Consider this case study: Chatham, NJ wealth management firm RegentAtlantic has grown from a staff of nine serving 275 clients in late 1996 to 30 employees working with approximately 600 clients as of early 2006. Assets under management have increased over the same period from roughly $225 million to $1.3 billion. But great growth comes with a challenge: How can the principals improve operational efficiency to ensure that they continue providing clients customized financial advice and investment management? In other words, how can they offer big firm services while maintaining a small firm culture?
RegentAtlantic's growth has been organic, although the company is the result of a merger between two N.J.-based financial planning and investment management firms, E B Advisory Corp. and Individual Asset Planning. The firms' principals had known each other professionally since the early 1980s, and four of the combined firm's five principals--Dave Bugen, CFP; Ed Stuart, CFP, ChFC; Larry Korn, J.D., CFP, and Chris Cordaro, CFP, CFA--decided that they could fare better in the changing competitive environment by combining their companies. They merged in late 1996 and subsequently changed the business's name to RegentAtlantic Capital, LLC in 2001. All of the two firms' clients, and most of the staff, remained. Compatible technologies and investment philosophies helped smooth the transition, according to Bugen. Both firms used Advent portfolio management systems--they've since switched to PortfolioCenter--and both advocated broad portfolio diversification across multiple asset classes.
The firm plans to continue growing at least as rapidly for the next 10 years: Bugen says their goal is to become a dominant regional competitor, and RAC has stepped up its marketing efforts to achieve this result. Such realized and anticipated growth raises concerns, however. "When we had nine employees, you knew everybody and what they did," Bugen says. "Now that we have 30 employees, how do we maintain our culture and values?"
RegentAtlantic's wealth management staff works in four teams of five staff members who serve 150 to 200 clients per team. Each team is staffed with two wealth managers who are responsible for acquiring and retaining clients; each wealth manager also serves as the client's financial strategist. Each team has a financial advisor--typically a CFP, CFA or CPA--who handles complex analyses and leads client meetings. An analyst--typically a CFP or CFP candidate with one to five years of experience--handles less complex research and analyses, including portfolio rebalancing. Each team also has a client service administrator who handles operations. In addition, one two-person team handles 100 of the firm's smaller clients whose average portfolios are in the $500,000 range. These clients receive the same services as more affluent clients, but their finances are usually less complex.
The firm focuses on high-net-worth investors with portfolios between $2 million and $20 million. Those clients won't settle for cookie-cutter portfolios and advice, which means the firm must find a way to implement customized solutions while maintaining uniform practices among the teams. "When we had a dozen people on staff, it was easy to know what everybody was doing," says Cordaro, echoing Bugen's concern. "But as we've grown, we have to ensure that every client is getting the same quality of advice, and all portfolios are being managed and monitored consistent with our firm's investment philosophy. Also, it's easy to provide indepth customization to each client if you have only five clients. But when you have over 600 clients, customizing each one is difficult." Cordaro's comments highlight two of the critical challenges that RegentAtlantic has decided to address with technology: 1) enhancing internal communications and quality control, and 2) making the financial planning and portfolio management processes more efficient.
The team approach to wealth management raises a potential risk: If the teams lack a framework for sharing information and reporting to management, it's possible that some teams could be operating sub-optimally without anyone realizing it. This need to share knowledge and manage workflow led to one of RegentAtlantic's major recent technology initiatives--the decision to switch client management software from Goldmine to Microsoft CRM. The firm had been using Goldmine for several years but the program's database was becoming too large and too slow, according to Jennifer Papadopolo, RegentAtlantic's COO. She and Cordaro, who together serve as the firm's informal technology committee, narrowed upgrade candidates to Goldmine's SQL version and Microsoft's Web-based CRM. They chose the latter because its family-tree view of client and account structures (as opposed to a contact structure) matched their view more closely. Additionally, CRM provided workflow management features that would allow RegentAtlantic's management to track internal activity in ways that had been unavailable previously.
To facilitate the move to CRM, Papadopolo held weekly meetings to answer questions and discuss the new program's procedures.
"With CRM we can set up work queues for each wealth management team, and we can monitor the teams' pending work," Papadopolo says. "We couldn't do that before. We'd hear that staff was busy, but we couldn't see just how busy they were. You can track each team's and person's workload with CRM."
CRM also allows Papadopolo to identify best practices in each team and share that knowledge throughout the firm. "CRM allows us to set up cases that consist of a series of tasks that are performed by different staff [members]. For example, setting up a new client is an example of a case comprised of multiple tasks. With CRM, we can track the amount of time each team requires to set up a new client and learn why one team is faster than the others. That lets us share best practices within the firm, which we must do to achieve scalable growth."
Papadopolo's example illustrates how technology supports the firm's business model by encouraging knowledge-sharing among all the teams. The wealth management teams operate independently, but Bugen says RegentAtlantic's principals did not want to create inter-team competition. Consequently, new clients are assigned to the team whose skills best match the client's needs--they are not required to work with the wealth manager who introduced them to the firm. "It's not an 'eat-what-you-kill' environment," says Bugen. "The wealth managers receive the same compensation."
CRM also helps Margaret Prentice, chief marketing officer, monitor the firm's client development efforts. Each wealth manager has a responsibility to help grow the business, and the firm uses CRM to monitor contacts with prospects and clients. "As soon as we know someone is interested in our services, we record them in CRM and code them as an 'opportunity,'" says Prentice. "We immediately send them a customized information packet that's based on a CRM template. They also automatically receive any communications we send to prospects, including our four quarterly newsletters and other communications."
CRM provides reports such as the number of prospects a wealth manager has in the pipeline and the prospects' estimated potential revenues. "We can produce reports that show all of the open opportunities as well as closed opportunities for a period," Prentice says. "It's a wonderful tool for measuring success with prospects and seeing each staff member's contribution to the firm's growth."
RegentAtlantic's tech investment decisions follow a typical pattern. First, Cordaro envisions a potential use for a new technology and discusses the idea with Papadopolo. She reviews the technology's potential benefits and determines if and how the software or hardware would fit into and enhance the firm's workflow. "We make a great team because she brings things back to reality," Cordaro says. "She asks if something will be a sustainable technology for us, or if it's just an interesting idea because I might need a new toy."
The firm has spent an average $200,000 per year on technology recently; roughly half that amount went to outside vendors. Although the company's network has nine servers and approximately 30 workstations, RegentAtlantic has no in-house network support staff: Data Link Associates, a consulting firm in Allentown, Pa., fills that role. Cordaro notes that it would cost at least $100,000 per year to have a full-time IT employee, and that person's skills would be limited compared to those available from Data Link. As a result, he believes the outsourcing arrangement is more cost-effective. "If we don't have much going on in day-to-day tech management, Data Link sends in one person on Thursdays to do maintenance," Cordaro says. "But if we have more activity--adding multiple workstations for new employees, for example--they can send three consultants. That lets us use their resources to scale up and down as needed. It's far more efficient than having someone on staff who is often under-worked or overworked."
The dominant theme behind RegentAtlantic's recent technology initiatives has been improving productivity. Papadopolo and Cordaro routinely examine the firm's work processes to identify regular activities that take a long time or are tedious. Then, they seek technologies that can handle the tasks "better, cheaper, and faster."
At one point, while he was struggling with a simulation model, Cordaro met Gobind Daryanani, CFP, Ph.D., at an FPA conference. Daryanani had just finished developing software that used a proprietary simulation method called "Beyond Monte Carlo" for formulating employee stock-option exercise recommendations. "I acted on the principle that if you meet someone smarter then yourself, you should hire him or her, so I offered Gobind a job at RegentAtlantic," Cordaro says.
Daryanani subsequently joined the firm and worked as the analyst on Cordaro's team. Cordaro knew Daryanani was overqualified but, "The idea was for Gobind to learn from the ground up what we do for clients, our process and procedures," Cordaro says "Then he would be able to consult with us on how to improve our productivity, service and recommendations."
Daryanani implemented several changes to RegentAtlantic's analytical tools. He replaced the @RISK MCS engine with Beyond Monte Carlo, which allowed analysts to run planning scenarios significantly faster. Daryanani also developed cash monitoring modules for tracking cash balances, allowing the teams' analysts to set minimum and maximum target cash balances for each account. The program alerted them when the cash balance was out of the target range. He also improved and standardized data entry methods for other templates.
Daryanani returned to consulting after six months, but the parties continue to collaborate--most recently to eliminate a productivity bottleneck. The firm's average client had five or six accounts that comprised the overall portfolio: Each spouse had a taxable account, an IRA account and often a joint or trust account, for example. From an allocation perspective, it didn't make sense to have four identical portfolios in each account. Instead, it was more tax- and transaction- efficient to treat the accounts as one portfolio with the tax-efficient investments in the taxable accounts and the inefficient assets in the tax-deferred accounts. Once you do that, however, Cordaro notes, rebalancing becomes complex. Subsequently, Daryanani developed software that reduced the time needed for rebalancing.
Although the firm's technology initiatives have been successful, Cordaro does admit disappointment with some of the software available to wealth managers. Ten years ago he wished for one fully integrated database--the "killer app" that did everything. But each time he looked at a candidate, he found that it did many things, but nothing well. He hasn't given up on that dream, but he says RegentAtlantic's emphasis will continue to be on improving productivity so the firm can maintain its growth without sacrificing quality. "Our direction now is to look for products or technologies that do something well," he says. "We can then integrate that solution into our system."
Ed McCarthy, CFP, is a freelance writer based in Pascoag, R.I.