Ryan Parker, who became CEO of Edelman Financial Services a little over 13 months ago, says the key to growing an advisory business for the long term rests with these key factors: caring for clients and employees and embracing technology.
The firm has a client retention rate of 98%, and it doesn’t need to use low fees to keep clients. Fees start at 2% for the first $150,000 and decline gradually to 1% after assets reach $750,000. “We talk to people who others won’t talk to,” Parker says, and the firm’s advisors are always available.
Taking Care of Business by Taking Care of Clients
“Always take care of the clients,” says Parker, who joined Edelman from LPL Financial, where he was the managing director of investment and planning solutions. “Take care of the client who’s in front of you. He or she has a unique set of needs.”
The firm has taken care of clients by spending time with them — two hours for someone with $100,000 in assets is not unheard of, says Parker — and focusing first and always on the financial plan.
“If you’re 55 years old and need an average annual return of 6% for the next 15 years to meet your goal, that should be the guidance to select the model, not do you want high or low returns … Do the planning first. If the plan guides your portfolio, that’s the better way to get to your result.”
The 30-year-old advisory firm invests in low-cost, passively managed mutual funds, primarily from Dimensional Fund Advisors, and ETFs from BlackRock and Vanguard and one from State Street — “nothing fancy,” says Parker.
The firm is in the process of developing portfolios focused on environmental, social and governance criteria — an area Parker says is getting more interest especially from female clients — but currently offers some “do good” portfolios that have an ESG component.
Adding portfolios specifically focused on ESG or sustainability would be an example of another guiding principle of the firm, according to Parker: “Evolve so that you’re meeting the needs of current clients” in order to maintain those clients.
“What people wanted five years ago is different from what they want now,” says Parker. “Their expectations are different and they’re more educated about what financial advice is all about.” They don’t just want to pay commissions on products; they want a full financial plan, according to Parker.
Clients also need different services as they age, which is why the firm has advisors who specialize in senior issues. It has created a senior awareness committee to put together content for those over 70, partnering with a former Edelman planner and former Rep. Dan Mica, D-Fla., who served on the House Select Committee on Aging.
The firm has many clients over 70 because its core client tends to sign on at 55 years old. “Let’s grow with them. Let’s make sure their family is taken care of,” says Parker.
The experience of Edelman’s advisors also supports that goal. The firm hires only registered advisors with 10 years or more experience, but it will hire graduates of planner development programs out of school as client service administrators who can eventually become planners after years of training and becoming a financial analyst first.
Taking care of clients now also means “investing in digital properties to make sure you deliver the services people expect,” says Parker.
With that in mind, Edelman Financial has launched an online aggregation tool, powered by Envestnet | Yodlee, that allows clients to link all their accounts and assets in one place and therefore provides advisors a full picture of a client’s finances. It has also introduced electronic chatting and appointment setting capability in the client portal.
One digital area that Edelman is taking the lead on is the treatment of digital assets in clients’ estates.
“Protecting digital assets is becoming a big part of estate planning,” says Parker. He explains that if family members don’t have access to the Facebook or Instagram accounts of someone who’s died, those accounts can be erased.
Edelman doesn’t draft the contracts to provide that access but will recommend that clients consult an estate attorney to do so, and the firm may even make recommendations to an attorney and include that item on the checklists that advisors review with clients.
Parker noted that the firm has the capability for video chats but hasn’t turned it on because clients didn’t want it.
Parker says Edelman Financial’s focus on clients and advisors has paid off in sustainable growth.
The firm has almost $18 billion in assets from 34,000 households responsible for about 80,000 accounts, and a client retention rate of 98%. The median account size is $550,000 and the median planner serves 150 to 200 households. Edelman has 550 employees, including 163 planners, operating out of 43 branches in 21 markets across the country.
Assets have grown about 20% over the past year — several percentage points more than the stock market, according to Parker.
“When you deliver value clients will come and stay,” says Parker.
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