Cottage Industry



The news last week that one of the founding partners of Iconiq was leaving the firm emphasized how the wealth management industry remains a cottage industry.  Our blog this week will look at the pros and cons of cottage industries.  We will also examine how a cottage industry can become an enduring industry that will survive multiple generations.  Is this a goal advisors and their clients want and are they willing to make the necessary changes?  We believe it is worth considering.

Cultive Personalities
Cottage industries promote the existence of big personalities that define the company and insure the clients know what they are getting if they work with the firm.  Iconiq has done a great job answering this question.  Is it the right answer for you?  The wealth management industry is very competitive forcing firms to differentiate themselves from their competition.  A big personality is a memorable differentiator but it is ephemeral. 


Brand
Most companies strive to create a brand.  This will help your SEO and will ultimately increase your firm’s value.   Creating a brand is easier said than done.   Building a brand starts with the firm’s executives and their marketing message.   Most established brands have defined their firm on the products they provide.  New independent firms use other firm’s products and differentiate themselves through their unique customer service.  Regulators have stepped into this debate and characterize products under the Suitability Standard and customer service under the Fiduciary Standard.  Some clients prefer great products and others prefer great customer service. 



Policies and Procedures
Cottage industries are order takers.  If the client wants a shirt you design and deliver a shirt.  The client is happy until the designer/manufacturer leaves.  This is not the end of the world for the client but it is a nuisance to find another person that they trust.  This reality created the need for firms to evolve from cottage industry firms to brand name firms.  Brand name firms create policies and procedures to insure that clients know what to expect when they do business with the firm.  Seems like an obvious goal but there are some unintended consequences of branding. The biggest issue is who owns the client? 

We all have a question to answer.  Do we want to be Charles Merrill [JS1] [JS2] [JS3] or Charles Schwab?  Not an easy question to answer.  The markets have an answer.





 [JS1]


 [JS2]


 [JS3]

Comments

Post a Comment

Popular posts from this blog

Inorganic

Image
Our industry has always looked down on Wall Street’s recruiting checks.  Last week there were numerous announcements that independent firms were offering advisors money to purchase their practice.  The term for these transactions is inorganic growth.  This week we will look at why these transactions are the new rage and examine if they are better than the old Wall Street checks. Wempy Popeye and financial advisors fall for the “I’ll gladly pay pay you tomorrow for a Hamburger today” pitch.  Unfortunately Popeye and and most financial advisors provide their hamburger but seldomly get paid what the firms and Wimpy promise .  Why?  The advisors need the cash and Popeye is gullible.  On Wall Street the deals adjusted when the advisors changed firms looking for a new deal every five to eight years.  The recent Luminous departure shows that the advisory contracts need to be adjusted.  The new contracts are written by experienced firms and lawyers to prevent serial departures. 
Read more

Career Hacks

Image
We are in constant pursuit to be the best we can be in our profession.  Is there a hack to help us?  Some days it feels like others have found one.  The Baby Boomer hack was to be a Doctor, a Lawyer or work for Goldman Sachs.  Millennials believe in the power of social media hacks and that a job at Google is on the Yellow Brick Road.  This week I’ll look at other experts and share my opinion that there isn’t an easy solution to professional success. Academia Those who  can’t do teach and those who can’t teach, teach gym .  Many of the established ideas that guide people in the wealth advisory business where researched in academia.  While their research is credible most academics remain as advisors not a practitioners.   William Sharpe  might be an exception to this rule.  He lost at Long Term Capital but was a recent  winner with Financial Engines .  Resilient and richer. Conferences and Media We attend industry conferences looking for hacks.  The concepts present
Read more

Stop Judging

Image
I have known that I have MS for over four years.  My doctors believe I have had MS for over twenty years.  Initially, When I received this diagnosis  I was very opinionated when I saw disable people. I assumed the worst. As a currently disabled person I can educate and warn you regarding things you shouldn’t say to me or disabled people..  This blog will educate on my disability. The places it manifests itself and how you can react and support me and other disabled people. The three items are: 1.) Needing a walker 2.) Government disability  3.) Falling MS causes me to loose my balance and fall.  The walker prevents this reality  I look at walkers as being as sign of old age,  I was incorrect and a good walker is an aid!  With a walker I fall less often.  I might look old, but I am OLD! Our government provides support to the millions of MS patients in the US.  Support is through Social Security and must be approved.  I am approved. The service can be cancelled if i get a full time job.
Read more