Taking the Good with the Bad

Indeed, Edelman says his biggest challenge now is just keeping up with new client demand, and that’s primarily why he created the Edelman Financial Network (EFN) earlier this year. After hosting his weekly national radio show, Edelman typically receives about 200 calls per week from consumers looking for financial help. Since the “panic” started in September, he says, calls have reached 500 per week. “Consumers around the country are scared and confused and don’t know where to turn,” he says. Edelman Financial’s 30 advisors scattered throughout the Washington, D.C. area just can’t keep up with the demand, Edelman says, so he launched a network this January that could pull together advisors from all over the country to service these consumers. “Many of these consumers want a local advisor,” Edelman notes.

Right now, 85 advisors have joined EFN, with another 15 applications pending, Edelman says. “Our goal is to get to 500 advisors because we think based on our analysis that’s the number we need to serve the consumer demand,” he says. Advisors who join get “substantial practice management training to help them manage these client referrals effectively,” he says, and “we have a series of two- and three-day training programs that advisors come to Virginia for and we provide them with substantial amounts of support [so they can] help the consumers.” Edelman also provides advisors who join EFN with marketing support.

There’s no fee to join EFN, Edelman notes, and advisors get access to the Edelman Managed Asset Program (EMAP), which the firm says is one of the fastest-growing money management programs in the nation, with $3 billion in assets. EMAP invests exclusively in the funds of Dimensional Fund Advisors as well as exchange traded funds.

Edelman says his “biggest problem is that I don’t have enough advisors,” and the ones that have joined EFN are sometimes overwhelmed by the number of referrals the network sends them. For instance, Edelman says EFN recently sent an advisor in New York “170 referrals in a month.” Those advisors who’ve joined EFN are also “very happy” with the quality of the referrals. “These are serious people who are genuinely looking for an advisor–they’re not just tire kicking or looking for solutions to get out of debt. These are people with hundreds of thousands and sometimes millions of dollars to invest.”

There is, however, an “elaborate due diligence” process performed on those advisors who wish to join EFN, Edelman says, because “it’s not enough that you’re a talented advisor.” Consumers who contact Edelman are very familiar with his approach to investing and money management because of his radio shows and books, “so when we refer them to another advisor, they expect that advisor to share our beliefs.” Edelman says his firm embraces long-term diversification with rebalancing–Modern Portfolio Theory–as most advisors do. So advisors who are keen on, for instance, market timing or options trading, would not be someone he’d be comfortable referring a consumer to.

Performance and Communication

Looking ahead to what we all hope will be a better year for the markets, Edelman says that those advisors “who are managing money correctly and letting that fact be known are going to succeed in the next decade.” It will require “both of those pieces” to succeed. “Some advisors know how to manage money, but you have to communicate that fact to clients and the public.”

Advisors will also have more success in building more solid relationships with their clients during these tough economic times if they ask for client feedback, according to Julie Littlechild, president of Advisor Impact, Inc. The economic downturn, she says, “has created an environment in which many investors need and want more frequent and reassuring contact with their advisors.” Clients want to know “that their advisor is there for them and the most successful advisors will take advantage of this opportunity to become better informed about the needs of their clients and demonstrate the value they deliver distinct from market performance.”

Getting client feedback is more than rating their level of satisfaction, Littlechild says, “it’s also a chance to understand what’s most important to them, what level of contact they expect, the kinds of communication they value, and the additional services they need.”