These days I do a lot of travel. I’m writing this at 36,000 feet headed for Phoenix. I’d like to share a story about how we travel versus where we are trying to go. My hope is to give you a different perspective on how you manage clients’ money and your business.
Imagine there are two planes scheduled to take you to your destination. One has a fully licensed, experienced pilot and crew. There are gate attendants, ground and maintenance crews, and fully staffed terminals with delicious airport food. The other plane has the same declared destination but has no pilot or crew except for you. The plane will have a connection to the internet with shortcuts to several sites that can teach you how to fly this type of plane. Information on fueling, filling the luggage bays, taxiing, flight operations, navigation, and take-off and landing can be readily accessed online. This option is 50% cheaper.
Which plane would you choose?
Now consider outsourced investment management versus “Rep as Portfolio Manager (PM)”. Certainly, most advisors have access to all the information s/he needs to manage client money. But is it wise? Do you have the dedicated, full time support such as Chartered Financial Analysts (CFAs), analysts, data managers, reporting and billing departments? Are you realistically able to become an asset class specialist and cover every geography and market? Sure, the information is readily available, but do you have the time, the education/training, the people, the experience or the other resources necessary to manage diversified portfolios effectively? If the answer is “yes”, then why are you an advisor? I’d consider a career in portfolio management!
Put simply, you can’t teach experience.
If the truthful answer to the question above is “no”, the solution is easier than you think. First, recognize that time is your most valuable asset. The more time you spend with clients versus on clients is paramount. The more time you spend prospecting versus reviewing statements and other necessary yet mundane tasks will determine your success or failure as you define it. You don’t need to be an expert in every asset class, active versus passive, sectors or factors. You need to be an expert in knowing and serving your clients.
I humbly submit that for many years I was an advisor just like you. Advisors love to help people. We work with them to quantify their goals, put a plan in place to meet those goals, and most of the time, that plan involves investing. What you do need to learn is how to select effective managers to fit into your clients’ plans. Here you can leverage your broker-dealer’s research to find a few managers that work well together or use a Turnkey Asset Management Platform (TAMP) and their research. Yes, you might need to learn about diversification of management style and work on integrating reliable managers into a portfolio, but isn’t researching and picking a few managers easier than continuously researching and choosing 40 stocks or a host of Exchange Traded Funds (ETFs)/funds, building a bond ladder and infusing some alts that you hope like hell will work?
Sure, you and your clients will likely pay more for managerial expertise, but you’ll get to spend more time growing your
practice as your research time will be reduced and controlled as you will only be managing your managers. If you choose well, the investment results may be akin to the experienced pilot landing in a storm rather than you reading page 12 of a flight manual.
Need some help learning how to select managers? Ask your home office or TAMP research department. Or, if you’d like, reach out to us and we’d be happy to share a short paper on how to build an effective and diversified portfolio for just about any client need. Want it even simpler? Ask us how our diversified strategies can serve as a complete solution for many of your clients’ needs.
Learning to fly takes time, training, knowledge and skill. Spending your time on the ground with clients and prospects should help grow and maintain your revenue, position yourself in the tower as the controller, and leave the job of navigating the world’s asset classes and turbulence to those experts who do nothing else.