“I tell my people all the time: We’re not in the financial services business, we’re in the technology business. I long have realized: stay on the cutting edge of technology, or fail.”
Ric Edelman of Edelman Financial Services gave this advice at a session Monday morning on the first full day of the Investment Management Consultants Association’s national conference in Boston, sharing the stage with another successful advisor, Paul Tramontano of Constellation Wealth. The session, moderated by Matt Barthel of Barron’s, traced the growth of both firms but also yielded suggestions on what both men would have done differently and how advisors can succeed in the future.
For example, Edelman said he had built his now-nationwide practice largely by broadcasting radio and television programs (he says he regrets not having gone national earlier). With changes in the media, that route can’t be imitated by other advisors now, he said, so Edelman counseled the successful advisor to take one of two steps. “Partner with another advisor” to gain scale, or “become a ‘narrow-caster,’ focusing on a specific niche.
“Physicians have long been specialized,” Edelman said, relating a doctor acquaintance who “only works on thumbs.” Responding to a question from attendee and noted advisor Michael Kitces, Edelman said that advisors who want to succeed starting now should become the “plumbers’ advisor,” and not worry about not being the “carpenters’ advisor,” relating other advisors he knows who’ve targeted specific audiences like Marriott Corp. retirees or American Airlines pilots.
“The most productive thing” for an advisor to do, Tramontano said, is to “give away revenue” from existing clients who are no longer a good fit for you. Partner with another advisor to give away that revenue, he suggested, or just “give them away.”
As for investments that helped the two men grow their businesses, Edelman pointed out that he became an advisor in his 20s, so to demonstrate his expertise to clients and prospects twice his age, he decided to focus on “long-form education.” By using “any media available” for that education, including live seminars and eventually his radio and TV shows, he grew his firm.
“I’m not a marketer; I’m an educator,” Edelman said. He learned that “if we give away our education, or make it very cheap, the world will take care of us.” That’s the main reason why Edelman Financial will add 30 advisors this year, he said.
On technology, Edelman says “we spend a lot of money” to attract and service clients, including his version of what are now called robo-advisors — Edelman Online — and a new website optimized for any device the client is using, especially mobile devices.
Tramantano said that much of his technology budget was spent internally to properly allocate his firm’s resources. In 2008, when his Silicon Valley-based firm opened a New York office, “our best technology investment was the cheapest.” To draw together employees on both coasts and build a common culture and client experience, Constellation “put a camera on every desktop,” so that in every bi-cosastal conversation, “when you call somebody, you see them.” In addition to those internal calls, Constellation also video records every meeting of the investment and compliance committees. “It’s built one company,” he said of the video investment.
Responding to another question from the audience about how to hire advisors, Edelman counseled “don’t hire another you,” and instead grow first by adding an office manager, IT person or public relations consultant. When you are ready to hire another advisor, first make sure that they share your ethics and be clear about “what you want from them.” Stay away from hiring ‘stars’ who want to do things their own way, since providing a consistent customer experience is paramount.
Edelman, who said he was launching a marketing services offering for advisors later this year, answered moderator Barthel’s question about succession planning by saying “we have a very formalized” plan, before turning to the issue of partnerships. “It’s good to start with a buy-sell agreement upfront” when you start a partnership, he said, since it “will make the inevitable divorce less acrimonious.”
Acknowledging that Edelman Financial has “lots of key-man risk,” since Edelman is the only rainmaker (the firm’s advisors “don’t do any marketing” and “can’t take any referrals,” focusing instead on client service) he said that his succession plan includes “having six full-time speakers” for seminars and webinars and “a team of writers for the newsletters” that Edelman Financial produces for clients, though Edelman vets the content and, he said, he continues to write his own books.