"There's no shortage of financial institutions eager to work with you. Your challenge is to identify the proper partners and get the most out of the relationship."

The Partnership Track

By John Bowen

If there is one thing that sets elite financial advisors apart from all the rest, it's this trait: They identify their core competencies—nearly always in client relationship management—and outsource as much else as possible. They leverage their talent and expertise by partnering with financial institutions that provide them with the support they need to remain fully focused on providing world-class service to their affluent clients.

Reprinted from:

This makes your choice in institutional partners one of the most important factors in your success. The right partners can help you effectively reach your target market, provide the optimal investment solutions to your clients and streamline your operational processes, all of which will help you differentiate yourself from your competition.

But many advisors have never consciously decided which financial institutions to work with. They often end up working with particular institutions by accident, and then become so busy with the day-to-day activities in their practice that they never take the time to consider what the ideal institutional partner would really look like.

There's no shortage of financial institutions eager to work with you. Your challenge is to identify the proper partners and then get the most out of the relationship.

For their part, many financial institutions recognize that they must do more than just bombard advisors with sales material for their latest products, especially ones that have largely become commodities, such as mutual funds. Progressive firms also understand that financial advisors are indispensable in reaching the affluent market. So financial partners should provide the practice with support beyond their core services, ideally in each of these three major areas:

• Marketing and sales support. This support should be focused on training or turnkey processes that help you build your business by attracting affluent investors.
• Technical support. Institutions should offer technical support not just for their own products, but for issues you face in delivering services to your clients as well.
• Practice management support. This support should bring you the ideas and best practices of other advisors so that you can apply them to your own shop.

The next step, before adding any financial institution's services to your business, should be a thorough assessment of its value proposition. You're looking for the institutions that will provide you and your clients the most net value-the value you gain minus your costs. There are four kinds of value they can deliver.

• Product value, where the product solution creates real value for the financial advisor. This is often significant when a product is first introduced and lessens over time as it is adopted and offered by more institutions.
• Service value, which includes value-added marketing, is a way of delivering higher valued services to advisors to help differentiate financial institutions from competitors.
• Personnel value, which refers to how effectively the product provider's representatives deliver value. Can they help build your business, or are they just product pushers?
• Image value is something that you have to evaluate from the perspective of your clients and prospects. Today many financial institutions have excellent images, but some may resonate more with the affluent.

Once you've assessed the total value you're likely to receive from an institution, subtract the costs of working with them. There are four cost factors you should consider:

• Monetary cost may factor into value-added marketing programs, but many of them do not carry out-of-pocket expenses beyond travel. However, you should factor in any cost you would incur changing your systems in order to incorporate the institution's offering.
• Time cost can be significant with many value-added programs. When you join a wholesaler's program, you will have less time to pursue other activities. This opportunity cost must be included.
• Energy costs are usually low. Advisors do not have to spend lots of energy identifying and using well designed value-added marketing programs.
• Psychological costs are also usually low. You should not have to struggle with any dissonance between your professional identity and participating in a value-added program.

While evaluating the value proposition of various institutions, it can be easy to be attracted to features that actually have little to do with building your business. Be careful to keep coming back to the fundamental question: "How can this institution help me grow my business by better serving my clients?"

Our research shows the most successful advisors often want quite different services from financial institutions than less successful advisors. The most successful advisors—those earning more than $150,000 per year—are much more interested in receiving education about clients and markets than their less successful peers. These elite advisors are much better at assessing the offerings of financial institutions according to the real benefits that can help them grow their incomes. In contrast, nearly two-thirds (65.9 percent) of the less successful advisors want conferences and trips for top producers. These advisors are much more inclined to choose institutions based on criteria that actually contribute little or nothing to their incomes.

Now look at the partnership from the side of the financial institutions. They believe that the wholesaler relationship is the most important link they have with financial advisors. They spend an enormous amount of their marketing and sales budget on this line item. They count on wholesalers to make advisors aware of new products, special training, current performance and new marketing approaches to use with clients.

Despite these efforts, the advisor experience with wholesalers has on average been subpar. In fact, CEG Worldwide research has shown that one-third of all advisors consider managing relationships with wholesalers to be a significant obstacle to their business success. Because wholesalers are a costly advisor support tool, financial institutions are greatly concerned about which ones are used effectively. It's up to let your product sponsors know when you get great service and when you do not. The smart product sponsors will be responsive to your feedback.

At a minimum, wholesalers should provide you with support in three areas: technology, marketing and practice management. In addition, any wholesaler that you choose to work with must:

• Have product knowledge. Expect them to bring you new product information, but more important, all product information—anything happening in their company—so you are never surprised.
• Understand what it means to be a financial advisor. Better yet, find someone who works with elite advisors and those advisors who are on the fast track to elite status.
• Understand the investment consulting process. If the wholesaler is focused only on selling products and not working with you to see where they fit into your investment consulting process, they're not a wholesaler you should work with.
• Know how to market to the affluent client. Ideally, they have accumulated wealth as an exceptional wholesaler. They understand what it is to be affluent and the challenges of managing wealth, so they can give you specific advice to help you grow your business.

Most large advisory firms appoint a staff member as liaison between product sponsors' wholesalers and the firm. They know the time required to filter out those who deliver little or no value. While you may not have the same resources as the larger firms, you do have the same desire to serve your clients and grow assets under management. Appoint yourself or another staff member as wholesaler liaison, setting aside a two-hour period each week to meet with wholesalers. You may be surprised to discover that you have a skilled business consultant who is there to help you to grow your business dramatically.

In these turbulent times, you owe your clients the best service you can possibly provide. Selecting and working effectively with the right partners will enable you to give your clients the time and attention they need, so be deliberate and choose well.