Dealmaking momentum in the RIA space continues to build, and Echelon data reports it reached record levels in the third quarter of 2020 despite earlier pullbacks from the pandemic. Evolving client demands and quickly shifting technology and resource needs, coupled with outsized valuations and a lack of proper succession planning by independent advisors, have all driven activity in the space, and this activity is on track to continue.
From the acquirer’s perspective, M&A can be a fast-track to growth, with many advisors looking to onboard entire books of business and quickly multiply AUM numbers. Yet, acting as an RIA buyer isn’t right for everyone.
Having the right approach to M&A is vital to short- and long-term success. At GVA, we support our advisors in growing organically and inorganically and play a significant role in advancing and supporting dealmaking activities within the network. We know the best practices because we’ve sat in your seat before too. Jumping into the M&A space requires a tested strategy and the right support to be successful. Here’s what aspiring buyers need to know.
Leveling the Playing Field in a Seller’s Market
The steady rise in buying activity is making for a very crowded marketplace, so it is important that serious acquirers position themselves to stand out among a sea of buyers.
Long before you engage in conversations with prospective acquisition partners, you must invest time on the back end, securing a strong financing partner and banking relationships to ensure you have the capital to buy when the right fit emerges.
Once the financing is shored up, it’s time to look the part. This means assessing your public-facing assets and image, from your website to your office space and your current team. Do these assets send the message you want and position you as a leader in the industry? If not, spend time cleaning these up before entering the M&A market. You can also be reactive with these assets. If an acquisition target is asking about specific offerings or resources that are not already featured on your site and supporting materials, it is a good chance to update your assets and better position yourself for future partners.
Identifying the Right Partner to Fuel Your Growth
Finding the right acquisition partner requires a significant time investment. Often the best-suited transactions take time — sometimes even several years — to materialize. As you look to grow, the focus must be on enhancing the practice you have built. While it can be tempting to move on all of the targets you meet, it is essential to find the right partner. This perfect “fit” will lay the foundation for a successful relationship in the long term.
There are three things advisors should keep top of mind when seeking an acquisition partner:
- Geography – One of the biggest value-adds advisors bring to the table is an intimate knowledge of the community they serve. As advisors seek partners, it can be tempting to look beyond your immediate area, but this can prove to be a significant stumbling block. It is important to have access to be able to meet with your clients in person. Closer is better, but areas extending beyond a two-hour drive are likely too far.
- Culture – The culture you create in your firm is hallmark to your offering, so it’s important that acquisition partners share a similar philosophy. Aligning a practice after acquisition requires much effort on the administrative and operational end, so when the firms’ joint culture is already complementary, it can alleviate an extra burden.
- Size and scope – It can be tempting to eye a larger purchase to propel growth, but buying a much larger firm can lead to issues as you navigate the transition period and assume the book of business. One of the most common missteps we see is overleveraging. In today’s environment, outsized valuations are common, and advisors can market a practice for much more than its actual value. It is not worth taking on significant debt for a firm that is not valued appropriately.
Preparing to Onboard
Handling the transaction is a relatively small feat when compared to the task of onboarding a new book of business. The onboarding process is a time and financial investment, requiring the help of internal and external partners to be successful.
The financial aspects should be accounted for early in the process, particularly if you need to add staff to assist with new business. You should also spend time preparing your current staff for the transition and ensure they can handle the new workflow. The seller will continue to monitor the process and want to see their clients well-cared-for and in the best hands. If your team is overwhelmed by the new work, it will strain the onboarding process and relationship with the seller.
A Partner You Can Trust
When you are acquiring a firm, you can’t go at it alone. You will likely need to tap outside resources and partners, including your custodian, third-party money managers, technology providers and other partners. GVA’s mission is to empower our advisors’ growth, both organically and inorganically. We strive to be a partner our advisors can trust to advance their practice and position them for success.
As more M&A opportunities present themselves, we are here to help our advisors navigate the process. The M&A process is multifaceted and we provide comprehensive support, including:
- We help in identifying potential targets — specifically advisors in our network who have indicated an appetite for acquisitions — or properly vet potential acquisition targets our advisors have sourced on their own. GVA includes a strong network of advisors who are growth-oriented and several are well-positioned as industry leaders and are ready to onboard new teams. We recently added a new Real Estate page to our website, highlighting these firms where there is opportunity to grow.
- As targets are identified, we perform extensive due diligence to determine appropriateness of fit, factoring in geography, culture, service suites and valuations. M&A transactions are often emotionally charged, so we offer a third-party perspective on the in’s and out’s of the deal to ensure it aligns with our advisors’ goals.
- All acquisitions completed within the GVA network are routed through our RIA, so we offer assistance on the tactical end of the deal, with support for onboarding, legal and compliance issues and the financing structure. We look at the transition in the immediate term, but also take the long-term view, projecting what needs to be completed to maintain the successful transition in years to come.
The M&A process can be an exciting opportunity to grow, particularly if you have designed a strategic approach and aligned with the right support to navigate the process. For more insight on the M&A process and opportunities for advisors within our network, schedule a call with us. Connect with us on LinkedIn, Twitter and Facebook for our latest insights and team updates.
Greetings GVA Friends, Happy Holidays! I hope this note finds you well and in good health. As we near the end of 2020, I wanted to share some thoughts with you on what has been one of the most dynamic and challenging years, not only in the investing world but in our daily lives. The way I see it, 2020 was a “one-hundred-year storm” and looking ahead to 2021, I see the beginning of a new year, a new era and quite simply a new start for all of us. So let’s push the rest button and look ahead to 2021!
In addition to my thoughts below, we have all kinds of information posted to the Valor Library on the GVA portal on Salesforce. For example, we recently posted two new “Valor Views” documents that provide additional thoughts, data and commentary on the market and economy along with changes we made to the Valor models for 4th quarter 2020. We also have our normal position reports for all Valor models and the latest performance posted out there.
Thank you and I wish you all the best during this holiday season.
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“The Year of Everything”
Advisors in the Great Valley Advisor (GVA) network know I have referred to 2020 as “The Year of Everything”, a lighthearted moniker for one of the most challenging and dynamic years we have ever seen. The events of 2020 have not only thrown a wrench in our daily lives, but also brought unprecedented uncertainty in the markets which led to wild swings all year long. From the economic fallout at the beginning of the year to the election at the end of the year, 2020 has been a constant blur of “Everything”. Words like “vaccine”, “stimulus”, “shutdown”, “social distance”, “PPP”, “new norm”, “recession” and “recovery” have become a part of everyday conversation. And they have highlighted a rapidly evolving news cycle that has taken a life of its own day in and day out as new information becomes available.
Quite simply, there has been a lot of noise for investors to sift through this year. This noise has led to extremes in the market we have not seen in a very long time. Perhaps ever. The US Government and The Fed made several moves during the year to help temper these extremes. These moves were not only historic, but they were necessary to help stimulate the economy. But all of this led to a very uncertain backdrop as investors assessed their investment strategy in 2020. And we know from studying behavioral finance that investors are inclined to let outside factors influence their investment decision-making process. That certainly rang true this year, but the flipside to that for investors is to try and look beyond the noise and try to focus on the quality and defensive oriented investments the market can offer to help provide ballast to their portfolios. This sentiment has become increasingly important in the current environment.
To that point, at Valor, we not only stayed true to our investment discipline and process throughout the year, but we added new steps and new checks to our modeling process to help improve our decision making. For example, we introduced a stress testing methodology to test all of our models for another COVID type scenario. That gave us a nice range of confidence between upside and downside expectations in the event the market takes another turn. We not only used that for our own models but passed that information on to the GVA network to help equip our advisors with the data, information and insight they needed to help with their modeling needs. This not only educated our advisors but also helped them facilitate meaningful conversations with their clients. All of this was meant to drill down to the core positions of our models and focus on the factors that could affect performance, especially on the downside. This approach was in keeping with the principals rooted in our Valor investment philosophy: keep it simple, focus on the fundamentals, block out the noise and manage risk through diversification. Now that we are at year-end, this presents an opportunity for us to look back on the year, assess wins and losses, reflect on lessons learned, and look ahead to the new year.
A Look Back on 2020
Back in January, investors welcomed a new year without any warning of what was truly in store. 2019 was a record year for the markets; the S&P 500 was up over 28%, the Dow was up 22% and the tech-led Nasdaq was up 35%. Investors, including myself, largely expected to enjoy the extended bull market. Early market performance indeed showed that as gains continued, and in February all indices reached then-peak levels.
In mid-March, everything changed as the coronavirus pandemic took hold and completely altered the nation’s way of life. The global health crisis prompted an emergency response, with a swift market correction fueled by staggering unemployment and the start of a recession. In April, we contemplated the “shape” of the recovery, reopening timelines and prospects for stimulus. We now have much more clarity on these issues, and we have since seen the markets make a so-called “V-shaped” recovery, breaking and setting new record highs in the S&P 500 and the Dow. As if that hasn’t been enough, we also saw a highly contested election in November which we are still feeling the aftereffects of, and there is still one more election to go with the Georgia runoff on January 5th, 2021 which has huge implications.
Volatility Reinforces the Importance of Diversification and Downside Protection
Pandemic-driven market volatility coupled with mounting political concerns, civil unrest and other events this year have left investors on edge about their portfolios. At Valor, we certainly did not expect everything that happened this year (“murder hornets”?) but we did prepare for a possible downturn at the beginning of the year after we saw record performance in 2019. Then when the pandemic hit, we saw unprecedented volatility which caused all asset classes to rapidly decline. Quite simply, there was no place to hide. After that, we stayed true to the Valor investment philosophy by continuing to invest in quality companies and managers with a competitive advantage, strong balance sheets and solid fundamentals. But we also sharpened our pencils and began shifting exposures to asset classes and companies that had a defensive and “COVID type” element to their business. For example, the “stay at home” trade complemented our models very well this year and it kept us diversified to help us manage risk and downside protection.
Speaking of risk, we expanded our thinking this year on this very important concept, which is sometimes overlooked by clients who typically focus on the upside. But the downside is just as important, if not more, because as we saw in early 2020, a sudden drop in the market can be a drag on your portfolio and can eliminate long felt gains in one fell swoop. To help prepare for that possible scenario again, we stress tested all of the Valor models and focused on minimizing downside capture for the level of risk each model would take. Now, like I said, there was no hiding in March and April, and we bounced out of it, but going forward we prepared ourselves for downside protection with diversification and sensible investments on both the equity and fixed income side to help dampen volatility when/if it happens again.
How the Valor Models are Positioned Going Forward
The pandemic will continue to be a significant concern for investors as we head into 2021. Even though a vaccine will soon be available nationwide with the first shots just given on Monday 12/14, the distribution and effectiveness may be cause for concern. There are also concerns about new spikes in case counts across the country which is prompting many states to shut down again. We have seen this in recent jobs reports where jobless claims are rising again. But it is my expectation that the measures being taken now across the country, along with a successful vaccine rollout, will lead to a positive outcome in 2021 and beyond. But it will take time. The economy will follow suit but again it will take time and be a slow recovery as jobs slowly come back.
The political landscape is also creating some cause for concern. The January 5th, 2021 Georgia runoff election will also have potential downside implications on the market if the Senate flips from Republican to Democrat. Both Democratic candidates will have to win on order for that to happen, but current polls show a tight race.
With all of that in mind, we feel it is important to maintain a focus on quality and downside at this time. On the equity side, that means a continuation of our current thinking by investing in a combination of what we call our “core” companies/asset classes that offer quality and strong fundamentals along with defensively themed names. On the fixed income side, that also means staying with a defensive theme by maintaining increased exposures to government bonds, investment grade corporate bonds and global bonds, all of which perform better in a volatile market. We also shifted out of real estate and into gold which is a benchmark for stability but also has an inflation-hedging component which should pick up slowly in 2021 and beyond (we invest in gold through the miners who have better margins).
Key Areas to Watch in 2021
Many of the same themes we were watching earlier this year are still very relevant as we head into year end. But as we look ahead, here are our primary areas of focus:
- Vaccine Optimism Balanced with Ongoing Risk from the Pandemic
The coronavirus pandemic remains a top concern among investors, with the CDC reporting over 12 million cases in the United States, and numbers currently rising. The best news we received was when the Pfizer vaccine got approved by the FDA for emergency use. But this will create an interesting dynamic in the markets going forward which I view as a pendulum shifting in investors’ minds between “fear of loss” if something goes wrong and “fear of missing out” if science does prevail. The markets will be sensitive to this and all news surrounding the vaccine, distribution plans, side-effects and effectiveness. In the end, I expect the vaccine to be a success, but the rollout will be slow and there will probably be some setbacks as the population receives treatment. But we should all expect a methodological rollout with some potential setbacks.
- New Stimulus Package
Record levels of stimulus have already been circulated throughout the economy this year and on Sunday, Congress agreed to a new $900B round of stimulus. It will now go up for an official vote but assuming it passes into law, this will certainly be a welcome sign for the economy. Especially as we enter the winter months. I had expected a new package to be delivered to the American people but wasn’t sure it would get done before the end of the year so it’s nice to see this happening now. The resulting cash infusion, new PPP loans and enhanced unemployment benefits should continue to spur the consumer and businesses alike. But as with all packages like this, it will not come with unlimited funds and unlimited relief. In the long run, the economy will have to eventually support itself. If not, another round of stimulus may be necessary. If that happens, investors should expect new debates and new negotiations, all with a new Congress in 2021. This is certainly a developing story and one the market will continue to monitor very closely as time goes on. But I’ve always believed “something is better than nothing” and with this new package, the economy will have renewed hope and the support it needs to stay in check.
- The Georgia Runoff and Potential for More Volatility
We closely monitor the Chicago Board Options Exchange Volatility Index (the “VIX”) for indications on future market volatility. We expect volatility to be driven by continued political uncertainty, specifically the Georgia runoff election in January and its potential to significantly impact the legislative landscape.
- Corporate Profits and Opportunity
The pandemic is fueling areas of opportunity and we can already see this as the markets have broadened a strong momentum-based rally as we end the year. This is a signal inferring equity valuations are attractive and the market expects a recovery next year. But the question lies where and in what sectors? For one, it will be sectors that benefit from an economic expansion which will ultimately drive corporate profits and favorable results going forward. Some sectors to consider in this environment are consumer discretionary, financials, technology and healthcare. Consumer spending is expected to remain strong, particularly if inflation picks up, and the technology sector is working quickly to meet the needs of the new digital lifestyle. Healthcare remains strong as testing increases, demand heightens for medical supplies and vaccine trials and distribution progress.
- The Economy – Key Economic Data Will Take Center Stage
GDP reached a record growth rate in the third quarter and investors will be watching to see if growth is sustainable. Other key indicators, including unemployment numbers and housing starts, will stay in focus as data suggests a recovery. Momentum in these areas needs to stay on course for positive change to occur.
The events of 2020 have been unprecedented. The related market, consumer, government and economic response has been unprecedented as well. While these challenges were all new, our country has adjusted to a new way of life and a new way of doing business and that has led to many bright spots this year too. I do see light at the end of the tunnel, and I have been especially encouraged by the rally we saw over the summer which wiped out the bear market returns we experienced when the pandemic hit. I am even more encouraged by the broadening rally we are now seeing as we close out the year. To me, both of those trends indicate ongoing signs of recovery and progress. And quite simply I don’t think America would have it any other way. We continue to maintain a focus on the long-term by investing in companies with a competitive advantage, strong fundamentals, resilient performance and growing cash flows.
Thank you for your time reading this note and please check out all of our materials posted in the library section of the GVA portal on Salesforce. We not only post regular market updates like this but also all Valor model allocations, all the positions and all the performance information. And please connect with us on LinkedIn and Twitter for our latest insights and team updates.
- Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. Value will fluctuate with market conditions and investments/portfolios may not achieve its investment objective. No strategy assures success or protects against loss. Investing involves risk including loss of principal.
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- Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.
- The prices of small and mid-cap stocks are generally more volatile than large cap stocks.
- International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
- Long positions may decline as short positions rise, thereby accelerating potential losses to the investor.
- Bonds are units of corporate debt issued by companies and securitized as tradeable assets. A bond is referred to as a fixed income instrument since bonds traditionally pay a fixed interest rate (coupon) to debtholders. Variable or floating interest rates are also now quite common. Bond prices are inversely correlated with interest rates: when rates go up, bond prices fall and vice-versa. Bonds have maturity dates at which point the principal amount must be paid back in full or risk default. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond yields are subject to change. Certain call or special redemption features may exist which could impact yield.
- Corporate bonds are debt obligations issued by corporations to fund capital improvements, expansions, debt refinancing, or acquisitions. Interest is subject to federal, state, and local taxes. The market value of corporate bonds will fluctuate, and if the bond is sold prior to maturity, the investor’s yield may differ from the advertised yield.
- Investment grade bonds are those rated BBB and above by Standard & Poor’s or Baa and above by Moody’s
- Municipal bonds are bonds issued by state and local governments to help fund large, expensive and long-lived capital projects in the communities they serve (like a bridge, toll road, school or airport). They are subject to availability and change in price. They are also subject to market and interest rate risk if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply. If sold prior to maturity, capital gains tax could apply.
- High yield/junk bonds (grade BB or below) are not investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.
- Preferred stocks are “hybrid” investments, sharing characteristics of both stocks and bonds. Like a stock they are generally paid after a bond, but like a bond they offer a fixed rate of payment and par value upon maturity/redemption. Risks can include interest rate risk, longer duration, lower credit ratings, and sector concentration, etc.
- Convertible bonds are a type of debt security that can be converted to a fixed number of shares of the issuer’s common stock.
- The fast price swings in commodities and currencies will result in significant volatility in an investor’s holdings. Precious metal investing involves greater fluctuation and potential for losses.
- Alternatives are investments that don’t fall into traditional investment categories—namely long-only stocks, bonds, or cash. Alternative investment managers can invest long or short, across multiple asset classes, aren’t constrained to an investment style, and aren’t entirely dependent on the markets going up to achieve positive results. Examples are hedge funds, private equity, event driven, long/short, hedged equity or “multi-strategy” which is a combination of the various alternative strategies.
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- Dividend yield refers to a stock’s annual dividend payments to shareholders, expressed as a percentage of the stock’s current price.
- An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors.
- Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
- Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business. At the most fundamental level, a company’s ability to create value for shareholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow (FCF).
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- The S&P 500 Index (the “S&P 500”) is a stock market index that measures the stock performance of 500 United States based companies listed on stock exchanges in the United States. It is a “market capitalization-weighted” index meaning the index is calculated by weighting the respective market capitalization of each constituent (calculated by multiplying the current price of the stock by the total shares outstanding). The S&P 500 is often used as a proxy for the U.S. stock market.
- The Dow Jones Industrial Average Index (the “DJIA” or “Dow”) is a stock market index composed of 30 United States based companies found on the New York Stock Exchange, with only a handful of Nasdaq-listed stocks such as Apple (AAPL), Intel (INTC), Cisco (CSCO), and Microsoft (MSFT). Along with the S&P 500 Index and the Nasdaq Composite Index, the Dow is one of the three most-followed stock market indices in the United States. The Dow is a price-weighted index, meaning its value is derived from the price per share for each stock divided by a common divisor. The term “Dow” comes from its founder Charles Dow.
- The Nasdaq Composite Index (the “Nasdaq”) is a stock market index that includes all the companies listed on the Nasdaq stock exchange. It is roughly 3,300 stocks. The term “Nasdaq” refers to the National Association of Securities Dealers Automated Quotations exchange, the first electronic exchange that allowed investors to buy and sell stock on a computerized, speedy, and transparent system, without the need for a physical trading floor. The Nasdaq is heavily weighted towards companies in the information technology sector (“tech” or “internet” companies) but there are financial, consumer, biotech, and industrial companies as well. Just like the S&P 500, it is a market capitalization-weighted index where its price is calculated by weighting the sum products of the closing price of each stock by their respective shares outstanding.
- The “VIX” is a popular name and ticker symbol for the Chicago Board Options Exchange’s CBOE Volatility Index. It is a real-time market index that represents the market’s expectation of 30-day forward-looking volatility (“implied volatility”) and is based on the prices of call and put options on the S&P 500 index that are traded daily.
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.
The COVID-19 pandemic prompted a wave of change for the financial services sector, namely accelerating the industry’s ongoing shift to digital. Firms are showing they’re willing to invest in technology that improves practice management efficiency and overall workflow. Nearly three-quarters of advisors surveyed by leading financial industry publisher Arizent said their firms were investing in technology to support the digital workforce. Further, July research published by InvestmentNews found that firms spent 3.7% of revenue on technology, an increase from 2018.
But with more resources behind this technological shift, the question remains: are RIAs investing in the right kind of technology?
One area that’s ripe for technological intervention is billing and compensation. It’s a familiar story for RIA firms: typical billing and compensation activities are time consuming and costly, often requiring a dedicated team member and absorbing days of their time each month. Data from a 2019 survey by Kitces Research of how advisors spend their time showed an average time-spend of 4.2 hours per week on administrative tasks like these.
How AdvisorBOB Can Help
AdvisorBOB (Book of Business) is one of Great Valley Advisor’s core proprietary technology offerings and it offers a complete billing and compensation solution for RIAs. It allows firms to track commissions and expenses in real time and gives advisors immediate access to their personalized portal. It saves time and money, promotes efficiency across the firm and boosts transparency with advisors – factors of increased importance as RIAs adjust to the “new normal.”
Since its launch in 2017, AdvisorBOB has processed and paid out over $85 million in override advisory fees. In that time, users have come to rely on several core features. Here are the top four features that our RIA clients love:
- Administrative view with live stats – As soon as users log in, the AdvisorBOB dashboard delivers quick insights into the full practice, including live stats on how the team is progressing toward production goals for the month.
- Complete payout transparency – The AdvisorBOB dashboard includes an in-depth look at payout figures, the sum of adjusted payouts and the sum of net payouts for a designated pay cycle, as well as the net sum difference between the current cycle and previous quarters.
- Customized reports – AdvisorBOB’s reporting feature provides the option of preparing customized and comprehensive reports on a variety of plan, commission and fee aspects. Examples include: quick analysis of commissions for designated pay cycles, line-items and adjustments by pay cycle, advisor fees by representative identification, account class or vendor, profitability of financial plans, net payout and levelized direct deposit for each advisor.
- Detailed financial plans overviews – Within the advisor portal, advisors have a complete view of their plans and clients, allowing them full visibility into how clients are billed (one-time fee or recurring charges). Advisors are given a historic and forward-looking view on all billing aspects, including whether plans are currently active and what is due to be paid in the future. They can set up payment preferences directly in the dashboard with check, credit card and ACH transfer options.
The Bottom Line
As RIAs embrace a move toward a more digital practice, they should be looking for tech solutions that actually solve their practice management challenges and not just a blanketed, one-size-fits-all solution. AdvisorBOB is a single-source technology solution for advisors, providing an in-depth, easy-to-navigate, transparent and — most importantly — a customizable view into their revenue streams. It was designed to streamline an important, yet time-consuming aspect of the advisor’s business and allow more time for the advisor to focus on working with clients.
AdvisorBOB is not affiliated with or endorsed by LPL Financial or Great Valley Advisor Group.
The coronavirus pandemic prompted a sudden and widespread shift to a remote workforce, and groups that traditionally conducted all business in person had to quickly adjust to a new virtual environment. Financial advisors rose to the occasion and maintained normal business practices amid the changes.
As the pandemic took hold in the spring, Arizent, the parent company of financial services publications like Financial Planning, surveyed 300 financial services professionals about the shift to digital, and many reported greater use of technology. Two-thirds of respondents were increasing use of video conferencing tools to communicate with clients and nearly 75% indicated their firms were investing more in technology to support the remote team.
While advisors were generally able to adjust to the digital workspace, many are eager to return to the office and resume in-person meetings with clients and colleagues, and many firms are well underway in creating plans to bring staff back. A May 2020 CNBC survey of its Global CFO Council found the vast majority (75%) of its North American members were working remotely at the time but expected a shift back to offices by September. Thirty-four percent of respondents noted less than a quarter of the workforce would be remote come fall.
However, as threats of the coronavirus still loom, returning to the office is a complicated — and potentially costly — task, with expectations of cleanliness and safety higher than ever before. There are steps you can take to protect your team — whether you lead a group of three or 30 — and safely bring them back to the office. Here are some tips:
- Assess your current office setup. Before bringing any staff into the building, it’s important to assess the current facilities and equipment and identify potential hazards. The open office setup that previously facilitated collaboration and team bonding now presents a health risk, and the shared coffee pot where you discussed the latest Wall Street news has likely become a bygone of the pre-coronavirus era. Consider adding plexiglass dividers and removing previously shared kitchen items to make the office safer.
- Determine who will come back and when. It’s not feasible or safe to bring your entire staff back at one time. Who returns and when will be unique to your firm and your team’s specific circumstances. In many cases, testing protocols with firm leadership is a smart place to start. A mid-April Deloitte survey of financial services institutions found that return-to-work plans would largely be based on job functions (64%) and/or geography (60%) or a combination of these two factors.
- Establish new office rules and be clear in relaying them to your team. Follow CDC and local guidelines when designing your office regulations, particularly when it comes to mask wearing, hand washing, temperature checks (including frequency and temperature thresholds) and other sanitation measures. There should also be strict requirements related to how team members report possible exposures and self-quarantine periods. Establishing these rules and ensuring everyone is on the same page will allow for much easier enforcement. The CDC has dedicated an entire section of its site to recommendations, tips and guidelines for businesses that can help guide your plan.
- Designate one room for meetings and clean it often. Frequent and thorough cleanings will be essential to keeping your team safe, especially in high-traffic areas. Designating a single space — ideally one of your larger conference rooms — for collaboration will make this process a bit easier.
- Provide cleaning supplies, sanitizer and personal protective equipment. Be sure to have masks on hand for yourself, your team members and any office visitors. These, as well as plenty of hand sanitizer and surface-sanitizing wipes and sprays, should be placed in prominent locations and vigilantly used by all personnel.
Bringing your team into the office is an important first step toward eventually welcoming clients back to the office. While in-home meetings are discouraged at present, there are some clients who will be eager to meet face-to-face with their team, and these in-person meetings will be necessary in some cases. There are several special considerations when bringing outside visitors into the office:
- Ensure client appointments are scheduled in advance and limited to a set amount of time. Clients must be discouraged from stopping in unannounced. When they are scheduled to come in, meetings should have a set duration to mitigate overall risk. Further, clients should not bring anyone else with them.
- Encourage social distancing. Whenever possible, work to maintain social distancing standards by meeting in a larger space — or better yet, outside. Encourage all visitors to wear masks during the meeting.
- Alert other office mates of visitors. Whenever someone is on the premises, it’s important to alert all other team members at the office — especially if you are in a shared space.
- Inform your client of office protocols in advance of the meeting. Share the firmwide rules and regulations and be clear on your expectations for their cooperation. Greet clients outside and bring them directly to the meeting space to begin promptly.
- Clean up immediately. Following the meeting, ensure the meeting space is thoroughly cleaned, with all hard surfaces, door knobs and chairs wiped down with a CDC-approved disinfectant.
For most financial advisors, operating in an entirely remote scenario isn’t feasible over the long term. As businesses adjust to the new normal, establishing rules and following protocols are essential to maintaining a safe environment for all.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The opinions expressed in this material do not necessarily reflect the views of LPL Financial.