RIA

Q1 2014 – Big Opportunity for Many

Posted by Anu Heda on Dec 10, 2013, in Thoughts , tagged with ,

Has sufficient time passed to merit investing in funds clobbered during 2008? That’s the primary thought occurring to me when I read this Morningstar article. 5-year returns starting in Q1 2014 will be completely devoid of 2008 performance. I think this situation will be extremely important to asset managers. Many financial advisors are sensitive to negative returns in the 1, 3, or 5 year periods. By that first 2014 fact sheet, many funds will have no negative performing periods.

Implications? Asset managers already free and clear of negative performance and leading with that message need to evolve to something different. Early next year, only positive performance can’t be the primary selling message, as many funds will also have only positive performance. Second, asset managers with newly all positive performance should resist leading with performance for the same reason: it isn’t differentiated.

I’d recommend asset managers consider using the unique time period to communicate changes to risk management practices and/or the underlying investment process to protect investors from the next market downturn. Our FA research aligns with the answers from this RIA (Ignites: subscription required) from Wescott: communicating process and underlying portfolio changes trumps boasting about performance.

Success Lessons from an RIA

Posted by Anu Heda on Nov 04, 2011, in Thoughts , tagged with

I met with the founder of a successful RIA practice last week.  His business is over 20 years old with about 1% client attrition (stunningly good to me).  As we spoke about how his business arrived here today and what may help grow the practice, he had three reasons for his continued success.

  1. Start small and prove performance – He mentioned that he’d often start with small slices of investable assets; something like $10,000.  And over time, he’d ask if the client was happy with his firm’s performance and similarly content with performance of her other assets.  Often she’d say yes about his firm and no about other firms.  Then she’d move additional assets to his firm.
  2. Out-service the competition – He believes that most of his competition spends too little time with clients.  He goes to great lengths to visit each client quarterly.
  3. Knowledge versus expertise – He built his firm to be knowledgeable about broad market situations and events, and to have extremely specific expertise in one investment strategy.

It’s always great to re-learn those lessons.  They apply pretty closely to product manufacturers as well.