For a few years now, we've run regular profiles of advisors in the throes of a particular business challenge. They get advice from a panel of experts: Hellen Davis, president of Indaba Training Specialists, a management consulting and training firm in Treasure Island, Fla.; Philip Palaveev, president of Fusion Financial, an Elmsford, NY-based network of advisors; and Chip Roame, managing principal of Tiburon Strategic Advisors, a Tiburon, Calif.-based market research and strategy consulting firm for financial institutions and investment managers.
We decided it was high time we touch base with some of those advisors to see how they're doing these days and whether our experts' advice was of any help. Here's a look at what's happened to three of them since they were profiled.
Tom Lydon: The Balancing Act
The background: When we last encountered Tom Lydon, who runs a small independent firm in Newport Beach, Calif., it was 2007 and he was faced with a dilemma: whether to spend more time on a newabout ETFs he'd launched two years before. With two assistants, Lydon was the only advisor in the firm, Global Investments Trends, and while he could see the blog had great potential, he didn't want client service to suffer.
The advice: For the most part, our experts urged him to back off or hire someone to run the blog for him. “He has to be very clear about which is his primary business,” commented Palaveev. “Otherwise, it will be difficult to expand both his assets and the blog at the same rate as before.”
The update: Lydon decided to go full speed ahead with the blog, and he's glad he did. “The popularity of ETFs has gone through the roof, and we've been fortunate to be one of the few real authorities on them,” he says.
But he's also expanded the staff, as our panel suggested. A full-time editor, for example, now takes care of most of the editorial work Lydon used to do and relies on a group of about four outside writers to produce much of the content. With the added staff, Lydon has expanded the number of posts from about three to eight a day and arranged content deals with such sites as seekingalpha.com and CNBC.com. And he's launching a new premium content section for members, with research on about 30 model portfolios. The upshot: Lydon is now taking in advertising and expects the blog to make about $850,000 in revenues for the year.
What about the matter of eating into client service? According to Lydon, he spends about the same amount of time with clients as he did before, dividing his day equally between the blog and his practice. That's partly thanks to his expanded staff. But a strict meeting schedule also helps. Every morning, Lydon meets with his editor to discuss top stories to highlight, and with his administrative assistants to go over client calls or meetings for the day.
Then there's the use of basecamp.com for sharing information about scheduling, client meetings, and other projects. And clients receive their statements electronically, as well as daily email updates on top ETF-related news., which Lydon says has increased efficiency as well as client communication. For starters, his firm's website now includes a detailed section laying out what's involved in becoming a client, thereby streamlining the process. He and his administrative staff also use a web sitecalled
Ultimately, according to Lydon, his ETF work has had other benefits as well. For example, he draws on all the ETF and related research he does when assessing client portfolios. Recently, for example, he decided to increase the corporate bond allocation for his clients based on research he'd done. But the biggest benefit, he feels, is the effect on his reputation. “It's elevated our overall brand in this space,” he says.
For Lydon, the proof is in the assets, which have grown to $85 million from $70 million three years ago.
Michael Grodsky: Making a Niche Business Work
The background: Michael Grodsky's small Woodland Hills, Calif., practice, Aquarius Financial, was barely two years old when we profiled him in early 2009. A former musician and teacher married to an artist, Grodsky had decided the smartest tack was to focus on a few niches: artists and non-profits and foundations, which he hoped to provide with socially responsible investment advice.
The advice: The panel warned Grodsky that he'd chosen a difficult path: a potential market that tends not to be particularly wealthy. Advice ranged from forgetting about the niche completely to targeting musicians in orchestras and joining an existing firm.
The update. Recognizing his dilemma — a chosen market on the less-affluent side of the spectrum — and heeding our panel's advice to find a more systematic way to reach clients, Grodksy changed his tack. Rather than pick a different group of potential clients, he revised his business model. Instead of trying to gather assets under management fromwith few assets, he decided to focus on selling health insurance to artists. “I may be serving people without a lot of money,” he says. “But everyone needs health insurance.”
To that end, last November, he started offering his services to arts-related organizations, proposing that he give presentations about health insurance options to their members. It seemed a perfect fit: Grodsky had taught music theory and composition at a number of colleges in the area and he knew he had a knack for speaking to large groups. And, thanks to health-care reform, interest in the topic was especially high.
Grodsky was on the board of a non-profit and he started with that group. Since then, he's done at least one seminar a month, working with about a dozen different organizations, and is gearing up to run webinars on the subject as well. While the point of the seminars isn't to sell, according to Grodsky, he's received many calls afterwards from participants seeking help. He's also been getting more referrals from existing clients. He's sold around ten group plans so far.
The way he hopes to distinguish himself, however, is through his process — trying to establish himself as what he calls “a fiduciary advisor in the area of health insurance, recommending only plans that are in my clients' best interest.” That means he discloses all his fees and any other often-hidden information he thinks clients should be clear about. He figures that, by becoming known as a trustworthy broker on the up-and-up, he'll be positioned to do even more business as health-care reform takes effect, especially by appealing to small groups. “Health insurance will remain a tangled web of options for a long time,” he says. In the long run, he hopes that will help boost his financial planning business as well.
Joe Ventura: Hiring Good Help
The background: In June 2009, veteran independent advisor Joe Ventura was looking for junior associates for William Tell Financial Services, his 14-year-old, Latham, NY-based firm, to replace a handful of advisors who had recently left. His solution was to find advisors “with an entrepreneurial spirit,” but to pay them a salary temporarily while they learned the ropes, then have them work with existing clients and sign a non-compete.
The advice: On the whole, our panel urged Ventura to rethink his approach. “He's trying to recruit people who won't want to stay with him,” is what Tiburon's Roame suggested.
The update: Ventura went ahead with his plan, anyway. In fact, shortly after the article appeared, Ventura got a call from an advisor interested in taking him up on his offer. “He told me, ‘I'm the person you're looking for,’” he says. They agreed the new recruit would come in as a broker's assistant, earning a salary and bonus. When the time seemed right, he would take a 13-week training program, and after that, he would be able work with existing accounts.
The advisor was hired in July 2009, and after about seven months, he was ready to start the training program. In mid-2010, Ventura hired two more junior advisors, who now work as broker's assistants. One was referred by a colleague, the other is the son of a long-time client. “I realized the person I'm looking for is a diamond in the rough,” says Ventura. “But I know he's out there.”
While these junior advisors work with existing clients, Ventura doesn't give them the dregs. In fact, according to Ventura, many of the shared accounts are among his largest. “If the client and I click, if we're like bread and butter, I don't transfer them,” he says.
Ventura had all three newbies sign non-compete agreements, something he hadn't done with the advisors who left the firm the year before. And, of course, clients are held jointly, so that both the advisor and Ventura's names are associated with the account. He also instituted a few changes aimed at reinforcing the clients' allegiance to the firm, rather than to any one advisor. For example, if an advisor hasn't met with a client for six months, then that account is “open game to all the other reps,” he says. Similarly, if they don't ask clients for referrals regularly, those accounts also go back into the pool. That's happened about five times in the past year. “It's been controversial,” he says.
Still, although Ventura now has six reps — up from three a year ago — and assets are about $90 million, from $70 million the year before, he admits it's too soon to tell whether the new recruits will stay for long. He also acknowledges that non-competes often aren't enforceable. “Someone might take a $400,000 book of business and you'll end up getting $150,000 in a settlement, he says. “The experiment is not over.”