The Commonwealth Case Study

As an observer at the Commonwealth Financial Network Chairman’s Retreat, the annual gathering of the broker/dealer’s top producers, the vibe is collegial in more ways than one, with blunt talk accompanied by an easy camaraderie that, this year at least, was tempered by the dreadful market and economic environment in which these successful advisors are plying their trade. Held in late January in the cozy confines of the Ritz Carlton on Boston Commons, the Retreat brought together 30 or so Commonwealth reps with the broker/dealer’s leadership, along with some Harvard Business School professors who used HBS’s vaunted case study approach to explore crisis management, using the explorer Sir Ernest Shackleton and Apple Inc. as subjects of the cases, and to take a stab at doing a balance sheet for the United States government.

At the Retreat, the frustration with the performance of the markets–especially since August–was palpable. But so was the desire of those advisors to better serve their clients by exploring every possibility of squeezing more alpha out of their client’s portfolios. As more than one advisor at the gathering mentioned, the poor performance of professional money managers at major mutual fund shops during the overall market downturn is leading them to hitch up their own asset management skills with at least a part of their clients’ portfolios. Some mentioned that their clients appreciated their efforts, and that the shift was partly due to the advisors’ desire to more clearly exhibit the value that they offered clients. One frustrated rep argued that investment management was not the core of the services he offered clients, saying he was much more interested in figuring out how he could deposit $5,000 per month in his retired clients’ accounts without “liquidating assets that are already down 25% to 40% this year, but others countered that the markets’ performance of the past year, coupled with the underperformance of professional money managers, had convinced them finally of the merits of active investing and the limitations of a buy-and-hold mentality. “This is not the time to just hand-hold clients,” argued one, “it’s time to be an investment advisor.”