Summer Conferences: Handling a Crisis

Hollywood, Fla. — At Pershing’s Insite 2010 conference in June, three top financial advisors outlined the steps they’ve taken to succeed during the financial meltdown and beyond. Further perspectives came from former Treasury Secretary Henry “Hank” Paulson Jr., who lauded advisors for what he saw as “heroic” actions during the crisis, and Wharton finance professor Jeremy Siegel, who gave an optimistic view of stocks going forward.

Advisor John Rafal, head of Essex Financial Services in Essex., Conn., spoke to 1,000-plus advisors during a panel discussion by three advisors on June 10 at the Insite 2010 conference. Rafal, who leads a group of 55 professionals with nearly $3 billion in assets under management, said his motto of the past few years has been: “Don’t let a crisis go to waste.”

Rafal told the audience that he took such an approach during the banking crisis of the late ’80s and formed important partnerships with community banks. This helped him refine the personal service he extends to clients, which was a major factor for five wirehouse advisors who approached Rafal recently about joining Essex.

In addition, Rafal cut his own salary in 2008 by 75 percent in order to invest in technology and staff. Such drastic steps are needed, he said, if advisors want to take their practices to “the next level.”

Another panel member, Frank Marzano, managing principal of the GM Advisory Group in New York, stated: “I ask prospective clients, ‘How have your advisors changed their approach during the past two years?’ and many say not at all.” Marzano leads a group of 10 professionals now doing most of its business as a fee-based RIA. The group has boosted assets 15 percent year to date, after growing them by 60 percent last year.

“We want to anticipate what we can in order to break through the brick wall (or business plateau), update our business plan and change our infrastructure,” he said.

During the crisis, GM Advisory Group decided to introduce its own hedge fund, so clients could have a product that was not highly correlated with the S&P 500. “And we communicated all the time with clients about changes in the markets and tax reform,” noted Marzano. “We have to articulate what we do that is different,” he added.

For panel member Xavier Maza, president of Actinver Securities, helping clients manage expectations has been a key focus. “There are no good or bad investments,” Maza said. “There are only good and bad expectations.”

These top advisors take the time to check in regularly with clients about their expectations and their day-to-day concerns. In addition, they reach out to prospects who turned them down to see how the competition is doing with respect to meeting client expectations.

“It’s worth calling prospects back a year or so down the road,” said Rafal. “You may want to meet with them again, because they could be receptive to you.”

View from Treasury

Paulson, who was Treasury secretary from June 2006 to January 2009, spoke at the conference’s opening session on June 9. He congratulated financial advisors on their roles as unsung heroes of the financial crisis of 2008-09. “At a time when regulators and others made plenty of mistakes, your work was heroic,” he asserted.

While saying he was generally sure of himself and his decisions during the crisis, he contended that his biggest errors during his time in office were in communications.

For instance, he said, rather than stressing how the $700 billion Toxic Asset Relief Program (TARP) funds were needed to prevent a sweeping market meltdown, his message should have focused on how such action was essential to protecting Main Street.

During the Pershing session, Paulson answered questions from Ted Bragg, a Pershing managing director and fixed-income trading executive. Bragg focused on issues and opinions shared in Paulson’s recently published book On the Brink.