Ask the Advisors

	Tiburon CEO Summit XIII Ask the Advisors panelist Bill Barrett (CEO, Fiduciary Trust International of California, Fiduciary Trust International, Franklin Templeton Investments, Franklin Resources)

With a similar goal to the Ask the Consumers panel, four leading financial advisors participated on the Ask the Advisors panel to allow attendees to better understand the businesses and decision-making criteria of financial advisors. Facilitated by Dennis Clark (CEO, Advisor Partners), the panelists included Bill Barrett (CEO, Fiduciary Trust International of California, Fiduciary Trust International, Franklin Templeton Investments, Franklin Resources), Pat McClain (Senior Financial Advisor, Hanson McClain), Alan Spiegelman (Wealth Management Advisor, Northwestern Mutual), & Jane Williams (CEO, Sand Hill Advisors, Boston Private Financial Holdings). The financial advisors were selected from various different backgrounds, including private banking, financial planning, insurance, and wealth management, to provide a wide range of perspectives. Furthermore, one of the panelists (Alan Spiegelman) essentially functions as a solo practitioner inside a big firm, personally managing $225 million with a six person team. The other three panelists function more as small-to-mid-size firms, with 16 - 36 employees and $1.3 - $1.5 billion assets under management. However, there was complete agreement that the investment advisory business is truly an exciting cottage industry (noted often by Tiburon research, unlike many sectors of the economy, there is no one firm or group of companies with significant market share). Amongst the key points made by the panelists were:

One of the panelists (Alan Spiegelman) essentially functions as a solo practitioner inside a big firm, personally managing $225 million with a six person team. The other three panelists function more as small-to-mid-size firms, with 16 - 36 employees and $1.3 - $1.5 billion assets under management


While all four panelist serve mostly individual clients, with institutional clients making up one-third or less of their client bases, average client sizes varied widely, ranging from $400,000 (Hanson McClain) to $11.1 million (Fiduciary Trust International)


At different levels, all four said that they really position themselves as wealth managers. Two of the four (Hanson McClain & Alan Spiegelman) primarily rely on mutual funds and exchange traded funds, while Fiduciary Trust utilizes mostly individual stocks & bonds (85%) and Sand Hill Advisors more evenly allocates its assets (55% mutual funds & exchange traded funds)


The panelists all market to different niches in different ways. Specifically, Sand Hill Advisors focuses on, “women and wealth in transition,” Hanson McClain targets, “telephone company retirees,” Fiduciary Trust focuses mostly on, “going where the wealthy people are (like non-profit boards) and seeking new business from estate & trust attorneys as well as small & medium-size tax firms that serve high-net-worth families," and Alan Spiegelman serves, “primarily high net worth retirees in the North Bay area.” The group spent a few minutes listening to Jane who explained that divorced and widowed women control a growing amount of investable assets.” Similarly, Pat also explained his strategy as, “ targeting a mature and downsizing industry with a defined benefit plan that allowed a lump sum option,” again pointing to money in motion.

In reflecting on the day’s earlier consumer panel, Pat commented that, “it is sad that we can not afford to help many of the people that need us”


When asked, “What keeps you awake at night?”, their answers ranged from hiring & retaining talented staff to concerns about unfair practices of competitors. Pat said that Hanson McClain has, “12 or 13 financial advisors that are all on salaries", acknowledging that he "must allow his firm to grow to offer these people opportunities.” He also added that the firm, “has opened five additional offices and taught other firms to use its marketing programs, raising an incremental $3 billion of assets.” Jane said, “hiring & retaining staff is difficult; others will offer big upfront bonuses.” Bill said, “I worry about the competition; I am not sure when they are calling my clients and I am not sure what false things they are telling them,” recollecting the “vultures” comment made on the earlier consumer panel


All had different succession planning strategies. For instance, Jane Williams (Sand Hill Advisors) has already sold her business to Boston Private Financial Holdings and Bill Barrett is now an employee of a large publicly-traded firm (Franklin Resources). On the other side, Pat said that his firm has recently started a stock ownership plan

Ask the Distributors

	CEO Summit XIII's panel facilitator Tim Armour (Managing Director, Sales & Marketing, Morningstar)

In keeping with the Tiburon CEO Summit tradition of emphasizing the need to listen carefully to one's clients and prospective clients, the Tiburon CEO Summit Ask the Distributors panel is the third part of this series. For many Tiburon clients (e.g., investment, insurance, & technology firms), understanding the workings of distribution firms is crucial to their firm's success in gaining access to an organization's network of financial advisors. Wirehouses such as Merrill Lynch, independent broker/dealers such as LPL Financial Services, and custodians such as The Charles Schwab Corporation can account for 50% or more of financial product companies' sales. Tiburon's Ask the Distributors panel, facilitated by Tim Armour (Managing Director, Sales & Marketing, Morningstar), allowed these distribution organizations to discuss their needs from investment management firms and other product providers through questions & answers. Five major distribution firms provided insights on how they serve financial advisors and how they would be receptive to hearing from the product manufacturers in the financial services business. Panelists included Keith Hartstein (CEO, John Hancock Funds, John Hancock Financial Services, Manulife Financial), John Iachello (Chief Operating Officer, Pershing Advisor Solutions, Pershing, The Bank of New York Mellon Corporation), Stephen Langlois (Executive Vice President, Research & Financial Planning, LPL Financial Services), John Rooney (Managing Principal, Commonwealth Financial Network), and Chris Wolfe (Chief Investment Officer, Merrill Lynch Private Banking & Investment Group, Merrill Lynch). The panelists represented a huge source of assets in the market, including 94,200 financial advisors and $907 billion assets under administration. Amongst their key points were:

• Tim Armour started the conversation by asking the group what distributors are doing to capture the frequently discussed IRA rollover market. Keith Hartstein said his firm “is working across business units to get better at this, trying to earlier identify departing employees and get them to the right silos.” Chris Wolfe said that, “Merrill Lynch has very specific initiatives around this, dealing with transition events for employees”
  
• The conversation then shifted to financial advisors’ product needs. Lower cost mutual funds, access to closed separately managed account strategies, retirement income planning vehicles, and better technology were all expressed as needs. Many said that mutual funds are serving their financial advisors quite well, with John Rooney summarizing it as “many financial advisors shifted to broader wealth manager roles after the market correction”, but Chris Wolfe said that in Merrill Lynch’s upscale private banking business, “we have a heavier concentration in separately managed accounts (about 45% of their $175 billion in assets under management).”
• Both Stephen Langlois and John Rooney emphatically made the observation that what financial advisors are looking for are solutions - solutions for their business practices and solutions for their clients' wealth management needs. All of the panelist agreed that, as platforms and custodians, they are in a unique position to offer these solutions because they have the capital and collective clientele to make such solutions available
  
• Most panelists said that access would be granted to manufacturers with innovative product offerings that address financial advisor needs’, and/or those which pay to be on platforms or by sponsoring conferences. For instance, John Iachello said that, he sees his firm as “a product agnostic supermarket; if it is operationally feasible, and the firm will not generate reputational risk for Pershing, we will add it.”
• A key theme for the panel was to pick up on a comment by Tiburon’s managing principal, and address the balance of power between distributors and manufacturers. All noted the current power of distributors, including the ability to drive down prices for manufactured products on their platforms. Tim Armour recollected his days running Stein Roe funds, when he thought 25 basis points was a stiff price to pay. Stephen Langlois noted that LPL’s real value proposition is its, “research, services, & training," and that it is "now distributing through independent advisors, banks, and its unique clearing model,” increasing its power as a distributor. Keith Hartstein agreed, saying that, “he sees John Hancock as a distribution powerhouse, utilizing 65 money managers and selling through 250 wholesalers, sending 62% of its assets to third-party managers.” But there also seemed to be a feeling that the industry is reaching a point of equilibrium, as Chris Wolfe noted that, “manufacturers are starting to push back now”
  
• Finally, Tim Armour asked the panelists to make a bold prediction for a year or two out. Keith Hartstein emphasized the “need for solutions for boomers transitioning from the accumulation phase to the distribution phase.” He noted that, “insurance companies are particularly well-suited to deliver these solutions.” Keith also informed the audience that, “John Hancock is the largest owner of timberland in the world, and is analyzing ways to package that as an investment for their clients.” Stephen Langlois emphasized the need “to support financial advisor growth, not only in investment planning, but in administrative tasks.” He noted that, “the demand for advice is starting to outstrip the supply of quality financial advisors.” Chris Wolfe noted that, “the era of enabling choice is over. It is time to think more about how to package and integrate all these choices in ways that make better sense to investors. For example, how many index ETFs do we really need?” John Rooney echoed Stephen Langlois’ comments about supporting business planning for financial advisors, saying the industry needs to “go way beyond just picking investments.” And John Iachello predicted that, “someone will break the back of the cost structure of the multi-custodian business model”.

  	Ask the Distributors Panelist Stephen Langlois (Executive Vice President, Research & Financial Planning, LPL Financial Services)