Ask the Advisors

	Tiburon CEO Summit XIV Ask the Advisors panelist Jeffrey Dunham (CEO, Dunham & Associates)

With a similar goal to the Ask the Consumers panel, three 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 Kristin Doe (the leader of a Smith Barney team), Jeffrey Dunham (CEO, Dunham & Associates), & Mitch Eichen (CEO, The MDE Group). The financial advisors were selected from different backgrounds and approaches to the industry, providing wide range of perspectives. However, there was complete agreement that the investment advisory business is truly an exciting cottage industry (as 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:

• The three panelists all serve mostly individuals and have similar assets under management ranging from $0.6 billion (Smith Barney team) to $1.6 billion (The MDE Group).
  
• The panelists all had large average relationship sizes ranging from $0.7 million (Dunham & Associates) to $9.0 million (The MDE Group). The firms also ranged in size of operations from 4 employees (Smith Barney team) to 50 (Dunham & Associates)
  
• Two of the three (Dunham & Associates & The MDE Group) primarily rely on mutual funds and exchange traded funds (70% and 50% respectfully), while Kristin Doe from Smith Barney utilizes mostly individual stocks & bonds (65%)
  
• All three panelists’ careers and companies evolved steadily as they identified and adapted to changes in the industry and client needs
  
• Jeffrey Dunham started in 1983 with a love for the industry but hated the compensation structure. When he approached his boss regarding performance fees he was told, "noble idea - now get back to cold calling." He started his own RIA and hired money managers on a performance fee basis, morphing into a turnkey asset management program
  
• Prior to forming The MDE Group in 1987, Mitch Eichen was a senior financial counselor for The Bank of New York, providing full-service personal financial counseling, including tax and investment advice, to senior corporate executives and high net worth individuals. When he left he took 16 clients and gave himself two years to make it, joking that, "the office was only on the second floor so I could not kill myself.” He later changed his strategy and got into the assets under management business as, "1% was more than the $5,000 - $10,000 financial planning fees"
  
• Kristin Doe worked her way up at the wirehouses starting as a sales assistant at Merrill Lynch and is now a wealth manager at Smith Barney. As the industry evolved so did the services she offered saying that, "the business changed from having to know this much (hands a few inches apart) to having to know this much (arms wide apart)." Answering how and why she expanded her services, Kristin Doe said, "necessity - you have a large client that needs something"
  
• All three panelists agreed that building trust with clients was how to grow their businesses
  
• Dunham & Associates utilizes performance fees to differentiate itself but said that, "at the end of the day it's not about fees with most clients- it's the one they trust. Once clients trust you, they become evangelists - on the golf course, at cocktails parties, and elsewhere"
  
• Kristin Doe agreed and said that, “we all offer the same products so it’s all about relationships; the that is only difference is me." To maintain that trusting relationship she said that, “the best way to keep trust is to keep in contact." Specifically she is constantly emailing clients throughout the day and outside of regular business hours
  
• The MDE Group builds trust with its clients by separating itself from traditional Wall Street firms and potential conflicts of interest
  
• The panelists also addressed a number of challenges regarding performance
  
• Kristin Doe noted that some clients can not handle risks as much as they think
  
• Jeffrey Dunham said that, "the client's focus is not on relative returns; clients care about the bottom line and their trigger points with their real money. They first look at the bottom right corner of their statements." Mitch Eichen added that, "we believe that benchmarks are largely oversold- if you beat the benchmark and you're down, you're still a moron"
  
• Finally, the panelists addressed industry trends
  
• On independent business models, Kristin Doe said that, "it's scary to go independent because you do not have a compliance department behind you and you become a target out there"
  
• On vendor needs, Mitch Eichen said that, "performance has to match the story. Not just innovation - they have to deliver"
  
• On fees, Jeffrey Dunham identified an industry trend where managers' fees have eroded from approximately 100 to 30 basis points for some products and said that, "as an industry we have beaten the snot out of each other over fees" and concluded by saying that, “the one who wins isn't the one who lowers their margin the most”
  

Tiburon CEO Summit attendees valued the opportunity to listen to these successful financial advisors discuss their businesses. Tiburon's Managing Principal Chip Roame concluded that, "there is an inaccurate message going around that small financial advisors' existing client bases are under threat; this simply is not supported. They may not grow as fast as others but I am not sure that their client bases are under any threat."

Ask the Distributors

	Tiburon CEO Summit XIV's Ask the Distributors Panel

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 (Board Member, Janus Capital Group), allowed these distribution organizations to discuss their needs from investment management firms and other product providers through questions & answers. Four major distribution firms provided insights on how they serve financial advisors. Panelists included Tom Bradley (President, TD Ameritrade Institutional Services), Derek Bruton (CEO, LPL Affiliated Broker/Dealers), Charles Goldman (Executive Vice President, Schwab Institutional) & Mark Tibergien (CEO, Pershing Advisor Solutions). Amongst their key points were:

	Tiburon CEO Summit XIV Ask the Distributors panelists Tom Bradley (President, TD Ameritrade Institutional Services) and Mark Tibergien (CEO, Pershing Advisor Solutions)

• Charles Goldman described how The Charles Schwab Corporation adds value, including technology, practice management and succession planning. Specifically, he addressed its recent acquisition of Etelligent Consulting saying that, “removing back office challenges is especially critical as more financial advisors leave established firms and strike out on their own. By providing opportunities to outsource administrative tasks, we can help new and established financial advisors focus on their clients and accelerate the growth of their businesses”
  
• Derek Bruton described LPL’s four pillars of success, including, "service, research, non-proprietary products, and world class technology,” saying that, "LPL’s job is to manage the complexity of the financial advisors' business"
  
• Tom Bradley made the observation that financial advisors are looking for solutions for their business practices. 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. Tom Bradley said that, “we need to look at financial advisors as a small business and help them become better business people. They don't want to be told what to do, but we need to help them leverage the resources of larger businesses and empower them to both lower expenses and increase assets"
  
• Pershing’s Mark Tibergien agreed saying that, "the right perspective to approach this business is to focus on the financial advisor's client satisfaction"
  
• Tim Armour then asked the group to define the biggest issues their clients face
  
• On offerings, Charles Goldman responded by saying that, “Schwab needs to deliver useful information including regulatory changes derived from massive data to financial advisors”
  
• On rollover acquisition, Derek Bruton said that, “LPL is offering marketing assistance to help financial advisors compete against the better known wirehouses for rollover assets”
  
• On expansion, Mark Tibergien said that, "Pershing has a fast growing segment of financial advisors working with clients in international markets that Pershing needs to serve"
  
• And finally on retirement, Derek Bruton said that, "the root of the retirement issue is to get the advisor in a position to spend more time with their clients”
  

The panel added perfectly to the Tiburon CEO Summit's agenda of focusing the CEO-level attendees on client needs. Tim Armour (Board Member, Janus Capital Group) summarized the panel saying that, "these guys know what financial advisors want; the product manufacturers need to see them as their clients too." Tiburon's Managing Principal Chip Roame agreed saying that, "the Ask the Distributors panel adds perfectly to the goal of getting all Tiburon CEO-level clients to see that this industry has three levels of clients - the end clients themselves, their financial advisors, and the firms with which these financial advisors affiliate."