Smaller mutual funds are also part of the trend. Many realize they are better money managers than marketers and decide to refocus their efforts. They often try to be adopted by larger firms with distribution so they can continue to manage the portfolios, sell the assets outright or liquidate. Other mutual funds see this is a buying opportunity to enhance asset levels or add portfolios they didn’t already have. We have helped a number of our asset management clients explore their options. In fact, I am currently working with a client looking for a mutual fund manager of a small-cap or micro-cap fund who may want to consider selling to another firm.
Hortz: What do you see as growing challenges for independent advisors and wealth managers?
Sondhelm: Like the asset managers they work with, many advisors now must shift to be compliant under the forthcoming fiduciary standard in the DOL rules. They will have to make changes to comply and may face a revenue loss as a result of moving clients to lower fee products. Concurrently, some offices will have to add staff or hire a vendor to handle the additional regulatory requirements, increasing their overhead.
Other challenges facing advisors are succession and recruitment. Clients want to know what will happen to their account if their advisor can no longer perform his or her duties. The average age for an advisor is early 50s according to a 2016 report by EY: The Next Generation of Financial Advisors. For each graduate of a financial planning college program who enters the industry, there are two advisors who just became eligible for Social Security benefits, according to the EY report. On the flip side of this equation, not many young people are entering the business. The U.S. Bureau of Labor Statistics projects the number of job openings for financial advisors will jump 27%, or 60,300 additional jobs, by 2022.
Advisors are also seeing a more educated client who often wants to have a hand in their financial planning. They scour the web and come to meetings armed with information and questions. People check credentials and reputations online before going to that first meeting. One’s reputation is now a dynamic entity that must be managed. You can no longer assume they’re going to automatically agree with everything the advisor recommends.
Hortz: You recommend positioning a firm’s experts as primary influencers in key conversations and creating a value that’s independent of investment performance. How do you go about doing that? What does it take to be a real thought leader today?
Sondhelm: Today there are multiple opportunities to tell one’s story. For maximum impact they should each be working together. Public speaking, small group meetings, one-on-one discussions and meeting with reporters and placing editorials in selected media help add credibility while controlling and spreading one’s message. Maintaining an active website and social media presence, as well as producing articles and white papers featuring timely content your prospects and clients care about are ways to become an influential subject-area expert.
Consistency is also important. It’s not enough to communicate. Post content weekly to your site, if possible, and distribute it via social media. You should also be proactive and consistent in regularly reaching out to the media, seeking opportunities to communicate positions and views on relevant issues. It’s OK to be controversial as long as you can support your position. The goal is to become credible and have influence. To do this, what you say has to matter and you must do so on a regular basis, otherwise no one’s going to listen.
Ultimately, your advice and insight should turn into active engagement via emails and calls, which will develop customer relationships. This is where advisors can become innovators as they creatively learn to engage people from online to offline.
Hortz: From your experience, what is the difference between a “great” story and a “lousy” story?