Around the Web with RIA Ideas

A few great reads from the month of February, highlighting some of the key conversations we’re having with advisors. Growth, technology, investment design, outsourcing, recruiting, compliance…all are key discussion points for RIA firms and we share the following for your own discussions:

Before hunting for new clients in the name of “growth”, advisory firms would do well to consider who they want to serve and how they plan to serve them. A Vince Lombardi-inspired read from Julie Littlechild on remembering the basic fundamentals of winning.

We desperately want to do it all and be a hero to our clients, colleagues, and family. Greg Menefee reminds us that we CANNOT effectively be everything to everyone, and empowering others really empowers ourselves to leverage our strengths where it really matters.

Finding prospective clients can be hard, and finding the right clients who appreciate the uniqueness of your offering can be even harder. Why not build and feed a virtual platform that is uniquely you, and tells a compelling story differentiating you from your competitors? Michael Kitces applies lessons from a best-selling book for a master class in narrowcasting.

This narrowcasting platform can also serve as the beginning of earning trust and loyalty. As Josh Brown writes, this key piece of the relationship is not an event but an ongoing process of earning investor loyalty requiring consistent, clear communication.

Diversification is said to be the only free lunch in finance, but 2015 left just about every investor starved for returns. Great set of graphics here from Resolve Asset Management shows how even perfect foresight led to pretty lame outcomes.

The TDA National LINC Conference was great, and focused heavily on growth and the integration of open-architecture technology into an advisor’s practice. A few perspectives from Adhesion and beyond.

A good advisor should hire themselves for planning and investment management, right? Seems obvious, but Bob Veres points out a few reasons why engaging an outside professional may be a better solution.

The upcoming DOL legislation is the great unknown for the financial services space, with “suitability” and “commissions” being replaced by “fiduciary” and “fees”. Michael Kitces chronicles the history of the broker-dealer model, and how firms would be wise to adopt a business model built upon the delivery of objective advice.

Innovation is great until it isn’t. The proliferation of novel ETF ideas has created the illusion of improvement, but can lead to complex, illiquid, overlapping allocations where simple, liquid, clearly-defined solutions may serve investors better. 3D Asset Management writes here on the dangers of complex design.

Growth-oriented firms are constantly thinking about the right team for the future. Financial Advisor magazine reminds us that the process of hiring and managing people is not to be taken lightly.

At some point, all successful business owners wrestle with capacity issues that directly impact the client experience. As the business evolves, which areas are most ripe to be handed off? TD Ameritrade shares a very cool infographic on Maximizing Your Resources as an advisor.

We all know this, but it never hurts to be reminded that working with the right clients and right colleagues are common elements to building a successful investment firm. Ben Carlson shares some common sense wisdom from an old interview with Charlie Ellis.

Adhesion continues to work behind the scenes in helping advisors grow, with new options allowing the integration of Outsourced CIO implementation via Mercer and robo technology via Riskalyze. We welcome your feedback at, and encourage you to subscribe on the upper right of this page to receive our regular blog updates.


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Crafting Solutions at TDA National LINC

Growth was a big topic at the recent TDA National LINC conference, and Adhesion was central to the discussion on many fronts. First, our recent entrance into the TD Ameritrade Unified Managed Account Exchange (UMAX) generated much discussion about the value of leveraging a specialist to implement a firm’s investment approach. While some firms use Adhesion as a delivery vehicle for internally built strategies, others see additional value in outsourcing the design of the firm’s asset allocation blueprint.

Significant buzz also came from the announcement that Adhesion is partnering with Riskalyze and TDA to deliver the industry’s first open-architecture digital advice platform built solely for advisors. While much of the “robo” discussion has centered on adding an outside vendor with limited choice, the Adhesion/Riskalyze combo is designed to blend in seamlessly with an advisor’s existing practice. It is a true business solution, helping advisors meet the needs of web savvy prospects and preparing the firm to serve the next generation members of existing client families.

While there was significant focus on growth and robos, there was also time to sample some truly unique craft bourbon. The Adhesion booth was quite popular the first two evenings with tasters – ranging from bourbon novices through the very experienced. All enjoyed the selection offered.

Bourbon Tasting_Bartenders  Busy @TDA (002)

For a more complete roundup of LINC – inspired reactions, here are a few stories published since the conference:

RIABiz on the threats and opportunities for advisors

Investment News on TD Ameritrade’s open-architecture approach to technology

Wealth Management on the Adhesion/Riskalyze offering

Financial Advisor IQ on integrating a solution for small accounts


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TD Ameritrade Institutional UMAX powered by Adhesion

On the heels of an announcement to help advisors strengthen their investment offering, Adhesion is very pleased to have partnered with TD Ameritrade Institutional for their Unified Managed Account Exchange (UMAX) offering to advisors. UMAX powered by Adhesion makes Adhesion’s industry-leading, personalized UMA platform easily accessible to all advisors working with TD Ameritrade Institutional. We invite you to read more details about the offering in this summary.


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Adhesion UMA platform adds Mercer Research

Reflecting its core beliefs, Adhesion has become known in the advisor space for its commitment to open-architecture solutions and responsiveness to RIA needs. True to that vision, a significant new piece has been added, enabling firms to leverage world-class research in an affordable way, with customized implementation just one step away inside of Adhesion’s Managed Account desktop.

This strategic relationship with Mercer Investments gives advisory firms a single, fully integrated solution for building, implementing, and monitoring client portfolios across major RIA custodians. We invite you to read the details about this exciting new way to leverage specialists in building out a scalable practice.



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Embracing Flexibility

Today’s Unified Managed Account (UMA) offers the masses an affordable mechanism for achieving portfolio diversification with management expertise – formerly achievable only with mutual funds – with the flexibility, control, and tax efficiency traditionally associated with SMAs.

CNBC has a new article on its site, and it does a good job highlighting key benefits of managed accounts. These are the same benefits sought by the advisors we speak with every day, including:

  1. Personalization
  2. Transparency
  3. Tax-efficiency

With today’s UMA, managed accounts are available to the masses, no longer simply an elite product for wealthy individuals and institutions. Leveraging Adhesion’s UMA platform, advisors deliver sophisticated investment services across all segments of the client base with the following benefits:

  1. Hefty account minimums are no longer an obstacle
  2. Expensive and tax-inefficient mutual funds are no longer the only vehicle for employing professional managers
  3. Low-cost, passive products are easily blended with active and/or tactical management in a single account
  4. Client-specific customizations or restrictions can now be efficiently accomodated

By partnering with Adhesion, RIA firms can not only shed back-office functions but actually win new business through differentiated investment delivery. We invite you to learn more about how the right UMA provider can help you grow a more sustainable practice.  To read the CNBC article in its entirety, click here.


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RIA Succession Planning

“We are an industry of planners who have planned for everyone but ourselves and our own businesses” Ryan Zeeb

Succession-Simplified is a recently published piece that caught our eye. Written by the CEO of Camelot Portfolios, a strategist available via the Adhesion UMA platform, it provokes a number of thoughts that are relevant to advisors at any career phase.

The sad story that sparked this paper is a reminder of how much lies outside of our control, and how important it is to move in the direction of a more sustainable enterprise that can extend beyond its present identity. This movement benefits a) the clients and their heirs, b) the owners and their heirs, and c) the firm’s existing support team, by adding a level of stability in a world of uncertainty.

As a specialist serving the outsourcing needs of RIAs, we see often just how much of a firm’s identity can be tied directly to the “brand” of the founder.  In working with Adhesion to institutionalize firm operations, a critical step that is often included is a rebranding of the firm that can sustain after the founder decides to step away.  Together, these steps can help position the firm for smoother transition and greater enterprise value.

A few starting points to provoke action include the following:

  1. Start with simple – answer the essential questions before worrying about every detail
  2. Challenge your ego and identity- create repeatable processes to extend the firm’s reach beyond today
  3. Quit talking and start doing – think of the succession planning process as a video, not a snapshot

And of course, control. When to put a plan in place, how early to start the transition, who the successor(s) will be…these are among the rare outcomes that actually lie within the advisor’s control. To continue considering key ways to tackle the succession issue, enjoy the full discussion here…


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On Trusted Partners

We most powerfully sustain focus when we’re engaging our greatest skills, interests, and capacitiesDr. Brett Steenbarger

In boom times, investors begin to wonder if they can just “do it themselves”, buying index funds and speculating on a stock or two that catches their attention. This rarely ends well, as an objective match between risk profile and portfolio construction has not been done and reality eventually sets in.

It’s during these market shifts that the true value of an advisor emerges. Has the advisor educated clients on his or her stated investment philosophy? Aligned client goals and financial situation with a thoughtful plan? Coached them through the dual needs of conservative planning and disciplined investing?

Clients of these advisors are a lucky bunch, having found a trusted partner committed to designing a prosperous future. But how does the well-intentioned advisor, likely in demand by prospective clients, continue to deliver this level of care as business expands? The paradox is that those most capable of delivering on their promises are the ones most likely to reach capacity.

This is where the thoughtful advisor finds his or her own trusted partner, to gain efficiencies without losing the formula for personalized service that brought success in the first place. Help with planning, help with relationships, help with investments are just the start; there are also concerns about compliance, operations, and marketing that need to be addressed for a firm to remain in control of their practice.

So, what happens when chaos enters the markets? You know, the actual markets that are responsible for delivering the outcomes needed for this whole process to work? When these outcomes are under threat, whether real or perceived, even the most proactive firms can be pushed into a reactive mode as clients voice opinions and ponder decisions to adjust portfolios.

As Barry Ritholtz says here, the best strategy is the one you’re most likely to stick with, and it’s the firms with the most systematized processes that are most likely to stick to the plan. Advisors are human beings with strengths and weaknesses, likes and dislikes, and in times of chaos the weakest link in the chain becomes the process least likely to be implemented…or at least implemented well.

On days like those in late August, when supposedly liquid ETFs traded 10-20% away from net asset value, is an advisor’s time best spent updating weightings in a spreadsheet? Trying to find the best way to execute trades in a fast market? Probably not, especially with incoming calls and client-specific advice to be addressed.

The most successful advisor-client relationships are built around trust, including a trust that the advisor will deliver as promised. Not some promised rate of return, but delivery of a) an investment plan in line with the client’s risk profile, b) ongoing monitoring and implementation of said plan, and c) coaching along the way to keep the plan intact. While the client may not realize just how much effort goes into each of those steps, the thoughtful advisor considers each aspect and creates processes to enforce the required discipline.

It’s easy to see how a strengths-based approach to building an organization can foster the healthiest of advisor-client relationships. As a partner to RIAs, we see the most growth among firms who have properly matched their personalities with their duties, and leveraged technology and other human specialists to round out their service model. For advisors using a specialist to deliver personalized investment models, wild market swings are simply an opportunity to speak with clients while leveraging the resources of a partner to run their playbook in the background.

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Resource Drain or Competitive Advantage

Leading RIAs have discovered that one key to differentiating their investment value proposition is to offer clients the benefits of a “Chief Investment Officer.”

“The executive position responsible for a company’s investment portfolios. The chief investment officer (CIO) usually oversees a team of professionals that have responsibilities such as managing and monitoring investment activity, managing pensions, working with external analysts and maintaining good investor relations. They will also develop short-term and long-term investment policies.” (Investopedia)

Having a leader in your firm with an expertise in investing strategy is not simply a luxury; it’s a significant value-add. As Phil Huber writes in the Wall Street Journal, “A chief investment officer can provide advisers with a resource for information and guidance, allowing them to focus on building and developing relationships with prospective and existing clients.”

The key here is having a unified investment vision for your firm. This way, all of your clients get the same investment strategy and approach. A CIO also adds value to the firm by helping provide investment information and guidance to prospective and existing clients in furtherance of your firms underlying investment approach. Beyond that, CIO leadership helps give your firm an investment philosophy. You need a long-term message for your clients that can help keep them on course in good times and bad.

However, as Huber points out CIO is not a position that’s right for every firm. Some firms may simply not have the desire to dedicate resources for this kind of specialized position. That’s where Adhesion comes in. For those firms, we offer an “outsourced CIO” option. Through our Unified Managed Programs, we provide a collection of leading strategists who offer asset allocation, manager and vehicle selection with on-going due diligence research. In other words, you get the same unified investment approach and philosophy without having to hire your own in-house CIO.

Visit our Adhesion eXchange site for more.

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Capital Gains Opportunity to Add Tax Alpha

Many advisors are currently in the process of selling off stocks; some as a precautionary measure as major equity indexes reach record highs, and others to rebalance portfolios by trimming the fat. The catch is that, thanks to a six-year bull market, many clients hold appreciated stocks that trigger taxable gains when sold. The upside for advisors is that these unavoidable taxable events present great opportunities to show their clients tax alpha. Or, as Financial Planning puts it, “How can advisors sell stocks and avoid a painful tax bite?”

The traditional way to offset these taxes is to balance portfolio gains with losses. However, many losses leftover from the 2008-2009 crash have been used up. Financial Planning offers advisors several approaches for adding tax alpha through offsetting clients’ capital gains. For one thing, advisors can utilize technology to optimize rebalancing processes. Says Lance Gunkel, COO at Sherpa Investment Management in West Des Moines: “We utilize a rebalancing tool that uses algorithms to come up with the most tax-efficient way to rebalance or get out of positions. In the current environment, this may mean taking offsetting losses in other asset classes, such as emerging markets debt and international equity.” Advisors seeking losses should also take a look at energy stocks due to plunging oil prices.

Advisors should also counsel clients to consider charitable contributions. As long as a share has been held longer than one year, the donor can get a tax deduction for its full market value. This way, clients can hold onto the cash they might otherwise have donated with the added benefit of offsetting capital gains.

Sue Stevens, an advisor out of Deerfield, Ill, suggests approaching retirement distributions as a way to minimize taxes. Says Stevens: “One tactic I’ve been using lately is doing 15-year tax projections for clients in early retirement. There may be opportunities to take IRA distributions or do Roth conversions in years when taxable income is low. They can also recognize significant capital gains.” Gain harvesting is another way to minimize tax hits; it’s especially effective for investors with more modest incomes. With this strategy someone can sell an appreciated security and realize the gain without incurring any additional tax.

Advisors looking for continued growth and new ways to stand out from the competition should be evaluating how they can assist clients with tax issues. Adhesion is in the business of powering advisor alpha, so we already have powerful solutions in place to help you add tax alpha. Check out this short video to learn more.

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Advisors Must Evolve or Risk Becoming Obsolete

Schwab recently released their latest Independent Advisor Outlook Study (IAOS), and as ThinkAdvisor points out, the report contains both good news and a warning for advisors.

The good is that RIAs report growth in new clients, compensation and wallet share since the onset of the bull market. 93% of 629 RIAs surveyed believe our industry is on a “continued growth trajectory,” while 53% stated that the industry will continue to grow at a faster rate than the market. According to ThinkAdvisor, “Respondents reported high employee retention rates, hiring plans and technology investments to maintain their growth, with their top talent acquisition priority being adding staff in operational and support roles.”

Bernie Clark, the head of Schwab Advisor Services, believes that these findings indicate a shift from RIAs “being entrepreneurs with practices” to “enterprises.” Clark went on to say that RIAs are “trying to make sure they’re scaling” these enterprises to make them “be more efficient exponentially.” However, in spite of all the good news, Clark warns advisors to beware of complacency. In his view, RIAs can either “evolve or die.” Key for a successful evolution is participating in “the next wave of technology.”

Clark further points out that the big wirehouses no longer have the allure they once did. Advisors can choose now whether they want to remain tied to the older traditional model of doing things, or break away and become the “new next model.” Says Clark, in the near future “even Uber will look like an old model.” New technology ushering in the new generation of advisors includes automated investment technologies (read robo-advisors) like Schwab’s Institutional Intelligent Portfolios which was released earlier this week.

Adhesion has been ahead of the curve with a personalized UMA platform that is scaleable and bolsters the advisor’s control over their unique value proposition. It allows advisors to segment their businesses and deliver customized investments and services to different segments. Helping advisors dynamically evolve into a new model of RIA firm is what Adhesion has been about all along.

Check out our short video to learn more.

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