With more than three decades of financial services expertise, Bob Rowe lists some heavy-hitting names on his resume including Prudential Bache, Oppenheimer, and Morgan Stanley. For the last two years, his Rowe Consulting Group has been affiliated with Raymond James. But running an investment advisory practice is only one of Rowe’s ventures. He’s also the principal behind Rowe Decision Analytics and the Web site www.myinvestmentpolicy.com, which provides a Web-based questionnaire that advisors can use with clients to create a comprehensive investment policy statement reflective of the client’s investment goals and objectives. After the data is input, a finished policy statement is delivered to the advisor in less than an hour.
Rowe has used investment policy statements in his own practice from his earliest days in the business and began trying to computerize the process as far back as the late ’80s, starting with a WordPerfect document. He has long found investment policy statements to be not only a great legal protection for the advisor, but one of the most effective marketing tools available.
Rowe spoke to Managing Editor Bob Keane in mid-May.
At this point, how many different policy statement templates do you have?
How many would be used by investment advisors with their clients?
Depending on the field they’re in–all of them, and there probably should be more. You have one for individual investors, you have one for partnerships, you have joint accounts, you have IRAs…
Why so many?
If you are talking to a Taft-Hartley fund, which is a union benefit fund, they don’t want to read about corporate responsibilities. They want to talk about the union membership and how this is going to help the local–and they will be very sensitive about it.
If you talk to an endowment, they don’t want to see the language of a foundation in their policy statement. It sounds overly redundant, but the language talks specifically about the kind of client that [the investment policy statement is for].
Do you work with many independent advisors?
The majority of our buyers are independent advisors. The independent market seems to recognize the importance of policy statements more right now and those are the ones that are the bulk of our business.
Why don’t they just create their own?
I know there are at least three firms that have been working for three to four years to develop their own, and I know they have been looking at our policy statements to replicate. That’s going to be real interesting when it comes to copyright infringement. There’s some language that I specifically wrote that is hugely important to the statement and we must have 40 or 50 copyrights on the document now.
Aside from the legal protection to the advisor, are there other advantages to using policy statements?
We’re getting more litigious [as a society] and this goes a long way to protect against that, but forgetting the legality of it, it’s great for marketing and client retention. I have not lost a client in the last 14 years and I would have to say that investment policy statements have a fair bit of bearing in that regard. As far as marketing, you can sit down and talk to a client and explain the process that we go through, where the policy statement is only the first step. For the first time we’re going to put into writing the client’s investment goals and objectives, then we’re going to evaluate his current investments, and then build a portfolio consistent with that. How can you argue with it? It gives you a document available to go back and look at on an annual basis, and ask, “Are we doing what we’re supposed to? Have your investment goals changed? Have you gotten more aggressive?” The policy can also keep you out of trouble a la the tech wreck in 2000 because you’re not going to have 90% of your assets sitting in technology, because the policy statement won’t allow it.
Do you think we’ll see the use of investment policy statements as standard practice throughout the field?
We are in conversation with a couple of very major firms, which are considering putting [our tool] in as a major initiative. When they do, I think those firms are going to set themselves considerably apart from other firms, just because of that. That will happen very shortly and it’s going to really rock this industry. All of a sudden everyone is going to be trying to do investment policy statements.