learned that the best."
    Grove pointed out that service expansion has to go beyond the basics if advisors are going to win the trust of high-net-worth clients. "Clients don't expect you to be an expert in all areas," she said, adding that advisors who display a willingness to take a secondary role in parts of the relationship often enjoy the best results. "Construct a team where you manage the relationship."
    In summation, Prince told attendees there is nothing that the nation's top 1,000 advisors do that other planners can't do. However, the elite advisors are extremely well-organized and work with remarkably systematic discipline.
It's no longer just enough to deliver products and services to clients; you have to help them merge their money with their lives, Roy Diliberto, president of Philadelphia-based RTD Financial Advisors, told advisors during his session. While that may sound like common sense, many advisors have yet to create lockstep planning processes that address not only investors' money goals, but their life dreams as well. During his presentation, aptly titled "Organizing a Financial Life Planning Practice," Diliberto said that advisors need to know a good deal more about clients than their income and assets to do the type of job that truly evolved "life planning" requires. That job starts with fact-finding at the most fundamental level, said Diliberto, author of "Financial Planning-The Next Step: A Practical Guide to Merging Your Clients' Money With Their Lives."
    Today, advisors create problems for themselves and clients because their assumptions are skewed; there is not enough emphasis on qualitative discovery and advisors "ignore the fact that money is an emotional issue," maintains the veteran advisor, who is also a columnist for this magazine. "The financial planning process is not about our ideas as much as it is about the life of our client and how our ideas might fit that life."
    That's why it's critical to ask about a family's money history, their past money experiences and their current money attitudes and concerns, Diliberto said. This is also the time to elicit client feedback regarding future concerns and current and expected transitions. "There is lots of quantitative data but not enough qualitative discovery," he added.
    Where should the conversation start? By asking clients directly what they've experienced, what they believe and what they desire. Questions should start with the money messages that the client's mom and dad passed along. "What financial values and/or discussions with your parents continue to affect you today?" is one of many questions Diliberto uses to figure out clients. He also suggests asking clients how they define success in their working life and their family life, how they envision their sixties, seventies and eighties, and how they think their lifestyle will change in retirement.
    True and successful financial life planners ask the right questions, listen carefully to the answers, help their clients focus on real life goals and care enough to put their clients' interests first, Diliberto said. Most important, "They improve the quality of their clients' lives."
    Without this approach, "Clients and their heirs may begin to ask, 'Are financial planners part of the problem or part of the solution?'" he added.
    As advisors seek to draw a more comprehensive picture of their clients through questions and answers, they are also looking hard at how technology can help. What was the greatest recent development, according to experts who spoke at the symposium? Web-based programs that integrate portfolio management, financial planning and customer relationship management on one platform. This provides advisors and their clients with a fully comprehensive snapshot of where they are, where they're going and whether their goals are being met along the way. "The long-awaited developments in integration are giving advisors the types of choices and efficiencies they've been longing for," says Andy Gluck, a Financial Advisor editor-at-large, who moderated a panel called "Silver Bullet 2.0."
    While Web-based integration may still be in its proverbial infancy, it already has begun to give advisors the type of one-stop account management they have been seeking for years. No longer do advisory firms have to manually input portfolio changes or even account or client address changes across multiple platforms. "We're offering full data integration, interactive and Web-based collaborative planning functions and full administrative and management capabilities," Blaine Maxfield, president of SunGard's Planning Station and Wealth Station, told symposium attendees. In addition to portfolio allocation, the platform offers 20 different goal-based planning models, scenario comparison and what-if modeling abilities, ranging from fairly basic client goals to advanced cash flow planning. "This allows advisors to clearly communicate concepts and individualized planning goals and recommendations," Maxfield said.
    While more and more advisors may share their platforms with clients, using dual computer or conference-room-style projection screens, the latest Web-based integrated platforms offer a new level of interactivity and tools that both advisors and their clients can use. Since these platforms are often driven by client goals, they will introduce an even  greater level of needs-based planning into advisor deliverables, Gluck said.
    How can products help? Both alternative investments and guaranteed income were the hot topics at the symposium. Recent Securities and Exchange Commission developments continue to make stand-alone hedge funds a more difficult reach for some advisors and their clients. That doesn't mean that hedged strategies or even hedge funds themselves aren't accessible, but they may serve investors better when multiple managers are used and they are wrapped in a registered mutual fund, said Lee Schultheis, chief investment strategist at AIP Alternative Strategies Funds, to advisors during his presentation "Hedge Fund Strategies in a Mutual Fund."
    One major reason why: The typical hedge fund is fairly illiquid and often has a significantly concentrated investment tilt, one that can create just the  type of volatility and potential losses advisors and their clients seek to avoid. At the same time, the ante for even getting into an individual hedge fund continues to be ratcheted up, as the SEC seeks to protect individual investors from overconcentration. In its latest pronouncements, the SEC has raised the bar for hedge funds, allowing only those with a minimum of $2 million in net worth, not counting the investor's primary residence, to invest in them. That's a noteworthy change for advisors who use hedge funds. Previously, the agency allowed investors with $1 million in net worth, counting their primary residence. This could disqualify 88% of investors currently deemed "accredited."
    One alternative, especially for advisors seeking fixed-income alternatives for their clients, is a multimanager mutual fund that invests in more than 20 hedged strategies run by hedge fund managers. That's what Schultheis created with his Alpha Hedged Strategies Fund (ALPHX) in 2002, which since inception has returned 7.5% per year (as of April 30, 2007), delivering a significant premium over the Lehman Brothers Aggregate Bond Index at 4.4% per year. Three-year returns for the fund were 10.74%, annualized, while the bond index was 3.49%.
    "I think it's more important than ever for advisors to be able to kick the wheels of their investments," Schultheis said. "We have real-time access to the actual investments being bought and sold by the hedge fund managers who sign on with us. With a hedge fund, there is a lack of transparency," the fund manager told advisors.
    While the symposium kicked off with a presentation about how to work with the uberwealthy and boost your own income to more than $1 million a year, another panel took a hard look at how to work profitably with middle-income clients, who in some cities are middle-class millionaires themselves.
    The efficiency of a practice is key, said Jill Hollander, who bought her firm Financial Connections Group in Berkeley, Calif., from a former partner in 2000. Hollander, who since has grown the firm some 96%, from $49 million to almost $100 million, charges a minimum annual fee of $5,000 for planning, asset management and three hours of tax preparation. Measuring hours against fees and value delivered is a quick way to measure a client's profitability, the veteran planner said. Having similar clients and outsourcing asset allocation help with efficiency, she said. "A $500,000 client is a good starting point," Hollander said, referring to her asset minimum. "Our clients' median age is 55, and we tend to work with a lot of therapists and some authors," Hollander said. "They're great delegators and know what they don't know. Many of them are the $2 million to $3 million dollar client of tomorrow."
    Economist Ed Yardeni addressed attendees at a dinner about the wealth of nations. Yardeni said that he thinks a recession in the next year or two is highly unlikely. "If we were to get one, we'll get it now" due to the subprime lending debacle, and he doesn't see it materializing.
    Moreover, the economic power shift away from the U.S. is not a bad thing at all. "The global boom has a life of its own and it's not dependent on the U.S.," he said.
    Despite a softening in the domestic economy early this year, Yardeni predicted that real gross domestic product would grow at 3% in both 2007 and 2008.
    Yardeni predicted the Standard & Poor's 500 Index would reach 1,600 by year's end. "My concern is that we'll get to 1,600 next week," he said. "We've got the greatest global boom of all time. Prosperity isn't a zero-sum game. Our economy is evolving into a knowledge-based economy. The unemployment rate for anyone with a B.A. is 1.9%." In this kind of environment, "It's hard to hate anything." There's even something of a virtuous cycle to the real estate bust, in Yardeni's view. "The carpetbaggers already are coming to Las Vegas and buying foreclosed properties," he said.
    Some of the major investment themes include energy, industrial infrastructure, basic materials and electrical components. "The cheapest way to play globalization is to buy industrial companies," he argued. "The world is building [a city the size of] Houston, Texas, once a month."
    The symposium's closing general session speaker was Nick Murray, who used two statistics to explain to advisors what their value proposition should be. According to Lipper Inc., the average return of the average equity fund over the last 20 years has been 10.7%. Research conducted by Dalbar found that the average return of the average investor over the same period is about 3.7%.
    "In a country and society which has raised a false god-outperformance-real people don't just underperform the markets, they underperform their own investments," Murray said. "The gap between 10.7% and 3.7% must be attributed in its entirety to bad behavior. That's a 7% gap. What does the average advisor charge: 1%."
    The financial services industry must shoulder some blame, since it often encourages Americans to chase outperformance. "That [7% gap] doesn't stop a huge percentage of people in this industry from going out and telling people they can get them better returns. It's a lie," Murray declared.
Instead, advisors should stress three beliefs-faith, patience ("the most un-American of values") and discipline-and three behaviors-asset allocation, diversification and rebalancing. At least this audience seemed convinced of that.