Dear Financial Advisors of Water Cooler

I know there are at least two of you out there - and since I haven’t stirred the pot in a while, I figure it’s time I do just that.

I talk to A LOT of financial advisors - really just about no less than 40 a day. And the most common re-occurring theme they all reference when they’re in the process of shooting my quantitative based asset allocation skills down is that, they’re - individually - far superior stock pickers and don’t need help. I hear all the time: “I don’t need help, I constantly outperform the market in all assset classes all on my own. Seriously, my clients would kill me if I ever retired”.

Yeah, okay, that’s GREAT! Really fantastic. But, 100 of you in a row tell me that same message. I could believe it if every 1 out of 100 advisors said that message. But, when I hear a long string of superior return claiming advisors, I just have a hunch that SOMEONE is lying to me.

What gives? Is being a financial advisor the last great hope for making $10k a day?

prolly they are trying to get rid of you. how are you getting these leads?

Relationships bro. Relation-ships.

So, you are selling them some kind of consulting or analysis service? How many people like this do they talk to, and what do they think about that?

Well I’m an advisor, MLA ( I think), gwoods and Greenie (hopefully soon).

I’m actually impressed that 40 advisors would take the call. (That’s sounds high to me). My secretary is pretty good at filtering out those types of calls. I mean, there are a lot of firms trying to get you to sell their products.

I’m not sure about your firms business model, but if I were in your role, my objective of that initial phone call would be simply to get the advisor to agree to a face to face meeting. That’s it. For the first meeting, you want to learn about how the advisor runs the practice, manages client investments, provides financial planning services etc. Then, once you have an understanding of how they run the practice, you can talk about how your solution can benefit them.

Most advisors would already have an established investment philosophy and strategy already in place. (Whatever it is, they pick their own stocks, they use managed solutions, mutual funds, ETFs…). They are not going to just change it to whatever it is your selling after one phone call. Never going to happen. Its like going out on a first date with a chick and expecting to nail her at the end of the date. Yeah, it could happen, but not very often. Unless your a stud, or, she’s just easy.

Regardless, your just out of college right? First job in finance? Just keep getting better talking on the phone (Think of this job as your practice girl). Ask more questions, less talking about what it is your actually selling.

yes. It’s a ‘free’ offering we use in which to deliver about 400 different model portfolios of which, our own proprietary strategies are embedded (where it makes sense). We have a huge quant. analyst team that formulates our CMA’s and what not every year, and then we marry those recommended asset allocations with the SMA managers we have the highest conviction in based upon our research analysts opinions. The end result is a set of investable models that we will handle all of the trade ops on so the advisor can go focus on growing their business while my team handles the account maintenance, performance reporting, etc.

We target this to the advisor base of advisors who are already on our platform - it’s a fintech company and I work within the actual asset management division. So, they’re not entirely ‘cold’ calls if you will because the advisor already knows where I’m calling from since they all have assets with us already. We have 600 advisors signed up so far in this new program, with a lot of assets flowing in.

Their reactions range from anywhere between “Never call me again” and, “I’m ready to convert my entire book to this”. It’s really mixed, so I guess it really depends. My value add may not be seen right away though. I’ll set up a meeting, explain to them why we’re such proponents of say, active/passive investment management, and then build models for them. Then a few weeks/months down the road, they’ll meet a client that is a perfect fit. That’s really what’s happening here. I’m guessing that they talk to a SHT load of people about this same thing though.

First–and I’ll admit freely that I’m a bit jaded against the industry that I work in–most of the “financial advisors” you meet aren’t professionals. Most of them are idiots. See this Dan Solin column.

Nonetheless, I would assume that your products are virtually the same as everybody else’s. Let’s assume that I love Loring Ward and want to use their TAMP. I know you offer the Loring Ward TAMP. So does FTJ Fundchoice. So does Envestnet. So does SEI. So does my B-D through their proprietary platform. Or I can go directly to Loring Ward to access it. Why should I go through you? What do you offer that I can’t get at one of these other firms?

If you can’t give me some sort of convincing reason to change, then…there’s no reason to change.

You’re exactly right about how to approach this. I’m more or less trying to sell the meeting rather than the product with as much of a Simon Sinek “Sell the Why” anecdote as possible. So far, there’s only been one person out of the thousands of phone calls I’ve made that I’ve closed all on my own directly over the phone. I love that guy though. I call him once a month just to say “Hi, sup?”.

I’m calling from someplace they already do business at though, so, me talking to an advisor isn’t unreasonable when I say “Hi, I’m CEO10KaDAY calling from {Goldman Sachs}, for Jeff Smith. . .” - they’ll transfer me, then it’s on the advisor to ignore or pick up.

PS: We should talk :wink:

FAs should not be picking individual stocks, period.

While philosophically I agree with an asset allocation-focused approach for most retail clients, at the same time, OP, what makes you the best in the asset allocation department?

Hey Op,

If you don’t mind I’m curious about your numbers. Assuming you call 35-45 people a day, how many of those calls turn to meetings?

My uneducated guess is something between 0-5 but if I knew any better I wouldn’t be asking you.

Or this.

I assumed in my first post that you had more or less the same TAMP’s that everybody else in the world has. But maybe you actually have better products.

So which one is it? Do you have a better product? Or a better way of delivering the same product that I already have?

I missed that you had essentially asked the same question.

No, different question. I assumed that he had the exact same model as the other guys. You asked if his model was better than the other guys.

At the end of the day, I would move to your platform if: 1. You had better performance, net of all taxes and fees, or 2. You had some kind of neat gizmo that I could use in my practice to keep clients happy or make my job easier. (EG - Morningstar will comp an advisor workstation subscription once you reach 40 accounts.)

A big issue, at least in Canada I see is that its all about distribution and weak industry (proficiency, regulatory) standards.

If proficiency standards are raised significantly, some “advisors” currently in the industry probably won’t be able to meet them - forcing them out. Fund manufacturers and dealers wouldn’t want that, because that’s going to negatively impact their ability to sell products (investments, insurance).

The banks (i.e bank branches) are getting better with proficiency (from what I see), requiring a CFP or PFP in order to get hired on as a planner or investment rep.

But investors are stupid too. They don’t even ask about your credentials (either current clients or prospects).

You have to be familiar with the Third Party Strategist/Model movement going on right now. Advisors have always had access to model portfolios (where you outsource all the investment decisions to someone else) but traditionally they’ve been offered by their broker-dealers own research team. For example, Morgan Stanley has their Select UMA platform where Morgan Stanley picks the investments for the advisor. Main benefit being it frees up time for the advisor to acquire more clients. But, using your home office’s models makes it difficult to move shops (portability) so many advisors decided not to use them.

About six years ago or so, a few TAMPs started offering their own models. As these TAMPs grew, they realized it was more profitable to have asset managers like my shop create and manage the models and they (the TAMP) would provide them to advisors for free. The TAMP makes money from my firm as we pay to have our models available. (This is the basic setup, anyway.) Now there are dozens of TAMPs and FinTechs that do essentially the same thing.

So what makes their/our asset allocation mouse trap better than the average advisors? The people creating the models have way more resources than the target FA (generally lower AUM advisors, not going after billion dollar RIAs), there are actual Portfolio Managers that typically have a long track record of managing asset allocation products that are named PMs on the models, and the model providers typically provide weekly updates to the advisor so the FA can always speak to their clients as to what exactly is going on with their investments while doing minimal actual work.

As much as I don’t like them, the best example of outsourced models is DFA. They’ve raised half a trillion in AUM by selling an asset allocation philosophy.

To sum up: Are model providers better asset allocators than your average FA? Yes, almost certainly. Think of the average FA and how dumb he/she is. Now remind yourself that half of advisors are dumber than that.

Is that M* direct? I have that on my laptop. It’s pretty cool. Although, I could just use my bloomberg terminal too whenever I want, which pretty easily trumps M* direct.

But to address your previous posts, I think our platform over delivers and under prices all of our competition (in fact I’m absolutely sure we under price). Although I have a hunch you were asking the question in a more rhetorical sense. So, I’d have to agree with you entirely. There’s very little differentiating factors in this industry when it comes to things like asset-allocation because the paradigms that underline investment methodologies for retirement are so strong throughout the entire business. IDK if I said that clear enough, but we all essentially believe the same things and have very similar expectations for clients & asset managers.

So, you’re right, I don’t know if what I’m offering you is totally ‘different’ - BUT, I will say, if you go with me, I’ll take you fishing. And who the heck would say no to that?

^So what are you pitching to the FA’s of the world? You already know you shouldn’t be pitching better performance. And to be honest, you shouldn’t be pitching lower price, because the clients are paying for it–not the FA.

If you call me, you should say “Greenie–what models are you using?” “Great! We have the same models on our platform. What cool tools is your current platform providing to you, such as performance reporting, CRM, client portal, document storage, account aggregation, financial planning software, rebalancing tools, etc.?” “Really? Do you have to pay for all those toys, or are they provided at a discount or for free?” “What do you find yourself spending a lot of time dealing with?” “Do you wish you could automate that so you could free up your time, so you could either prospect or get to the tee time early?” “Well!!! Have I got a deal for you!!!”

i think i like the original advice. where you are trying to get a chick to commit to a first date. just invite her to a party. tell her there will be free booze and pizza. and flex hard when she comes through.

Send me your location, let’s Focus on communicating 'Cause I just need the time and place to come through (place to come through)

obviously the advisors you’re talking to are a$$hats given they’re not realistic about their own performance. the fact they’re taking your call/meeting to lie to you tells you they’re a$$hats with too much time on their hands. personally, i’ve never deceived about performance. we have a style tilt that results in better than average returns in some periods and lower than average returns in others.

most advisors sell their offering as a somewhat unique investment strategy and part of that is the fact that the strategy is developed, monitored and adjusted by the advisor. my experience is that clients seem to gravitate toward a portfolio run by the advisor they will be talking to because they want to hear from the guy managing the assets, they want to feel like they’ve got the “inside track” or “secret investing recipe” and to do that you need a face, and most clients want to reduce the management cost which usually means third parties are a no-go. and like greenie is saying, if i ever were going to offload the investment process to anyone, it would likely be my own firm’s internal asset management arm which allows me more flexibility at a lower cost. plus, i can pick up the phone, dial 4 numbers and get the PM immediately if need be. i can also talk to anyone else that is part of the investment or admin process in a heartbeat through internal comms.

This industry isn’t dead yet…