The pandemic prompted a significant shift within the financial services space, yielding a decentralized workforce as professionals moved from the corner office to their home offices. What was believed to be a short-term solution has evolved into the new reality for many businesses. While the change may be welcome in many regards, it creates new vulnerabilities that RIAs have never encountered. Chief among them, a greater risk of cyberattacks. Globally, over 75% of institutions saw an increase in cyber attacks and crime since the pandemic began.
Cybersecurity needs to be a top priority for RIAs. Our team at GVA has been proactively designing a solution that will help advisors in the GVA network safeguard their practices and client data, and we are excited to share more on GVA SecureOffice, a new cybersecurity-focused platform powered through our partnership with Align Managed Services, a leading technology and advisory firm in the investment management industry.
Our Chief Operating Officer James Spinelli recently sat down with Align’s Chief Operating Officer, Vinod Paul, and Managing Director, Cybersecurity and General Counsel, John Araneo to discuss the latest trends in the cybersecurity space and what RIAs need to know to protect their businesses. Here’s what they had to say:
What is GVA SecureOffice and what benefits does it provide GVA advisors?
James: The GVA SecureOffice is a cybersecurity and operational platform designed for our advisors. It provides the proper cybersecurity infrastructure, rooted in the policies and procedures that our firm adheres to. It also provides managed IT services and the office applications and backend structure that they need to run their business. The platform is powered by our third party partners at Align Managed Services. Align is cutting edge in respect to cybersecurity best practices and regulatory policies, and GVA SecureOffice empowers our advisors to focus on their clients while having the peace of mind that their business is properly structured.
How does a single-point solution like GVA SecureOffice yield stronger cybersecurity measures?
James: We feel incredibly confident in the platform as we introduce it to our advisors. GVA has been using the GVA SecureOffice platform internally for over a year. We did this to best understand exactly how it works, its full potential and Align’s role. It will help yield stronger cybersecurity measures because advisors and access users will be on one secure platform with professional oversight on the cybersecurity policies and procedures we put in place for the different offices we are working with.
How will the components of GVA SecureOffice better protect GVA advisors from cyberthreats?
James: We have the best minds on this platform. There is protection from both the technology and knowledge standpoints of who our advisors will interact with at Align and GVA. Those are measures that we put in place to not only protect the advisors, but also their end clients and the personal information they hold.
Vinod: Maintaining a secure environment is a must-have from a compliance, reputational, operational, legal and due diligence standpoint. Cybersecurity is a multi-factor challenge that requires a number of layers of security. These layers are built into the technology platform we have designed for GVA SecureOffice. Aside from the technology piece, we have to ensure users know how to leverage the technology available to them.
James: Education is essential.We have quarterly compliance calls that include an educational component about cybersecurity. In our most recent session, John spoke to our advisors and employees on best practices, what to look for and more.
Vinod: The beauty of the platform is it’s evolving. We don’t just deploy dual-factor authentication and never look at it again. As the threat landscape changes, new technology becomes available that enables us to better protect our clients, and we pass on that industry-specific knowledge to the clients.
Cyber attacks have increased in recent years and have been a heightened concern as more businesses operate in a virtual environment. What do advisors need to know about the current environment for cyberthreats? How can they safeguard against cyber attacks?
John: The world has transitioned from the corner office to the home office, and the necessary protections have evolved. Technologies can accommodate protections at the end-point level. Advisors need to be mindful of this. We are no longer looking to protect just the server room. Instead we now need to safeguard the end-point, the laptop, mobile phone and other parts of a distributed network. Those who are working from home need to make prudent decisions about what has been authorized by the network. The shift to a decentralized workforce has really changed this.
What is new for advisors when it comes to cybersecurity? What changes have been made in 2021 to help better protect RIAs?
James: The applications advisors are using today have gone internet-based. They are no longer installing software on a computer and are logging into their trading platforms, performance reporting platforms, email, etc. Advisors’ work is cloud-based, and these changes open the door to vulnerabilities and have come with the need to enhance the overall platform and tools installed on computers to monitor usage and related activity on individual computers. Align has end-point services that monitor what is going on. It sends information to a centralized source that monitors if someone’s activity is unusual.
Vinod: We put a lot of emphasis on securing your identity. This is leveraged often with single sign-on, dual-factor authentication, a secure Microsoft ID and accessing SaaS-based applications, like portfolio management, banking, institutional services and more. With the decentralized workforce, we worry about the actual end-point, whether it’s in the office, a hotel room or the home, and we look at behavior and leverage artificial intelligence to identify malicious behavior.
John: Cybersecurity Risk Management contemplates balancing many fluid elements simultaneously, new attack vectors, new malware and new protective technologies. As these elements continue to evolve, one thing is constant; advisors simply cannot skimp on the underlying IT infrastructure as the foundation to a meaningful Cybersecurity program. GVA SecureOffice is providing a stronger underlying IT infrastructure advisors need to adequately protect themselves.
Are there any new elements advisors need to consider for a robust cybersecurity policy/plan?
John: In 2020, the SEC made a significant shift in the regulatory landscape by adding mobile security as a unique domain within a model cybersecurity program. As advisors continue to respond to the evolving landscape, the ability to collaborate cohesively and securely is important, and mobile security is a part of this. Mobile security has been a significant and inevitable addition, and is certainly a sign of the times.
We have also seen an increase in regulatory appetite for disaster recovery and business continuity controls. These have been heightened up the ladder on the regulatory landscape.
Why is it so important for advisors to prioritize cybersecurity in today’s environment and to do so using the right partner?
James: In general, everything that every business is doing translates back to some internet base, and they have some information stored in a network environment. Cybersecurity should be your primary concern. You don’t want to simply partner with someone because they are the least expensive or easiest to partner with. You want to partner with a firm who does this day in and day out, specializes in the space and is entirely dedicated to designing and implementing cybersecurity solutions for financial services firms. Consider this: your clients come to you for specific advice for investments. If they come to you with tax questions, you partner with a CPA who can help. The same perspective applies to cybersecurity; you want to use someone who specializes in the space.
Through GVA SecureOffice, we are partnering with Align, who we feel is best in the space, so our advisors can feel comfortable and confident in the platform.
Vinod: The two greatest assets of financial advisors are their labor and employee-base and their intellectual capital. There is a misconception among small advisors that they are “too small” for a hacker to pay attention to them. This is the wrong way to think about things.
Hackers are sophisticated and see it is easier to mine a small organization’s data. Firms like Bank of America, Wells Fargo and other large institutions have layers and layers of protections. Small financial advisors, especially those who are decentralized, may not have as many layers. GVA SecureOffice allows small individual firms to deploy enterprise-level security within their organization.
John: Advisors must address cybersecurity risk management in a meaningful way and too many vendors fail to right-size the appropriate cybersecurity controls for today’s investment managers. The SEC has declared cybersecurity as a top regulatory priority for the last nine consecutive years and ODD firms will not give any managers who lack the required controls a second bite at the allocation apple.
How are advisors missing the mark when it comes to their cybersecurity measures?
John: The biggest mistake advisors make is not taking cybersecurity seriously as a fundamental tenet of their business and failing to properly invest in underlying IT infrastructure. The industry has long tolerated inexpensive IT offerings that provide sub-par networking and IT solutions and we’ve disproved the IT vendors’ “race to the bottom” model in this industry. So the big miss is when the underlying IT structure is not taken seriously enough or isn’t invested in it properly.
Vinod: It is easy to go and try to run IT by yourself. Anyone can go into Microsoft Office 365 and start up an environment. The hard part is configuring it correctly and ensuring you can employ levels of underlying technology features.
Cybersecurity is not a project, but rather a process. You can take a methodical approach to Cybersecurity and employ a reasonable cadence in maturing your cybersecurity program over time.
For more insight on GVA SecureOffice, our partnership with Align Managed Services and the combined benefit for advisors, schedule a call with us.
Advisors’ worlds have been completely revolutionized within the past two years, as they’ve navigated shifting terrain in the regulatory landscape, managed a transition to remote work and subsequent return to the office, and faced mounting pressure from clients concerned about the ongoing coronavirus pandemic.
These changes have prompted many advisors to reevaluate their businesses and approach to the profession, especially regarding where they seek support. Many advisors are turning to advisor networks ― groups of like-minded advisors coming together to achieve a common goal ― in their pursuit of ongoing business growth and personal development.
Great Valley Advisor Group (GVA) is anchored by a culture of connectivity most readily seen through our advisor network. We have thoughtfully designed a model that allows our advisors to operate independently while still being part of a larger team, surrounded by the knowledge and insight of other advisors. As advisors look to the future and seek avenues for continued growth, aligning with a network presents an appealing opportunity.
Cornerstones of the GVA Advisor Network
GVA’s strategically designed, well-curated advisor network drives success and provides a supportive and productive community for members, based on four cornerstones:
- Transparency with our partners: We pride ourselves on our commitment to communication with advisors. This means initiating an open dialogue and maintaining candid conversations around what is or isn’t working, where specifically they need more support and how our team can do more to propel their success. These conversations must be frank, and rely on our leaders and advisors coming together, but the resulting transparency and corresponding experience are unmatched.
- Facilitating strong advisor relationships: The strength of the GVA network doesn’t come from the top, but from within. We look to our advisors, themselves, to help advance the network as a whole by engaging with fellow advisors, learning from one another and sharing experiences and advice along the way. Advisors who join the GVA network need to be willing to have these types of conversations, and those who engage at this level truly flourish.
- Making a consistent and considerable investment in tools: GVA’s business model is built on a foundation of technology and innovation. From day one, our leadership team recognized the importance of implementing strong technology systems, as well as comprehensive tools and resources, and the impact this makes on advancing an advisor’s practice. GVA network advisors gain immediate access to our dynamic technology stack and robust solutions to support their growth.
- Providing ongoing support aimed at advisor practice growth: Our work with advisors extends well beyond technology and related tools. We identify their areas of need and how they want to grow, and then implement targeted support and solutions. Our M&A team is a great example of this philosophy in action. Our advisors are entrepreneurs who seek to grow their businesses, and the M&A team offers a clear path forward for such inorganic growth, providing insight on the acquisition process, preparing relevant documentation and information, reviewing deals and more.
A Near- and Long-Term Plan for Growth
The strength of the GVA network lies in our ability to consistently adapt to the changing environment. Our primary goal is to empower advisor growth, and we feel strongly that a well-curated network of advisors is the best way to do that.
Advisors who join our network realize immediate benefits, coupled with longer-term advantages. The network provides a centralized platform yielding high levels of efficiency that advisors cannot leverage elsewhere. The suite of technology and resources they need to create an immediate impact on the business and streamline operations are available at their fingertips.
From a broader perspective, the network’s focus is strengthening our partnerships with advisors and creating the connectivity they need to thrive. We provide resources and the advisors offer insight, innovation and growth to the platform. We strive to continue enhancing our offerings to advisors within the network and realize that both parties add structure as we grow. We select advisors who are innovative in nature and maintain a similar philosophy and outlook on the business landscape.
The feature we plan to implement in the near future is small advisor forums within the larger network, creating connections among advisors facing common challenges or seeking to uncover similar opportunities within their businesses. We are using these as a springboard for stronger relationships within the network and to share valuable insights into where our advisors are taking their practices, so we can add new solutions and services.
Finding Your Network Match
For growth-oriented advisors, finding the right network to align with can make a significant impact on your business. The right network partner is one that shares your values and communication style but celebrates diversity among its community. Diversity in opinion, focus and life experiences will drive a stronger network and add significantly more value for the advisors.
Every advisor who joins the GVA network shares our larger vision and goals for the future. The growth of the company is only as strong as its core, and our advisors are the core of everything we do.
Mergers and acquisition activity in the RIA industry continues to grab headlines and make history. Despite early setbacks from the coronavirus pandemic, 2020 dealmaking activity bounced back, and Echelon Partners recorded a record-high 205 deals closed last year. The pace has not slowed in early 2021, with Q1 activity achieving a 65% increase over the first quarter of last year.
Our team remains active in the M&A space as well, both at the corporate level and in supporting our partners in completing their own acquisitions. Our team has completed several successful acquisitions throughout our history, and we have built a dedicated M&A team to support our advisor partners as they evaluate acquisition opportunities.
We work closely with advisors who are active acquirers, as well as connect with potential partners for GVA, and are regularly connecting with potential sellers about their objectives. We have seen several common themes emerge from our conversations with sellers regarding what they are seeking in a partner. Here’s what we have observed as the top trends on the sell-side.
A consistent experience is paramount
The acquisition process is inherently disruptive, but for many positive reasons. In some aspects, consistency facilitates a stronger partnership and more seamless transitions. One thing RIAs often look for is a partner who uses the same custodian. Transitioning custodians can be catastrophic for RIAs, a major operational burden that brings a risk of client attrition. Our firm is aligned with LPL Financial, one of the leading custodial platforms in the nation. Our relationship with LPL has been a driving factor in some of our most successful acquisitions and partnerships, making it easier for partner firms to plug into the GVA model on day one.
Enhanced resources and tools close deals
Sellers are not just selling to make a specific profit; they want a clear understanding of how they will benefit from joining your firm. They will be seeking clear details on the resources available to them and how those resources will be delivered. These two factors come together to complete the overall deal structure and help sellers differentiate between potential buyers.
At GVA, our partners come to us because of our in-house expertise, executive leadership team, extensive technology and operational support services, as well as resources for retirement plan consulting and asset management. We most commonly hear clients ask about access to myself and my partners. We make it a priority to stay actively engaged with our advisors and are consistently creating solutions that facilitate even better communication.
Culture and the impact on staff cannot be overlooked
While the firm’s owners are dictating the sale, the entire firm — from advisors to front-office staff — will be impacted by the transaction. The advisors, the relationships they’ve built with clients and the work they engage in every day are some of the main drivers behind the sale, yet they rarely see financial gain from the actual transaction. Keeping a focus on culture creates an environment where advisors can continue to thrive and allows for a more seamless transaction.
We understand that the sales process is incredibly personal for the seller and we make it a priority to be transparent and responsive throughout the process. We make ourselves available to the entire acquisition partner’s team, ensuring their advisors and support staff have their questions answered, too.
Growth needs to be a mutual priority
Advisors who are aligning with another firm are largely motivated by growth prospects. They want the ability to continue running their business the same way, while having access to added resources, tools and scope to up-level their practice. GVA has built a structured firm with open-architecture features and flexibility for our advisors. Our team is growth oriented, and our goal is to help our partners achieve their goals.
As the sales discussions progress and planning becomes more actionable than aspirational, it’s important that both buyer and seller maintain a flexible perspective. While purchase price is almost always the deciding factor, there are certainly plenty of other opportunities to showcase value. Understanding the mindset of the seller is an important starting point.
Technology continues to dominate the conversation around advisor growth strategies, and the ability to leverage it as a growth tool remains an important focus for the future. Technology is my passion, and I have always been keenly focused on its role in helping businesses grow and adapt, as well as its ability to revolutionize how we approach our daily lives.
This has become even more apparent within the last year, as more advisors shifted to remote work and more firms were forced to invest in tech to keep business activities consistent. In fact, the TD Ameritrade RIA Sentiment Survey found that RIAs were investing more in technology than planned because of the pandemic, with 33% of firms upgrading tech capabilities because of the shifting workplace needs.
The last year has opened advisors’ eyes to the role technology plays in their practice and its ability to amplify impact or harness growth. Here at GVA, we have always placed a high priority on technology, leveraging it to improve how we work as a team and with the advisors aligned with us. This focus has been instrumental in our growth and ability to partner with advisors from across the country.
Technology is non-negotiable for sustained growth
While advisors know they must embrace technology in today’s world, it can be difficult to know where to start. I recommend assessing your current tech stack and examining what is working, what is being actively utilized by the team and how your practice is benefiting.
Once you have an idea of your baseline, you can begin shopping for other technology assets. There are two silos of technology: 1) tech you need and 2) tech that can help grow your business. The first category includes the basics, like your custodial platform, CRM system and other specific tools — the technology that helps you run your business efficiently. The second category involves the technology you need to grow and that empowers you to focus on specialties — the tech that gives you the “disruption factor” that will create real change.
Technology should allow you to streamline tasks, establish workflows and work smarter. When used correctly, technology can propel your practice to new heights. If your current technology package is not meeting these goals, it may be time to reevaluate how you are implementing tech into your work.
Leveraging technology for our advisors via open architecture
GVA is 100% technology-driven. We have put a very robust technology structure in place with elements that support growth. We have partnered with Align Cybersecurity to design cybersecurity policies and procedures. We offer Valor Asset Management, a comprehensive and technology-supported asset management platform; as well as AdvisorBOB, our dynamic advisor compensation software. We have worked to customize Salesforce for our team’s benefit, with specialized workflows, processes, automation and more to streamline activities and allow more time for business-building efforts. We are currently building our GVA Gateway, which will function as an intranet for our advisors to connect, share ideas and collaborate, as well as a centralized portal with the resources and tools they need to succeed.
We feel confident that we have the right tools and resources in place, and we have designed an open-architecture structure with our technology, allowing firms who align with us to opt to continue using their preferred technology platforms after joining us. They will gain access to our suite of solutions but it is up to them whether or not they use it. We view this is an excellent opportunity for our advisors to leverage what we have built to whatever extent they desire.
How technology has revolutionized GVA’s approach
Our focus on technology has been intentional and supports our larger approach to working with advisors. Our goal is to help advisors up-level their practices, as well as provide them with the tools and resources they need to grow their firms and meet their long-term objectives.
The technology we have in place is attractive to our advisor partners, but also allows us to collaborate with them in a better and more meaningful way, effectively elevating the conversation from surface-level to an in-depth and actionable discussion. We can quickly view and publish reports and benchmarks against similar advisors, and we have more visibility into our partners’ businesses so we can understand their challenges and trends. This allows us to explore challenges and create solutions in real time, connect them with other advisors who have faced similar challenges and collaborate in a way that makes everyone better. My colleagues and I can give real advice, outlining specific tools that will work for you and more. We are solely focused on helping you grow your business.
As technology becomes more central to our lives, it’s impossible to ignore the implications it can have on your practice. Technology is nothing if you don’t have anyone using it — and doing so to its full potential. We view it as one of the best tools available to meeting your short- and long-term goals and facilitating meaningful connections. For more insight on the technology we employ to improve workflows and empower advisor growth, and how we can help you leverage technology to grow your practice, schedule a call with us. Connect with us on LinkedIn and Facebook for our latest insights and team updates.
There is no doubt that 2020 has been a challenging year, as advisors shifted to mostly digital practices and navigated market volatility alongside their clients. Year-end will represent a welcome relief for many advisors who were forced to reevaluate their approaches over the last several months. But as the new year beckons, succession planning is one significant item that should be on every advisor’s checklist.
A well-designed succession plan preserves the personal and business relationships that advisors have developed within their practices. It is an essential element if a business is expected to continue beyond the advisor’s retirement. Yet, 73% of financial advisors do not have a written succession plan in place, and 60% of those without a plan are within just five years of retirement, according to a 2018 survey from the Financial Planning Association.
The strongest succession plan is considered early and evolves as your business expands; it is a living document that you adjust to align with your values and goals for your business as it grows. The plan is created with the owner in mind, but also has direct benefits for your clients, business associates and family. While you focus on doing everything in your power to better the lives of your clients daily, don’t lose sight of the fact that having a plan in place for your future impacts them as well.
1. Start by Taking a Step Back From the Day to Day
The first step in designing a strong succession plan is quite simple: Put pen to paper and translate your thoughts and goals into a concrete, yet flexible plan. Take a step back emotionally from your business, and gather the hard data on every aspect of your book. This includes total assets under management, types of assets, number of households, client demographics and more. These data points will be instrumental in reaching a reasonable and realistic valuation of the business.
Advisors tend to numerically overvalue their firm. And we understand why: Trying to put a number on something you have devoted your whole life to is difficult! GVA offers valuation services that provide an objective industry perspective on the dollar value of your business, but we also recognize that your practice is more than just a company. It is an integral piece of your family’s legacy and should be considered as such. Your loved ones should be incorporated into the succession planning process as well. When developing your plan, be sure to clearly outline what your family and beneficiaries will gain from the sale of the practice. Once the numbers have been clearly defined, you can begin to dive into the less quantifiable facets of succession planning.
2. Keep the Intangibles Top of Mind
Throughout the process of creating a succession plan, you should envision what you want your practice to look like after you have exited. Which aspects of the company would you most want to see preserved? These elements help define your legacy.
No matter your sales timeline, you have a responsibility to your clients. They work with you for a reason that likely relates to shared values. The advisor-client relationship is based on more than just trusting someone with your money; it consists of abstract constructs, such as the alignment of ethics and values. The successor who takes on the business also assumes responsibility for the company culture and should be made aware of what clients will expect. This intangible construct should be a key factor as you search for a successor.
3. The Right Partner Shares Your Philosophy
Choosing a successor is often what holds advisors back from beginning the succession planning process. The FPA survey referenced above notes that 67% of advisors worry the business will not be as successful if they are not at the helm. Overcoming this fear can be as simple as establishing trust with the right person.
Whether potential successors are courted internally or externally, plans should be considered early and often because they take time to design and execute. Some advisors choose to mentor a junior advisor already on the team or proactively identify a candidate through an internship program. When selecting an internal candidate, it is vital to foster open communication within the team to ensure everyone remains aligned with the end goal.
If you have not been able to locate the right candidate internally, you should start seeking outside partners. GVA provides support for advisors in this position, offering resources and tools to facilitate a successful pairing and transition process. Our network is expansive and opens the door for conversations with the right types of advisors. We help to identify someone who is both fit for the job and aligns with your values.
No matter how you find the successor, it is critical to do your research. Don’t choose a successor until you are absolutely certain they are the person you want to carry on your legacy. To GVA, finding your perfect match is the top priority. In some cases, the advisor match may be clear but the financing presents a challenge. GVA can help by providing capital up front to facilitate the transaction, so both sides can rest easy.
4. Continue Growing and Improving Upon Your Business Model
As you design your plan, identify areas of improvement for your practice. This process will make your business stronger in the immediate term and more marketable over the long term. Some pain points might not be easily addressed, but identifying them could help you choose the right buyer to improve your offering for clients. Be sure to document how you have resolved issues and overcome challenges, so you can share these relevant details with potential buyers.
GVA understands your business and respects what it means to you, your family and your livelihood. Realizing that you do not have to go through this sensitive, yet critical, process on your own can be the catalyst you need to embark on the journey of succession planning.
2020 has been a volatile year in the financial markets, with the presidential election, the pandemic and civil unrest contributing to widespread uncertainty. Investors are increasingly looking to their advisors for new strategies to ride out volatility without derailing their long-term plans. With clients seeking additional support, it presents a challenge for advisors who strive to be reliable partners to their clients and add value, while simultaneously seeking opportunities to grow the business. As advisors look to scale, they reach a pivotal point where they must decide where to focus their time and efforts.
One area where advisors can save time and create efficiencies is through asset management. We believe when asset management is approached strategically, it can differentiate your business, propel growth and help your clients meet their long-term goals. We provide support for advisors on this front through Valor Asset Management. An extension of our core GVA offering, Valor is one of the many solutions GVA provides to help streamline our advisors’ days, so they can focus their time and resources on working directly with clients. Here, we spotlight the philosophy behind Valor and the benefits it offers to GVA advisors.
A Solution Designed for GVA
To understand where we are now, it is important to highlight how we got here. GVA was founded on the traditional RIA structure, and we provided compliance and back office support to those wishing to transition to an independent practice. This approach supplied the foundation for all those in our network to grow their businesses and achieve the structure they desired. As we broadened our network and solidified our foothold within the backend support channel, we recognized an opportunity to expand our focus to include another core offering for our advisors: asset management.
Four years ago, we welcomed Lee Johnson Jr., CFA, to our team as our chief investment officer and he set out to create what are now known as the Valor models. His focus was on methodically and strategically building models that met our advisors’ goals of managing investment risk while advancing clients toward their long-term objectives. The models need to work for investors at various risk levels and be customized to advisors’ preferences.
As the models took shape, we offered them to advisors within the GVA network, who could choose to outsource their entire asset management function to Valor or utilize the extensive research within their own strategy. This dual-sided approach puts the power in our advisors’ hands and creates a launchpad for growth.
A Disciplined and Customizable Investment Approach
Valor offers eight models with a range of diverse exposures. The suite includes three equity-only models and five ETF and blend models that range from very conservative to very aggressive. Each model is directly managed by our CIO and his team, and the strategies meet various investment objectives and risk metrics.
Valor models are unique for a variety of reasons, particularly the highly trained team behind them. These experts have designed an investment approach that manages risk while also driving growth, thanks to the underlying actively managed strategy.
Individual equities offer tremendous upside, and return potential is not watered down as it can be within an ETF or mutual fund wrapper. This approach creates an incredibly powerful offering for the end investor, but the associated due diligence process on the advisor’s part for equity selection is time-intensive and cumbersome. We handle that for you.
Our team utilizes tools like Orion Advisor Services and Morningstar Office to identify individual companies and perform extensive research and due diligence on performance, managers, cash reserves and other fundamentals that drive their long-term potential. Our models are reviewed and rebalanced quarterly to ensure we are not over- or under-allocated to certain positions. The quarterly reviews allow advisors to stay on top of what their clients are invested in and ensure they keep within prescribed investment allocation targets.
Adding Value and Empowering Advisor Growth
Our asset management offering was designed with our advisors in mind. It is meant to streamline portfolio management processes and allow advisors to spend more time on planning and working directly with their clients. Some of the core benefits include:
- A dedicated and responsive management team -GVA advisors enjoy direct access to our chief investment officer and his team of portfolio managers and investment professionals. In addition to scheduled quarterly conference calls where details are provided on recent investment decisions and market outlook, Lee makes it a point to be available to our advisors, answer questions from clients, offer his take on the latest events and act as a sounding board for concerns and questions.
- Risk-minded and customizable – Because our team takes an active management approach, advisors can design a solution that meets the client’s goals while appropriately managing their risk tolerance. This is a significant value-add for high-net-worth investors. The process of customizing a portfolio needs to be responsive to the client’s risk appetite. We provide every office with a risk questionnaire that they can share with clients to assess needs, goals and outlook. The 15-question survey explores a client’s perspective on the markets, economic landscape and more. This survey produces a score that the advisor can use to assess overall risk tolerance and facilitate a follow-up conversation with the client.
- Ongoing risk-mitigation measures -The risk questionnaire was strategically designed to provide a well-rounded view of client risk appetite and foster stronger communication between advisor and client. This is not a one-time activity, and rather it can be used repeatedly, allowing advisors to react to the latest newsflow and market changes and bring their client into the investment process. Since the election alone, we have seen double the questionnaires distributed to clients, empowering their advisors to keep a finger on the pulse of their risk tolerance and a step ahead of any changes.
- Supportive of a holistic wealth management approach – Advisors on the GVA network share a common perspective on the importance of a holistic approach to managing their clients’ wealth. We are responsive to current events but maintain a long-term view, conducting appropriate research of investment opportunities and investing only in high-quality companies.
Lee Johnson provides his latest market commentary in real time and his door is always open for GVA advisors seeking his insight. Check the blog later this month for Lee’s reaction to this year’s events, his current outlook and perspective on 2021.In the meantime, connect with us on LinkedIn and Twitter for our latest insights and team updates.
Cybersecurity continues to be an important focus for RIAs, particularly as more firms embrace the virtual and largely decentralized workplace, and both the SEC and the ODD community tighten the prevailing standards and expectations regarding properly safeguarding client data. Our team remains dedicated to providing the tools and resources you need to succeed, and we recently announced a partnership with Align Cybersecurity to keep our team up to date on the latest trends, innovations and news in the cybersecurity space.
The partnership provides us with direct access to some of the leading experts in cybersecurity, and we recently connected with John Araneo, the virtual Chief Information Security Officer of Great Valley Advisor Group. John is the Managing Director, Cybersecurity and General Counsel of Align Communications, Inc., a leading technology and advisory firm in the investment management industry, and he is a long-time investment management attorney and recognized cybersecurity expert. We are excited to leverage his experience for GVA’s benefit and the following post reflects a recent discussion with him in connection with GVA’s partnership with Align and its support of the GVA network, as well as his advice for RIAs. Here’s more from our conversation:
How will Align support GVA and its network of advisors?
Align provides cybersecurity advisory services for investment management and other types of financial services firms. We maintain a specific focus on this industry, have direct lines of communication with the SEC, and work directly with the investor community and ODD firms. My team follows the emerging cybersecurity standards and frameworks and studies the relevant regulations, rules, risk alerts and enforcement actions. We are focused on keeping a finger on the pulse of regulatory changes and best practices recommendations with regard to cybersecurity compliance in the investment management space.
Cybersecurity is a top-line regulatory issue, as well as an operational due diligence focal point. Align takes a unique approach to cybersecurity, and we believe we have “cracked the code” in achieving cybersecurity compliance. Fundamentally, cybersecurity is a multifactorial challenge that requires a multidisciplinary response, and so from the outset, Align assembled an elite team of distinct subject-matter experts in three core disciplines of technology, security, and regulatory compliance. Through our approach, we think we can help investment management firms — whether small or large — satisfy the unique regulatory requirements they face, as well as meet the prevailing ODD expectations to create an appropriately-scaled model cybersecurity program.
How can advisors begin managing cyber risks to their practice?
Cybersecurity has proven to be a challenge across the financial services sector and affects all investment advisers, irrespective of size, notoriety, investment program and/or AUM. RIAs are generally well-acquainted with managing the more conventional and typical risks associated with their business – market risk, liquidity risk, operational risk and compliance are examples. Cybersecurity risk, however, is an opaque challenge for RIAs, largely because it requires at once: (i) a fundamental understanding of technology; (ii) an appreciation of the prevailing cybersecurity frameworks like NIST and ISO; and (iii) an awareness of what regulators have said constitutes a model cybersecurity program. So many RIAs simply don’t know where to start, and lack the time and resources to apply comprehensive understanding to cybersecurity best practices.
While it’s true that there are several core elements of a model cybersecurity program, advisors shouldn’t “DIY” this and should instead identify a partner who understands all aspects of cybersecurity. Fortunately, there are some great cybersecurity solutions out there that are easy to implement, such as employee education, centralizing your policies into a standalone cybersecurity policy, and basic email monitoring and logging. However, it can be overwhelming to navigate the seemingly endless solutions that are marketed to RIAs at rocket-speed. Through the all noise and rancor of everything “cyber,” we’ve observed that to really start gaining on the cybersecurity arms race, the first step is to conduct an initial Cybersecurity Assessment that identifies a baseline of your cybersecurity posture, and illustrates the strengths, weaknesses and any glaring omissions from your Cybersecurity Program. Once this baseline is identified, you can begin to set a cadence and take a methodical and responsible approach to mature the Cybersecurity Program over time, treating it as a process as opposed to a project.
What does a strong cybersecurity risk management strategy look like?
Cybersecurity risk management is complicated because there is a matrix of emerging standards, rules and regulations, laws and best practices to consider across the spectrum of all different industries and regions. Your firm’s approach ultimately depends on where you sit in the world, the technology and information you use, and the customers you serve, as well as your work-flows and data-flows.
With that in mind, for investment advisers, the SEC has charted out seven categorical requirements that each financial advisor needs to consider in designing a model cybersecurity program. We refer to these domains as the “Cyber Seven,” and they include (1) Governance and periodic risk assessments; (2) Data loss prevention; (3) Access rights and controls; (4) Mobile security; (5) Employee training; (6) Vendor management; and (7) Incident response.
While regulators have worked to identify these core areas as the loose anatomy of a Cybersecurity Program, they have not provided direction on how to prioritize these seven areas. There is no cybersecurity checklist, black-letter law, bright-line rules or a safe harbor. The best answer, however, is that a strong Cybersecurity Program is one wherein the RIA can demonstrate it is engaged in the process of understanding its unique cybersecurity risk posture and give a full throated, confident response as to what controls are currently in place and those which will be determined down the line, as the program matures.
What are common areas of concern you observe in small-to-mid-sized RIAs?
Although the Cyber Seven are not prioritized within a finite checklist, several of these elements are considered more pressing and fundamental than others. There are two common issues we observe among -to-mid-sized RIAs:
- Not having a centralized policy in place – Advisors need to be able to demonstrate the cybersecurity controls they have in place via a centralized policy. We often see policies distributed among a compliance manual, an employee handbook or other documents with orphaned, singular policies about email use, internet and social media use, document handling, or privacy. These various policy arms need to be centralized in one, easily accessible place.
- A disconnect between policy and action – While some firms have a singular policy in place, actually following its guidance presents new challenges. It can be difficult for practice leaders to confidently confirm they are adequately completing certain policies and tasks. For example, some mandates are rooted in technology, making it difficult for the manager to see its impact. Other mandates are operational in nature, leaving managers unsure whether their teams are complying.
Beyond these primary issues, we see firms falling short on employee education and implementing basic data loss prevention controls, including multi-factor authentication, encryption, and a defensible password policy.
What is your best advice for advisors regarding their cybersecurity measures?
The first step is to establish a baseline through a Cybersecurity Assessment that is completed by a credible, industry-specific advisor, specifically one which understands how RIAs operate, the underlying regulatory regime, as well as their investors and stakeholders. This provides a clear perspective on the things you are currently doing, as well as analysis into where there might be gaps. Without this baseline assessment, further action will be fruitless.
The cybersecurity phenomenon itself is still somewhat nascent, but there has been a huge upending of the risk management paradigm amid the pandemic, as more businesses are operating in a remote and decentralized environment. Prior to 2020, the available cybersecurity controls assumed the goal was to protect the centralized network and the data on it. As more employees work virtually, the focus has shifted to protecting the data at the end point, meaning the laptop or other devices you use for work. Your workforce is operating in different ways, and yes, that requires different technologies to allow employees and the firm to function, but it also requires different cybersecurity solutions.
Do you have anything else to add regarding Align’s support of the GVA network and focus on RIAs?
My team has been focused oncybersecurity since 2014 when the SEC held its first roundtable on the subject. We have seen that a lot of advisors initially took a defensive posture and procrastinated on this, and as a result, are largely unfamiliar with the idea of cybersecurity and all the pieces of it. For a long time, it remained unclear to many RIAs as to what they were investing money in and what they were going to get out of it.
The SEC has communicated to our team directly that RIAs can outsource certain core cybersecurity functions while maintaining proper regulatory and fiduciary duty responsibilities. The compliance function is a good example of this, as it is well known that the SEC allows RIAs to outsource the function of compliance, but not the responsibility. The SEC has taken the same position with regards to cybersecurity. To really hit the mark on cybersecurity and do what you are supposed to be doing, you need to find an advisor who understands what the asks are holistically — meaning not just from the technological perspective, not just from the compliance perspective or not just from a pure security perspective, but from a lens that encompasses all three aspects.
Many advisors think a cybersecurity program is a large investment, suitable for larger enterprises. We formed Align specifically to avoid that problem and provide a much more cost-efficient, effective and credible exercise for all sorts of smaller enterprises. There is a way to identify and design an appropriately scaled cybersecurity program for every advisor.
In the last several years, investors have increasingly turned to virtual environments to engage with their professional partners, checking account balances, initiating trades and carrying out complex financial transactions all online. As the pandemic took hold, the trends shifted significantly toward an all-digital world, and it appears the RIA industry is embracing the new normal as well.
While the online environment offers many perks and efficiencies, it creates vulnerabilities among those who use it. In 2019, over 60 percent of compromised data originated in financial services organizations, according to research from Bitglass, a cloud security firm. This number has alarmed many, and the SEC is proactively working to mitigate the risk with increased scrutiny in its examination of financial services firms.
October is Cybersecurity Awareness Month, and the Cybersecurity & Infrastructure Agency-sponsored initiative presents the opportunity to assess your cybersecurity plan. Advisors need to take action to protect their practices and their clients, and there are some basic steps advisors should follow to ensure they are well prepared.
- Establish policies and procedures – RIAs must establish specific rules and requirements for staff around cybersecurity measures, including what team members should and should not do with regard to data. This cybersecurity guide should be customized to the firm and include checklists and best practices for the team’s standard workflow and any specialized needs. The rules and procedures for a small shop that relies on administrative staff for support will look quite different than for a larger team with dedicated client-facing personnel. However your team decides to manage the policies, it is smart to provide a copy for all team members so they have quick access moving forward.
- Assess your third-party vendors – It is not enough to have your own policies and procedures in place; RIAs need to assess the processes their partners and vendors follow too. Part of the vetting process should include a vendor review template that touches on key areas including the following: Has the vendor completed penetration testing? Have they experienced a data breach? Do they have cybersecurity certifications? Do their emails use proper encryption? Who has access to the data? How is the data protected? Advisors must take care to assess these high-level risk factors before engaging with an outside partner.
- Educate your team (and do it often) – Even the most iron-clad plans can be compromised by simple human error. Often, data breaches and security threats come down to phishing emails or scams and personnel who don’t know what to do. Even seemingly innocuous practices — like setting up your laptop in the local coffee shop while waiting for a meeting or leaving your computer unlocked while you run to the office kitchen — can create significant risk for the firm. It is essential that your team is smart about daily business activities and remains updated on the latest threats.
- Assess your vulnerabilities with stress testing – Any firm can go through simple cybersecurity training and check a box. However, the firms that will be most successful in protecting their clients and their practice are those who undergo stress testing and realistic data breach simulations. For example, conduct random phishing attacks and penetration testing to identify vulnerabilities and address them in real time. In addition, look for a partner who can provide guidance on what other RIAs have experienced and how they have successfully adjusted their approach to safeguard their data.
- Have your post-breach action plan ready – While the above steps will help mitigate your risk of a cyberattack, the reality is data breaches happen to even the most prepared among us. RIA practice leaders need to have an action plan that’s leveraged in the event of a data breach. This includes a detailed outline of next steps, specifically how the system is disabled; a communication timeline for alerting partners and clients; contacts at your technology and security partners; and more. It can even go as far as detailing client-facing offerings like credit monitoring services to help clients feel safe following an attack.
Don’t Forget to Share With Your Clients
Creating a cybersecurity action plan is an essential business practice in today’s environment, and the moves you take to protect your firm matter to your clients too. They want to know you are taking every precaution to safeguard their information and data. Let them know the work your firm is doing to educate and train the team, how you are vetting vendors and partners, and what your plans are in the event of a security breach. Such action adds value to your relationship with clients.
Our Commitment to the Network
Technology has become central to our lives, and as more people work remotely and conduct daily activities online, the network will become overwhelmed. It is essential to partner with a cybersecurity organization that can protect you as hackers become more sophisticated and adapt to our current environment. You want to feel confident that you have the right partner to support your firm.
Our team recognized an opportunity to fortify our cybersecurity practices, and within the last year, we began the process of reviewing different cybersecurity partners. Clients trust us with their most confidential information, and it is critical that advisors are confident in their ability to keep this data safe. We ultimately decided to engage with Align Cybersecurity, the premier global provider of technology infrastructure solutions, to keep our team up to date on the latest trends, innovations and news in the space. We are dedicated to sharing this information within our network so you are equipped to make informed decisions for your practice too.
We are continuing to spotlight the importance of cybersecurity during Cybersecurity Awareness Month and beyond. Be sure to check back for an exclusive Q&A on our blog with John Araneo, our virtual Chief Information Security Officer and Managing Director, Cybersecurity and General Counsel of Align. In the meantime, connect with us on LinkedIn and Twitter for our latest insight and team updates.
This year is presenting unprecedented challenges for financial advisors, with the pandemic impacting businesses of all sizes, the election and market volatility spooking investors, and Schwab’s acquisition of TD Ameritrade forcing change in the brokerage model. We are engaged with financial advisors every day, both in and outside of our GVA network, who are closely monitoring current events. These items weigh heavily on advisors, and the conversation often comes back to one thing: giving greater consideration to transitioning to an independent model.
While it may seem counterintuitive amid mounting uncertainty, the current environment is quite favorable for advisors considering the move to independent. The benefits of making this move are expansive, and our recent blog post with several members of the GVA network provides an initial perspective on their motivating factors for going independent. We strive to facilitate a seamless process for advisors who join our network, but GVA advisors aren’t the only ones pleased with the career decision. In fact, a 2019 survey from Charles Schwab found a whopping 90 percent of advisors who transitioned to the independent model had no regrets about doing so.
In an environment of uncertainty, reevaluating how you run your business stands to be impactful. Approaching your clients with a forward-looking plan — one with direct benefit to their financial life and goals — shows you are staying current and always looking out for their best interests. The post-pandemic era will favor independent advisors, and the following factors will be increasingly important for financial professionals in 2021 and beyond:
Flexibility needs to be woven into your business model
There is value in having the flexibility to run a practice the way you want to, and transitioning to independent allows you to gain control of your business model. When you run your own operation, you can make necessary advancements whenever you see fit. Gaining the flexibility to work with the people, products and strategies you want yields a better business structure. This is especially true in today’s environment; advisors need to be flexible in their decision-making processes to be more proactive versus reactive. This type of flexibility is crucial to growing your business.
Access to the right technology can make or break a practice
The pandemic has prompted many businesses to shift their operations to a digital platform, which has placed an increased emphasis on practice management technology. To be effective in today’s environment, advisors need access to top-tier technology solutions.
Many advisors are inclined to stay in the brokerage model because of the technology available through those channels. In reality, aligning with the right partner to go independent bypasses these concerns. GVA has invested heavily in technology and forged partnerships with industry-leading solutions providers to ensure our advisors have the ability to build the practice as they see fit. Advisors can run a successful independent practice with the confidence that they have the appropriate technology for their clients.
Asset gathering will be more important than ever
Data from Schwab’s 2020 RIA Benchmarking Study found that higher-net-worth investors favor the independent model. This is noteworthy, as it points to the fact that investors recognize the difference an independent shop offers, particularly when it comes to investment options.
Independent advisors can make decisions that are in the best interest of their clients. They are no longer obligated to offer proprietary products just because of their proximity to them. This makes for a more robust client experience.
The right support will harness growth potential
Advisors should always be growing. If you find yourself stagnant — or alternatively, if you are growing rapidly and are overwhelmed — it’s time to consider a change. In both scenarios, advisors can benefit from a strategic partner. Whether you need additional compliance oversight, more support or a wider range of resources, partnering with an RIA in the independent space could help you harness growth. Even the biggest and most successful offices need help to streamline processes. When it comes to growing or managing your growth, partnering with a strong RIA could help you exponentially achieve your goals.
As the world works to recover from the pandemic, the financial advice sector will look different. Investors will expect more from their advisors, and the independent model can help address this expectation. Our team has helped many advisors transition to independent, and we understand the transition process can be daunting. That’s why we help you every step of the way, providing the support, partnership and technology you need to be successful.
If going independent is even a thought, then you have already taken your first step toward the path of independence. Considering transitioning your business to an independent model? We’re here to help. Reach out to our team today or connect with us on LinkedIn and Twitter.
We’ve seen a major shift in the financial advice industry in the last decade, as more advisors opt out of the traditional brokerage model and dive into the independent RIA space. The leap is a significant one, with the potential to propel growth and revamp an entire career trajectory. When we speak with advisors considering making the move to an independent RIA, many of the same concerns rise to the surface: Do I have what it takes to succeed? Will my clients come with me? Where will I find the right operational support?
These concerns are not unfounded but the advisors who have successfully transitioned to independence with GVA will tell aspiring-independent advisors a different story — one of perseverance and ultimate success as a result of finding the right partner.
It’s helpful to hear directly from advisors who have already been successful in transitioning their practices. Here at GVA, we have a network of 75 advisors who broke away and are now running independent practices. We tapped four of those advisors to learn why they took the leap and aren’t looking back.
In Their Words: The Benefits of Going Independent
Defining your own success. Financial advisors are inherently success-driven when working to achieve clients’ goals and objectives. But when it comes to your own practice, operating as an independent advisor is one of the best ways to define your distinctive measures of success. Entrepreneurship comes with its own challenges, but our team has the firsthand knowledge and experience to create a clear pathway to success. We customize transition plans, help review contracts, offer marketing support and provide resources to transition old clients and onboard new ones. Once your business is established, we also offer operational and compliance support so you can focus on what’s most important — your clients.
Enhancing your clients’ experience. One thing we hear loud and clear from all our advisors is the importance of adding value for your clients. GVA advisors want to make a profound impact on their clients’ lives by designing solutions that help them meet their goals. The traditional broker setting requires advisors to sell specific products that may or may not meet client objectives. In the independent setting, however, advisors no longer need to mold themselves to a certain style or feel constrained by a limited list of potentially ill-fitting products. This liberating flexibility provides unparalleled benefits for clients, while better positioning you to design plans that meet and even exceed their expectations. GVA has a suite of proprietary investment strategies, all managed in-house, that our advisors can implement for their clients.
Realizing your true earning potential. Opening an independent shop requires an initial financial commitment, but the potential is great for higher and more consistent income streams throughout the life of your business. It’s important to be strategic when vetting firms to partner with as you establish your RIA, specifically understanding what their compensation package covers and what your true take-home pay would look like. GVA offers transparent fees and a clear picture of advisor compensation so you can better envision your earning potential. One of our core offerings, AdvisorBOB, helps facilitate this clarity across the network by providing a complete billing and compensation solution for RIAs. Such financial support ensures a strong foundation on which to grow your practice.
Accelerating your growth by leveraging the right resources. A high priority as advisors transition to independent is growing the business in asset size and headcount. In order to achieve this scale, advisors need access to the right resources. GVA provides a framework to facilitate such growth, enabling smaller shops to leverage premium tools commonly associated with larger firms. One of the highlights is the GVA technology stack, which features some of the top technology providers in the industry, including Orion, Smarsh and PandaDoc. Aligning with GVA provides access to these programs as well as the support and structure to implement them properly, freeing up your time and resources for pipeline-building.
Advice From Our Advisors
With the right support, shifting to an independent model is not only doable, but presents an exciting range of new opportunities for your business and clients. Furthermore, the path to this ideal destination doesn’t have to be intimidating. At GVA, we strive to make the transition as seamless as possible, supporting our advisors as much (or as little!) as they would like.