The Wealth Manager's Playbook

Create an Institutionalized Team Approach

Sustainable wealth management practices have been able to differentiate themselves by institutionalizing their relationships. Rather than a client or referral source being drawn to a practice because of an individual, the goal is for a client to fall in love with the practice's process and team.

We have seen this approach in action with many of our investment adviser partners. The lead adviser, who has remained by the client's side for years, is able to seamlessly transition that relationship to the junior adviser. The planning, the discovery, and the tribal knowledge about each client is not lost, but instead transferred to the next generation within the organization. Successful investment advisory practices are now teams of specialists brought together for the common goal of creating and implementing a client solution. This strategy gives clients great comfort and builds institutional value for the firm.

In fact, this concept of a team and a succession plan for clients may no longer be a best practice for Registered Investment Advisers (RIAs) ' it might be a requirement. In June, the SEC proposed a rule that would require RIA firms to have a written plan for succession in the event of retirement or death of a principal. See, “Adviser Business Continuity and Transition Plans,” RIN 3235-AL62. It's obvious that the SEC views succession planning as a vital component to protecting clients.

Embrace Technology

Technology can be viewed in twos ways: 1) to be feared; or 2) something that can help to make us more effective and efficient. Generally, the wealth management business is embracing new technologies. Individual firms that embrace innovation to supplement their core skills and value proposition are thriving. Advisers who are not are being marginalized and replaced.

As an example, the process to open and fund an account once took an in-person meeting, five unique sets of paper forms, and two weeks of processing time. Today, this can be done online in five minutes or less. Clients can use their custodian's website to complete all necessary self-service actions and get real-time account updates.

Conclusion

The above developments in the wealth management space, at one time, were unthinkable to “stock brokers.” Over the past 20 years, we have seen an industry of brokers shift into “wealth managers.” What I am saying may seem unthinkable today, in our business of independent, eat-what-you-kill, lone-wolf “producers.” Nevertheless, change is coming whether we like it or not.

Fully embracing these ideas can only happen when a firm has size and scale. Teams take time to build. Team members need career paths and opportunities to grow. Training relationship managers takes time and experience. Embracing new technologies takes specialists and resources. A firm needs bench strength. All of the moving pieces need to be managed and nurtured, but the results are well worth the effort.

There are two ways to accomplish the goals of an institutionalized, tech-savvy practice. The first is to build “it,” which takes time, resources and patience. For most producers, this is not something they have the interest or aptitude for and would take attention away from business development activities.

The alternative is to join “it.” Firms are building platforms and practices designed to endure through and leverage these changes. Those lone-wolf producers who haven't been able to institutionalize their connection with clients can partner with those firms that have.

The wealth management business is unique, with an important advantage ' recurring revenue. This playbook will help ensure that the recurring revenue will end up in your pocket rather than someone else's.

The producer who is able to focus on institutionalizing their practice, or partner with a practice that has, will survive and thrive in this new world. Nevertheless, those who choose not to do so will quickly take on water and ultimately sink. Our industry will and must adapt. The unprepared producer will experience declining income, firm value and number of prospects. Producers will have two simple choices over the next five to 10 years ' adapt or die.

Tyler Horning is Principal of TDC Life, a third-generation retail high-net worth life insurance practice. He can be reached at [email protected].