"We expect to see rising inflation going forward-maybe not next year but in the long-term-and we think that'll affect our real estate lease costs," he says. "We're looking at a longer lease. We also expect salaries to rise tremendously in the second half of the decade because of inflationary needs. As a result, we're doing what we can to expand our revenue base through client acquisition."
One of Legend's big growth initiatives centers on a new firm it recently launched to address the middle market. Legend typically services people with generally $1 million in investable assets. The new firm, called EmergingWealth Investment Management Inc., will effectively have a $300,000 minimum.
Legend will subadvise the portfolios, and will eliminate as much mail as possible by sending everything by encrypted e-mail. Stanasolovich says the firm has used an encrypted e-mail product from IronPort Systems, a Cisco division, for the past year with good results.
In addition, he says Legend is looking to outsource as much as possible to get mundane work--such as performance reporting--out of its shop. Outsourcing can be helpful, but Stanasolovich says his firm has become more aggressive in dealing with outside vendors. Specifically, he says Legend has been burned in the past by vendors who didn't deliver what they promised. In response, he says the firm has started recording every vendor conversation.
"It's helpful when we go to court to get our money back," Stanasolovich says. "We're doing this going forward as a regular precaution against getting sold a bill of goods."
When it comes to investment management, Legend has crafted a game plan based not on the recession just passed but on what it believes is the downturn to come. "All the writing is on the wall for another downturn similar to '08," Stanasolovich says.
His rationale includes a negative view on the housing market, where the 500,000 units built in 2009 and 2010 is a mighty drop from the 2.3 million units built in 2005. "Yes, that's 10% higher than the low point," he says, but big whoop! It's still very weak."
And Stanasolovich believes unemployment will likely persist around 8% during the next six to seven years. Plus, he forecasts the second wave of the mortgage crisis will hit this summer, and that many countries-including the U.S.-will be plagued by debt problems.
"We'll have high inflation going forward, so we'll have variable problems that will cause the market to turn down," Stanasolovich says. "It'll probably be a good six to seven years before the secular bear market is over."
For that reason, he says, Legend has built portfolios around contingency plans based on such scenarios as high inflation, deflation and prolonged periods of lethargic economic growth. "We think we need these contingency plans to be successful as an organization going forward," Stanasolovich says.
Whatever form it takes, advisory firms are trying to position themselves for the next stage of the industry's growth.