Tag Archives: RIA

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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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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Rep as PM is Not Without Risks in 2015

In the Fidelity Advisor Investment Pulse Survey almost a third of advisors cited portfolio management as an area of focus during the first quarter of 2015. This was a marked increase from 18% in the fourth quarter of 2014.


Source: Fidelity Advisor Investment Pulse Survey

Scott Couto, President of Fidelity Financial Advisor Solutions, stated in a recent WealthManagement.com article that in the current climate increasing numbers of advisors are taking discretion over their client portfolios. A WealthManagement.com survey reported that 54% of advisors said they have used rep as portfolio manager platforms for the past five years, managing investment portfolios across client accounts.   This can come with its own set of problems, however. Couto points to situations where advisors must defend their portfolio allocation when clients ask why their portfolio didn’t match the S&P 500 at the beginning of 2015. Add to this the increasing concern over market volatility, especially in regards to international investing. 11% of advisors cited international investing as a concern; up from 5% in the previous quarter.

Opportunities abound, but advisors shouldn’t automatically assume that they can capitalize all on their own. Many top advisors are maximizing their “rep as PM” value prop by outsourcing to a customized UMA platform like Adhesion. This enables them to offer unified household reporting and a range of investment types and managers as they see fit. Many others are finding that they offer more value to their clients when they outsource the CIO function.

Adhesion offers an outstanding team of managers and strategists that we call our Unified Managed Program (UMAP). These leading strategists offer asset allocation, manager & vehicle selection (SMAs, MFs, ETFs) with on-going due diligence documentation. Click here to learn more about Adhesion’s UMAP. This “fully defensible” approach lets advisors maintain discretion while leveraging best in class investment expertise. With Adhesion advisors choose the level of outsourcing they want and designate the experts and resources to carry it out. This gives them the ability to focus more time and energy on client relationships and bringing in new business.

Click here to learn more about Adhesion’s outsourcing options.

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How Will Clients Find You Now?

On April 21 Google’s latest algorithm update took effect. It’s intended to improve the search experience for mobile users, but for many advisors the change means that it will be much more difficult for potential clients to find their websites using a Google search. This is due to the fact that many firms have fallen behind the times and are still using websites that are not mobile-friendly.

In a 2015 InvestmentNews study, 41% of participating advisory firms conceded that their websites were not optimized for mobile use. An InvestmentNews article cites Google’s advice for making a website more mobile-friendly:

  • Make it easy for customers
  • Measure the effectiveness of your website by seeing how visitors can view your page
  • Be consistent in your design for your website across all devices, like phones, websites and tablets

As MarketingProfs points out in an April 21st article, these Google changes will make mobile optimization a necessity rather than a convenience. In today’s ultracompetitive marketplace, firms cannot afford to be digitally out of reach from clients or potential clients. With that in mind, MarketingProfs offers five ways that advisors can update their digital presence and become more mobile-friendly.

1. Create a specific and well-placed Call To Action button

This is important: mobile users who find your business online have a conversion percentage that’s almost three times higher than users making the same search from a laptop or desktop. 70% of mobile searches can lead to some kind of online action within an hour. However, to take advantage of mobile access firms must have a CTA button that is easy to understand, easy to locate and easy to use. MarketingProfs suggests that you take some time with your CTA and pay attention to the details. For instance, you might change the color or add some animation to make it more attention-grabbing. You can also add some copy that communicates your value proposition and helps drive potential clients to action. Check this out: “Adding just one word after the word ‘submit’ can boost conversion rates as much as 320%.” Finally, give some thought to placement and size. Put your CTA at the top of your landing page, and make sure it’s accompanied by good copy. And make sure the CTA button is big enough to be easily tapped on a mobile device.

2. Embrace social autofill

Respect your customers’ time. 64% of users who leave sites because of forgotten login information say that companies should offer social login. More importantly, your rate of conversion can increase up to 189% when your users have the option of using social autofill, according to Formstack.

3. Pare down the content on your mobile site

This is a time when less is more. 57% of users would not recommend a business that has a poorly designed mobile website. Too much content clutters up your site and makes it feel clunky. The end result is a website that’s difficult to use and hard to navigate.

4. Make sure your Web forms are mobile-friendly

The length of your forms is crucial when it comes to mobile users. Formstack found that 22 fields will feel daunting to users accessing your site from a mobile device.

5. Be ready for all mobile devices

Gartner predicts that, with a growth rate of 54%, ultramobile devices like tablets and hybrids will be a primary player in the devices market beyond 2014. MarketingProfs’ advice: “Make sure your mobile site looks as good on tablets of all sizes as it does on smartphone screens.”

Don’t let back-office or investment management functions get in the way of key business processes like keeping pace with digital technology. Top advisors are simplifying their business and improving their client experience by outsourcing to a turnkey asset management solution. Adhesion Portfolio Solutions offers essential investment services and a robust client experience with lower costs and lower minimums. Check out our video to learn more about how APS can power your Alpha.

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Less Smaller Accounts Means More Time for Wealthy Clients

As advisors battle increased competition and downwards pressure on fees, many advisors have begun letting their smaller clients go. This helps firms raise their productivity and shift more focus onto larger accounts, which allows them to retain more of their wealthier clients. So says a report by PriceMetrix cited in a recent Wall Street Journal article. According to the article, “Advisors’ productivity rose last year as they reduced the average number of clients they service to 150 from 156 in 2013, according to the report by PriceMetrix, giving them more time to focus on wealthier clients.”

Advisors needn’t worry that their smaller clients will be simply laid off with nowhere to go. “In many cases, they’re being better served by more appropriate channels,” says PriceMetrix co-founder Patrick Kennedy. Smaller clients have the choice of moving their business to robo-advisors, or to the specialized services some firms have set up specifically for the small investor. Even some broker-dealers are beginning to offer alternative channels designed to accommodate these smaller accounts.

PriceMetrix reports that these efforts have allowed advisors to retain more of their priority clients ($250,000+ in assets), and premium clients ($2 million+ in assets). Retention of priority clients went from 96.2% to 96.7% last year, while retention of premium clients went from 97.4% to 97.7%. However, as the WSJ points out, advisors are facing challenges to growth due to a client base that’s growing older faster than the overall population.

According to Alois Pirker, research director of wealth management at Aite Group, the big brokerage houses have been best positioned to cultivate larger clients while still retaining their smaller accounts. For example, Merrill Lynch launched Merrill Edge in 2011 to target mass-affluent clients. Merrill Edge offers advice both online and over the phone, and benefits from Merrill Lynch compensation models that encourage their advisors to direct smaller accounts their way. Mr. Pirker points out that the big brokerage houses have the advantage here since, with many more wealthy clients, they can more easily segment their accounts.

So how can smaller advisory firms keep up? John Hogarty, COO of global wealth and investment management at Bank of America, says that expectations have been changing across the advisory industry. According to Hogarty, “Clients now expect advisors to spend more time with them, and advisors are assessing their own capacity.”

In fact, a CEG report (“Best Practices of Elite Financial Advisors”) found that elite advisors are focusing on fewer accounts rather than more. Financial advisors earning $1 million or more serve 25% fewer clients than those earning between $500,000 and $1 million. As CEG points out, this is logical since having fewer clients enables advisors to spend more time building client relationships and ensuring client satisfaction. This generates increased client loyalty which leads to more referrals. Of course, to get increased profitability from fewer clients, advisors must be serving and retaining wealthier clients.

However, there are outsourcing solutions available to help retain smaller accounts. For instance, a smaller account might be the child of an affluent family. When an inheritance is passed down to the child, an advisor can scale Adhesion Portfolio Solutions (APS) into a full-featured account. APS is an excellent choice with lower costs and lower minimums, but still delivers a robust client experience.

APS lets you:

  • Deliver your essential investment services and keep your focus on client facing activities with larger accounts
  • Offer clients a single ClearView of their managed investment holdings and performance
  • Provide a cost-effective client experience through simplified, online on-boarding
  • Serve up a single investment allocation that can grow to become a sophisticated portfolio as your clients’ needs and resources change, all on a single platform that saves you money and increases efficiency

Learn more by watching this short video.

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Is Your Referral Strategy Passive or Active?

Congratulations! A new Pricemetrix study shows that advisors’ AUM and revenues continue to reach record levels. PriceMetrix reported assets under management for the average advisor reached $97m in 2014, average advisor revenue surged 13% year-on-year to $655,000 and revenue on assets improved to 0.69%, the first increase since the beginning of the financial crisis in 2008.

But many advisors are finding that retaining clients and continuing their growth is becoming more difficult. To help overcome these roadblocks to growth, a new article in InvestmentNews, “How to Become a More Referable Adviser,” shows us how to find more qualified opportunities. Client referrals are essential to the growth of a financial advisory practice.

The premise behind the referral is simple: if a client likes your product, they’ll probably tell someone else about it. Here’s where it gets more difficult. As the article points out, “clients need to fully understand the benefits of a product or service and how it can help others before they spread the word—and it isn’t easy for most people to internalize and explain the advantages of a financial planning approach or asset allocation strategy.”

The question many advisors need to be asking themselves is this: how do I make my clients understand exactly what I’m doing for them and how it is different from what other advisors are doing?

Extensive research conducted by Dan Allison of Feedback Marketing Group found that the top reasons investors gave for not referring advisors included: “I don’t understand who my advisor wants to work with,” “I don’t know how to explain what they do,” and “I don’t know how to make the introduction.” These problems are far from insurmountable, but addressing them does require that advisors give these kinds of client-facing activities more time and attention.

A key thing advisors can do to increase referrals is change the method and frequency with which they request feedback from their clients. Instead of sending out questionnaires or surveys, consider holding meetings with clients to solicit and discuss feedback about their overall experience with your practice. This is a time when advisors can update clients on their firm’s growth objectives, products and services. InvestmentNews states, “during face-to-face meetings at set intervals, advisors provide clients with the expertise, insight and confidence they need to make referrals.”

Schwab’s 2014 RIA Benchmarking Study found that, while the majority of advisory firms view growth and acquiring new clients as top priorities, client referrals are not getting the same amount of focus. The study stated “despite widespread agreement that referrals are the main driver of growth, many firms do not dedicate the time and resources required to create a formalized [referral] initiative.”

This seems counter-intuitive, since a huge factor in growth and acquiring new clients is getting current clients to make referrals. One reason for this discrepancy is that today’s advisors have so many things vying for their attention. To address the issue of referrals, many advisors need to create more mental shelf space and free up valuable time and resources. This is where outsourcing comes in.

Where do you find the time to work on developing more referral business? Leading firms are turning to a new generation of TAMPs. Check out our short Adhesion video below to learn more.

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Can Your Firm’s Cybersecurity Pass a Client’s Scrutiny?

With cybercrimes continuing to grow in both frequency and sophistication, RIAs must have protocols in place not only to prevent but to respond in the event that a cybertheft takes place. If not, writes Norb Vonnegut in a recent Wall Street Journal article, you might find out the hard way and lose your client’s trust in the process. And it’s not just about your firm’s response to an actual cybercrime. Vonnegut predicts that prospective clients will start evaluating which firms are more or less likely to have a security breach. He also poses a question to RIAs:

“You encrypt emails and establish careful online procedures. But when it comes to Internet security, is your practice keeping pace with broker-dealers?”

The answer, according to the Securities and Exchange Commission, is probably not. An SEC survey found that 84% of broker-dealers “require cybersecurity risk assessments of vendors” versus 32% for RIAs. The SEC also found that only 30% of RIAs have Chief Information Security Officers versus 68% for broker-dealers. Asks Vonnegut: is this good enough? Not likely. As he points out, an RIA client aware of the SEC’s numbers will likely be wondering if their firm is among those trailing the broker-dealers. RIAs that don’t heed the warnings will be easy prey for more cyber-savvy competitors; especially as investors continue to be inundated with identity theft horror stories.

For RIAs wanting to beef up their cybersecurity, Vonnegut suggests the following steps:

  1. Name a team CISO, the person responsible for understanding internal security. If nobody has the appetite, find a 20-something junior partner who does.
  2. Audit what security options your clients are using. For RIAs, this audit includes the technology available through custodians.
  3. Schedule client meetings to review best practices for Internet security.
  4. Bookmark idtheftcenter.org. It’s a go-to resource for victims of identity theft or for those that want to become smaller targets.

So how does Adhesion Wealth Advisor Solutions address these issues?

100% of Adhesion’s operations are conducted in the United States. No client data is stored offshore. The Adhesion platform was built from the ground up to meet an RIA’s strict requirements. Finally, Adhesion offers advisors an integrated back office solution from a single vendor.

Here are just a few of the strategies Adhesion employs as part of our comprehensive cybersecurity package:

  • We conduct our own independent risk assessments using questions provided by the SEC.
  • We review the results with the SEC as well, and regularly solicit their advice.
  • We also regularly perform multiple levels of network testing, as well as weekly vulnerability scans across all of our production environments.
  • We conduct a full-on penetration test annually.

At Adhesion we believe that our staff is the first line of defense in securing client information. For that reason, we conduct phishing testing and staff security training combined with comprehensive data handling policies and procedures.

The bottom line is that Adhesion believes in and implements a proactive approach to cybersecurity. Rather than waiting to be attacked, we constantly work to anticipate and prevent cybersecurity threats. For us, keeping our clients’ information safe and protecting them from identity theft is paramount.

To get further insights on cybersecurity issues for RIAs, check out this blog post featuring our webinar: “Cybersecurity for RIAs: The Good, the Bad and the Ugly with Raj Bakhru.

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Tax Season is the Perfect Time to Add Tax Alpha

As we near the April 15th deadline for filing, taxes are at front of mind for many advisors and their clients. It’s the time when advisors can significantly add to their value proposition by generating tax alpha for clients. According to a recent InvestmentNews article, though they may not play a direct role in preparing taxes, advisors can “mine the 1040 for additional information and savings ideas and provide an additional service to clients.” Meaning, investigating a client’s 1040 form can yield significant ways to add tax alpha this spring. In many ways, this is a more concrete way to demonstrate value to clients than promising a percentage of investment returns.

Here are some of the 1040 opportunities discussed in the article. First, advisors should be taking a close look at line items. A high amount of interest in line 8a is an opportunity for advisors to reduce that number in the future by reassessing their client’s investments. Another issue here is asset location. Tax efficient assets like municipal bonds might be better suited for a standard brokerage account or non-qualified account. Meanwhile, tax inefficient assets like emerging market debt may be better off in tax deferred account like an IRA.

For lines 9a and 9b, advisors should be asking where these dividends are coming from and their tax implications. However, the article cautions against focusing solely on whether dividends do or do not qualify to be taxed at the short-term or long-term capital gains rates. Stephen J. Bigge of Keebler & Associates states: “You have to look at the after-tax effect. Many clients complain that their advisor is generating all these short-term capital gains. You’re still getting a great return, and you’re still out ahead after taxes.”

When it comes to charitable giving, clients should know that there is a smarter way to do it than just giving cash. Donating appreciated stock can soften the blow of capital gains. The income tax reduction from charitable giving is reported on line 40. 1040 time is also an important opportunity to remind clients that now is a good time to fund a last-minute IRA contribution. Even if a client won’t qualify for a deduction for IRA contributions, they should still not miss out on the tax deferred growth offered by an IRA.

Another important component of adding tax alpha is building strategic alliances with CPAs and other tax preparers. This way, advisors get to focus even more on what they do best: working directly with the client. After all, an automated and outsourced solution is not just about delivering more in-depth service and consistency. It also keeps valuable resources free for client development.

However you do it, advisors should not be missing out on ways to add tax alpha to the value they show their clients. But one thing is for sure- in today’s environment, it’s not just about finding and implementing value-add strategies like tax alpha—firms have to be able to do it efficiently without compromising resources and face time with clients.

This is where Adhesion comes in. The Adhesion Advantage lets high-performing advisory firms save time and resources by automating key tax aware strategies. The tax-aware investing process becomes a lot more efficient when incorporated with Adhesion’s technology and overlay managers. The Adhesion Advantage significantly augments advisors’ ability to add tax alpha and show clients real value. But it’s important to keep in mind that adding tax alpha doesn’t have to create additional expense or burden your business with added complexity. Top advisors know this and are already realizing the benefits of outsourcing.

Check out this short video for more information.

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Targeting the Affluent: Who They Are and What They Want – Part 2

While today’s wealth is primarily concentrated in the hands of the affluent baby boomers, this will not always be the case. Advisors who wish to grow should be shifting part of their focus to where the money is going to be: the next generation of clients. Patrick Kennedy of Pricemetrix was quoted in a recent Wall Street Journal article as saying: “When you have a healthy mix of age, all indications are that you will be more successful, your revenue will grow faster and you’re building a business that will stand the test of time.” To achieve this mix and position themselves to address the emerging market, advisors must evolve to marketing strategies that shift some of the focus over to younger clients while continuing to go after the boomers. In other words, your firm must be operating efficiently enough to attack two different market segments while doing more with less.

An efficient marketing approach begins in the planning stage. To optimize their efforts, advisors should first put together a clear picture of who their target audience is. An advisor can then leverage prospective clients’ passions, interests and needs in their tailored marketing approach. Ultimately, in order to grow advisors must be able to effectively attract their target clients. In their report entitled “The State of the Affluent 2014,” CEG Worldwide suggests three ways advisors can become more attractive:

  • Position yourself for what affluent clients want
  • Pull in prospective clients through client introductions
  • Appeal to prospective clients through strategic relationships

Specifically, this means cultivating strategic alliances with centers of influence, social engineering events to create more referable moments and improving the client experience to generate more word of mouth referrals.

As important as strong planning is to developing an effective marketing strategy, a Fidelity Benchmarking Study found that only 31% of RIAs have a written marketing plan in place to guide their actions. And while most firms have specific goals regarding their marketing and business development, only 20% reported being extremely proficient or very proficient in measuring their success in achieving their goals. Fidelity’s findings make it clear that having a strong marketing plan is a key differentiator: high-performing, high-growth firms have them, and the others don’t.

Keep in mind that, as the above-referenced WSJ article points out, immediately heading off into a new marketing direction can be a mistake. This is why planning is so crucial to being able to effectively engage with a new market. For example, many younger investors tend to be risk averse. Advisors who plow ahead without carefully taking this into account may find themselves employing a marketing approach that alienates the audience they are trying to reach. What we know for sure is that boomers and younger investors have very different wants and needs. Advisors who want to position themselves for growth while maintaining their client base will have to move beyond what worked for them in the past. It’s time for advisors to refine their marketing.

As firms begin to see the fruits of their marketing planning in terms of growth, they may experience some additional hurdles. Challenges to organic growth may arise in the form of lack of time for business development or client relationships, inability to scale the customer experience or increasing costs. Regardless of the form they take, Adhesion can help firms overcome obstacles to growth. Check out this short video for more information.

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Outsourcing Investment Management Could be the Best Club in Your Bag

“No one firm, no one company, no one team of people, much less a single person has all the investment know-how to effectively manage all types of money in all types of markets all over the globe. Even the best golfer doesn’t use just one club
when he/she plays the course.”

— Said an advisor from a $1 billion-plus RIA quoted in the Northern Trust survey.

The payoff: 92% of respondent RIAs said that their clients’ initial reaction to outsourcing was positive.

Here’s how many of your peers feel about outsourcing as a tool for more efficiently delivering more client value:

  • 9 out of 10 advisors said they’re satisfied with their outsourcing solution
  • 8 out of 10 advisors reported no loss of clients and/or firm revenue
  • 7 out of 10 said that their growth in clients and/or revenue could be attributed to outsourcing
  • In terms of the solution itself, 53% of advisors were using TAMPS
  • 4 out of 10 said that they outsourced all of their client accounts

When asked what outsourcing has achieved for their firm, 57% cited more time to spend with clients.

Announcing to clients the decision to outsource is usually when the rubber meets the road for an RIA. Many advisors wonder exactly how to break the news. Of those surveyed, 4 out of 10 cited to clients the desire to better allocate their resources.

When it came to the initial client response to his decision to outsource, one advisor reported that “our clients invest with us because of the relationship. The investment product has significantly less importance.” Another found that “our clients appreciated our intense focus on them. We let them know they are the client, not their money.” Other advisors found that their clients appreciated the “intellectual depth” that would be added by outsourcing, as well as the increased amount of advisory face time they’d be receiving.

When it came to growing their client base and firm revenue, RIAs had more good news to report. One advisor found that she had been able to land larger accounts than she would have on her own. Another had this to say: “More prospects were interested in us once we broadened our access to more asset classes and external managers.” Others reported that outsourcing had freed up more time to prospect for new clients while giving them the ability to do more for their existing clients.

Among the issues that drove the outsourcing decision for advisors, access to alternative investments expertise was at the top of the list. Northern Trust did find one major change from 2012: superior back-office technology and support fell off the list and was replaced by cost efficiency. Other key decision drivers were portfolio construction, portfolio monitoring and the potential to generate alpha through best investment ideas. Whatever the reason that drives the decision, these results are great news for advisors, clients and outsourcing providers.

The even better news for RIAs is that outsourcing solutions don’t have to be cookie cutter. Adhesion Wealth Advisor Solutions provides RIAs with world class investment strategists and asset managers so that their clients receive the benefits of best in class investment expertise. This frees up advisors to focus on clients and business development. We call this Adhesion Portfolio Solutions (APS).

Check out our video to learn more about how APS can power your Alpha.

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