Many talented professionals some day dream of having their own business. In the financial industry this usually means being the trusted advisor and investor on behalf of individuals and institutions. On October 4, CFA Society Chicago and its Professional Development Advisory Group assembled a panel to discuss the challenges of building an RIA business for the second part of the Starting Your Own RIA Firm series. The process of business development, brand development and marketing were addressed by the panel.
Jennifer Aronson, CFA: Aronson, moderator of the panel, is managing partner with Mosaic Fi, LLC. In that role, she works with family offices and high net-worth individuals. Prior to founding Mosaic, Aronson had over 20 years of experience with Northern Trust and Brinson Partners. She is currently serving on the Board of Directors for CFA Society Chicago for a three year term (2017-2020) and is a member of the CFA Women’s Network Advisory Group.- Scott Bosworth, CFA: Bosworth is vice president and regional manager in the Strategic Relationships group of Financial Advisor Services. He is responsible for sales, leadership and management of some of Dimensional’s larger advisory relationships.
- Andy Kindler: Kindler is managing partner at Xcellero Leadership. Xcellero is focused on facilitating solutions for developing individuals, teams and organizations to spur growth. Kindler has a wealth of experience from different industries both on the corporate side and consulting.
- Laura Sage: Sage is director of marketing and investor communications at Castle Creek Arbitrage, a relative value hedge fund. Prior to joining Castle Creek, Sage was an independent equity options trader.
- Mark Toledo, CFA: Toledo has over 40 years of experience providing investment advice to individual and institutional investors. He began his career at Aetna Capital Management and after leaving Mesirow Financial in 2003, he founded Total Portfolio Management, LLC, his own RIA firm. In 2013 he merged his business with Chicago Partners Wealth Advisors.
Aronson began the discussion by asking the panel to address the critical tasks of marketing and business development for newly formed RIA firms.
Marketing and Business Development
The panelists agreed that as in any business, a business plan must be created, and that plan must include a path to an effective marketing strategy. The leader of the new advisory firm should spell out his role and have goals. A statement of investment philosophy is critical to the process. Advisors should focus on why they want to do this, what is their passion? You need to stick to your expertise and not try to be everything to anybody. It is important to be true to yourself and be able to tell your story. New RIA’s should attempt to have client meetings scheduled weekly and if you believe a prospective client’s needs are outside of your expertise, refer them to someone else. Client referrals will be critical to your success; often you will get a referral back. It would be useful for a new RIA to have a five-year plan where years one and two would be devoted to getting your story out; you will probably need to pay bills from some other source. Years three through five is when you can expect your business to ramp up.
Targeting Institutional Clients
The universe of potential institutional clients is much smaller. Sage was the panelist with the most experience in this arena. Most pension funds and sovereign wealth funds employ consultants. You will market to the consultant, not the fund directly. There are proprietary databases that contain information on these funds which can be accessed for a fee. There are other platforms similar to “speed dating”, which can gain you some introductions.
Methods to grow the business
- Social Media: The use of social media is a critical skill to garner and keep clients. Retirees are ubiquitous on social media sites. LinkedIn is a site that can be helpful. Congratulate clients and potential clients on life-events they post online. Follow their work and offer assistance if there are sudden interruptions in their careers. They will remember you for it. A clear and concise website for your business is a must.
Referrals: Referrals are the way in which you will grow your business. A vast majority of clients would be happy to give you a referral, however not enough RIA’s ask for this. It is wise to spend time teaching your clients how to sell you. Don’t be shy about asking your client for a referral, however, you never want to put your client on the “spot”, be clear as to why you are asking for this.
- Public Speaking: The panelists encouraged prospective RIA’s to burnish their public speaking skills. When you present yourself to other people, either publically of privately, be passionate about your expertise. It is important that you are able to communicate your conviction. You may suffer some setbacks, but show no fear in your demeanor. If you are able to keep your level of enthusiasm high, people will want to be part of your success. Clients are more motivated to put their trust in someone who can communicate vision and strategy with confidence.
There was a brief question and answer session with the audience at the end of program. There were inquiries on how to “close”, whether to remain independent or affiliate with an institution, and what functions to outsource. The panelists termed “closing” as the natural outcome of a positive meeting, once again there should be no fear in the “ask.” Typically affiliating with an institution is something that is done after establishing your business. Outsourcing functions can be expensive, but pay dividends down the road. You must look at your skill set to determine if some functions are better left to others.