From the November 2007 issue of Wealth Manager Web • Subscribe!

Hailing CABs

If you haven't formed a client advisory board by now--or at least had fleeting thoughts about creating one--you could be missing out on an elegantly simple way to improve your firm's fortunes.

Client advisory boards (CABs) have been gaining momentum with RIAs, independent wealth managers and financial advisory firms. And it's easy to see why. Comprising some of your key clients, they provide an opportunity to gain valuable insights into their concerns, they foster stronger client bonds and they often lead to referrals and new prospects. Indeed, a CAB can be a win-win both ways--for your firm and the board.

The Financial Planning Association reports that more firms are forming and benefiting from CABs. "They are incredibly valuable--not only for increased referrals, but for 'wallet share,' determining what position of your client's business you want and actually get. It can be a build-on of your clients' relationship and loyalty to you," says Bruce W. Peters, president and CEO of CABHQ in Pittsford, N.Y. (, who has helped scores of firms design CABs and facilitate group meetings. "Most of the time my clients look at it as a marketing/referral. It's all that, and more," he adds. "It can involve transitioning issues, service issues and marketing and strategy concepts."

Basically, there are several reasons for wealth managers and advisors to form client advisory boards. Many are looking for guidance and suggestions on the firm's direction, as well as feedback from clients on products and services. They also want to strengthen the advisor-client relationship, which, hopefully, will lead to additional referrals and prospects.

Paul E. Palmer Jr. CFP, CLU, managing principal of Cypress Advisory Services Ltd. in Houston, formed a CAB in April 2007 on the advice of a marketing consultant. "It gives us a benchmark of what clients use and are interested in--and what they aren't interested in," says Palmer. "Secondarily, we wanted to open up the possibility of getting additional referrals. We talk about the size of our firm, plans for growth, and try to impress upon [the board members] how growth comes from getting other good clients from our good clients."

Peters says that in his experience the increase in referrals from an advisory board versus a similar client profile with non-advisory board members ranges from a low of 34 percent in increased referrals and other advantages to a high of 68 percent.

CFP John Gugle, a principal of Alpha Financial Advisors in Charlotte, N.C., hadmany of the same reasons in mind when he set up a CAB last year. "Our board members feed off each other's ideas, and we have learned what matters to our clients and our potential clients, too," he says.

How to Do It

The first step in setting up a CAB is to determine your board's mission. Gauge what it is you're trying to achieve. This takes considerable thought and planning. You have to fix an agenda, decide who's going to serve on your board, and how you want meetings to be run. Will you run it yourself or use an inside or outside facilitator? Do you want strategic growth or operational efficiency? Finally, determine the tone of the meetings by deciding whether they will be all business or social as well. Your invitations should be based on these considerations.

Once your goals are established, prepare an agenda for each board meeting and send it to members in advance. Follow-ups are important to reinforce key discussion points and keep in touch with members.

Keys Tinney, CFP and managing partner of Integrated Advisors, Englewood, Colo., asks his board to prioritize the top three items that the group feels they should be working on over the six months prior to their next meeting. When that meeting date arrives, he will review progress on those items, and then review other items they discussed at the previous meeting, make any additions, and have the board re-prioritize its action items for the next six months. Between meetings, Tinney also provides one or two status updates to keep his board informed of progress. "It's really formal--like a board meeting, with minutes," he says. "They expect the meetings I run to be like the meetings they're used to."

A lot of advisors favor the more formal model of a typical board of directors meeting. Gugle is a proponent of the give-and-take, and runs his firm's meetings with the help of a communications expert, a board member who acts as facilitator. Each meeting is devoted to a specific topic.

"We work before our meeting with our facilitator to create the agenda, which is sent to our board members a few days prior to our quarterly meeting," Gugle explains. "The facilitator is well trained to pull information from our board members and manage the flow of the meeting. Our job as principals is to absorb what we are being told and ask questions of our board members."

Palmer has taken the board concept a step further--and enhanced the social aspect--by inviting spouses of his top clients to attend. "We wanted to make it a bit informal," he says. "We felt it would improve our chances of getting clients to come if we invited their spouses. Board meetings tend to be very structured with a detailed agenda, so our goal was to make meetings more social and invoke some dialogue with everyone."

Palmer continues: "We want to know clients intimately and in a more social setting. We've been successful in getting input from the spouses, in fact, more than we thought we would get. One spouse suggested having social events, like a wine-tasting where they could invite prospective clients we could meet."

Making your best clients "virtual partners" in your business can reap many benefits. For one thing, they provide a perspective looking from the outside in. They can suggest new ideas regarding what services your best clients may want or expect from you. They may even introduce you to new prospects and give advice on how to access new markets. This could result in the creation of client advocates who are not only your clients, but are also extensions of your practice. Always keep in mind, however, that they are clients--not co-owners of your business.

The main opportunity is the chance "to invite clients' creativity," says Gugle. "It gives clients a sense of empowerment and ownership in the firm. When we sit down with a client at our office it's always about them. [A CAB is] not about them anymore. It's now about our firm. We can never ask those questions when we meet them on a regular basis. We're really asking them to help us improve our firm. What we really want to know is how we're doing and could we do it better."

Recent topics at Gugle's board meetings have included pricing strategies, the Web site, client services, marketing and growth strategies, and what the future of the firm should be in terms of adding principals and staff, creating a wealth manager approach, and the optimal number of clients it should service.

Tinney's board meetings have had positive results as well. Tinney took his board's suggestion that the firm integrate clients more closely with other outside advisors such as CPAs, attorneys, and mortgage and insurance representatives. Tinney says clients on the board had been frustrated by getting advice from different sources and not having anyone to sort through it all and determine the best course of action from a holistic perspective. They wanted someone to analyze the recommendations they were getting from outside sources on legal, mortgage or insurance matters, and how it all applied to the planning advice Tinney's firm provided--rather than just providing contact names and numbers. "Essentially, what we're doing now is acting as a relationship manager, or quarterback, for all their other advisors," Tinney reports.

At another meeting, it was suggested the firm customize the frequency of client contacts: Some wanted monthly contact, others semi-annual or quarterly meetings. Tinney took the board's suggestion and implemented a system tailored to individual clients' wishes.

Joshua P. Itzoe, CFP, was familiar with individual advisory boards when he worked in the brokerage industry. After he began working with a partner as a principal in Greenspring Wealth Management in Towson, Md., the two combined their boards. The new CAB meets quarterly and discusses just one topic per session--typically related to financial operations. In fact, the firm recently implemented the board's suggestion of a way to more accurately forecast revenue on a quarterly basis by identifying and tracking certain quantitative measures. The result has increased the firm's operational efficiency, Itzoe says.

Of course it can be awkward if your board suggests a move you don't want to take, and sometimes boards can shoot down an idea of the firm's. It's best, then, to be upfront at the start and tell the CAB that not every idea will be implemented, but that every suggestion they make will be seriously considered.

Who sits on the board depends on what you are trying to learn and hope to accomplish. There is no one-size-fits-all. Your board could be made up of your best clients, new clients, old clients--or even non-clients, says Peters, the CAB consultant. But no matter who you choose, aim for a fair representation. For example, you might want a mix of your best clients, such as business owners, corporate executives, retirees, and key centers of influence like CPAs and attorneys. Also, try for demographic diversity, such as both younger and older clients and women as well as men. From there, create a list of candidates. "Twelve is perfect," says Peters. "You can do it with fewer with the right people in the room, but more makes it harder to get everybody involved."

John Gugle's board consists of nine clients--five women and four men--plus two principals. "We have an attorney, a retired school teacher, a CIO, a CPA, a health insurance consultant, a PR/communications consultant, a marketing and advertising business owner, a realtor and a retired mortgage broker." Ages range from 33 to 65.

Next, decide on the tenure of your board members. The usual term is one or two years, and members should be rotated. This can be tricky, Peters warns, since members form relationships and may want to continue serving. They also become invested in your success. Having a facilitator can aid the process, Peters adds.

The frequency and length of meetings are also important factors. The usual length is one to two hours, and most advisors opt for semi-annual or quarterly meetings. Other considerations are meeting location, time of day, time of month and day of the week.

Finally, keep in mind that while more firms are finding client advisory boards worthwhile, they're not for everyone. Some have found the exercise more trouble than it was worth. RegentAtlantic Capital LLC in Chatham, N.J.--a firm with 33 employees and $1.8 billion AUM--disbanded its board after a two-year trial.

Explains Regent Atlantic CIO Christopher J. Cordaro: "It took too long to bring board members up to speed on issues. Also, by the time we prepared issues (an agenda) for the board for their opinion, we had made up our mind about the course of action, and they ended up rubber stamping our decision."

Some Dos and Don'ts

Don't just jump into a Client Advisory Board. Think through what you want and why.

Do: Make it "invitation only" to get the right people on board; make a personal call (phone or visit) first to explain what it is.

Do: Have a variety of clients on the board.

Do: Consider using an outside facilitator who has done this kind of work before. If there is no facilitator, select a chairman.

Don't ignore advice from the board if you don't like it. If the board discusses it, you have an obligation to act in some way.

Don't allow hurt feelings or take things personally. If you are not open to honest feedback, don't do this.

Do: Set a term limit for the board. The effectiveness of the members may have limits.

Do: Set a year's schedule for the meetings in advance.

Do: Ask for input about the meeting place and meeting environment and make it convenient to the board.

Don't ramble, talk too much or try to control the meeting. Give board members a chance to talk.

Do: Prepare. Prepare. Prepare. Don't waste their time.


Bruce W. Fraser, a financial writer in New York, was a commissioning editor for the recently published Sixty Things to Do When You Turn Sixty, and is currently writing a book about millionaires.

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