2015 RIA GUIDE RIA Trends & Opportunities in 2015 PAGE 1 Which RIA Platform is Right for You? PAGE 3 Sponsored by
2015 RIA GUIDE Trends & Opportunities for the RIA ın 2015 The RIA space is currently experiencing an explosive growth cycle, ushering in an era of opportunity like never before for independent advisors. Dean Zayed, president of Brookstone Capital Management, one of the top 30 fastest-growing RIA firms1, shares his observations on several trends and opportunities facing the independent advisor in 2015. FOLLOW THE PATH TO A BETTER ADVISORY BUSINESS TURN-KEY ADVISORY PLATFORM 100% INDEPENDENT Trend #1: With returns on fixed income investments like CDs and T-Bills being low, more and more people are looking for other alternatives in the stock market. Opportunity: Clients and prospects are wondering if it s possible to get good investment returns when the stock market is near all-time highs. Here s a simple concept Wall Street tends to miss: The only way to grow your dollars is through geometric compounding. When big firms or funds advocate the pursuit of big gains, this also means the investor is assuming the risk of taking large losses. To use a baseball analogy, we think the secret of winning consistently is focusing on getting singles, doubles and triples instead of going for home runs and risking striking out. Most investors want respectable re- RISKMANAGED INVESTING Thinking about adding fee-based money management to your current services? Looking to grow your existing advisory practice? We ll help you run your business your way, with the resources of a full-service firm by your side. To learn more, visit www.theriaguide.com to get your Why Brookstone Information Kit for FREE. 1 turns. They might be thrilled to score big returns, but not at the risk of a 50% drop in their principal if the market goes south. Consider what we ve seen in the stock market in just the last few years. In 2013, the Dow Jones Industrial Average was up about 26%. As of late November 2014, it was up about 10%. Yet many investors who have been fully committed to the stock market since 2007 are only breaking even. They don t realize a 50% drop in the market requires a 100% rise in the market to recover the loss. At Brookstone, we feel that aiming for consistent returns while avoiding large drawdowns leads to dollar growth. We utilize a risk-managed approach using professional money management and strategies that are specifically designed with low correlation to broader market activity. The ability to offer investors several innovative strategies that are focused on managing to a downside protection threshold is extremely important in volatile markets. Your client wants portfolio risk actively managed at all times, to avoid large losses while participating in the market s upward movement. Trend #2: Clients are living longer. Today s 65-year-old will likely live to age 90. Their retirement assets need to work harder and last longer. Opportunity: Retirement isn t what it used to be. People need advice more than ever. Financial Advisor Magazine s List of Fastest-Growing RIA Firms for 2014 February 2015 1
2015 RIA GUIDE 2015 RIA GUIDE Most clients today won t have the advantage of a defined benefit pension plan such as their parents enjoyed. They need to provide for their own retirement. The financial services industry has done a fairly good job in teaching advisors how to grow a client s assets over time. Unfortunately, it has done a poor job teaching preservation and distribution during the client s retirement. Today s clients need income planning because their assets will likely need to provide for 30+ years of an active retirement. At Brookstone, we feel it s important to design retirement portfolios that meet the long-term needs of investors at various stages of retirement. One way to help advisors prepare for the demands of this kind of income planning is to provide them with the best tools possible for the job. As such, we not only look to partner with portfolio managers that focus on tempering market volatility through active management and a truly diversified approach, we also constantly seek out the most robust income-planning software tools in the industry today. You can t expect advisors to provide expertise without the proper education and tools, and advisors must be income-planning specialists if they want to remain relevant over the next 20 years. Trend #3: Technology is here to stay. Successful advisors must be on the leading edge. Opportunity: Technology. Clients demand it. The advisor must provide it. Mass-market financial services firms have spent billions on technology. They Advisors must be incomeplanning specialists if they want to remain relevant. offer clients access to portfolio and market data anywhere and anytime. Their advisors can access data and conduct business remotely. Independent advisors must be able to compete with the big boys. At Brookstone, we have invested in technology that allows clients and advisors to access detailed performance reports 24/7. Clients can evaluate portfolios themselves on the weekend instead of waiting until Monday to call their advisor. Our platform allows advisors to open accounts online at a client s home and utilize electronic signature technology to complete documents. Many clients want the technology benefits the large firms deliver along with the independent approach you can provide. We help you do both. Trend #4: Independent advisors own a business. What s it worth? Can it be sold? Opportunity: Succession planning independent advisors want to retire too. At Brookstone, we help advisors build their book of business. We also help them transition to the next stage of their life. If an advisor chooses to merge or sell their practice to another advisor on the Brookstone platform, their clients enjoy continuity of advice and service. We also have the legal structure, blueprint and capital funding to assist advisors seeking to buy another Brookstone-affiliated advisor s practice. If your own retirement is in the near future, Brookstone can help you transition your practice. How to Decide Which RIA Platform Is Right for You When searching across the ever-growing RIA landscape for a platform that suits you best, there are certain capabilities that should be carefully considered if you truly want to take your business to the next level. Of course, you want to be part of a select network of highly trained advisors who have proprietary access to unique, proven investment strategies. That kind of operational support would help you devote more time to your #1 priority your clients. But what criteria should you apply in your search? Critical Criteria 1. Manager Selection How many professional money managers are available on their Separately Managed Account (SMA) platform? How many strategies utilize mutual funds? Are some exclusive? Rationale: One-stop shopping is appealing. Your client does investment business. You want to provide enough choice to be their sole provider. Good for the client: They don t need to compromise or limit their horizons if they choose to invest with you. Access to exclusive managers is a plus. Good for the advisor: The platform can compete head-on with an offering from a mass-market financial services firm. You are providing a comparable service while maintaining your objectivity and exclusivity. 2. Pricing Structure Is it competitive and transparent? Are there hidden fees? Rationale: Many investment products involve front-end sales charges or backend surrender fees. The ideal managed investment platform has an ongoing, prorated fee structure. Good for the client: Although investing should be considered with a longterm time horizon, clients appreciate a pay as you go pricing model. Good for the advisor: Being paid for assets under management puts the client on the same side of the table, moving them away from the pay-by-transaction model. 3. Exchangeability Can a client switch from one manager to another without encountering additional fees? Is it easy? Rationale: Clients need change. A retiring client s risk tolerance might change from Aggressive Growth to Income and Growth. Can they easily change money managers or move from one managed strategy to another, bearing in mind the tax issue? Good for the client: When clients make a decision, they often want to 2 February 2015 February 2015 3
2015 RIA GUIDE 2015 RIA GUIDE Why Use an RIA Platform? 1. It s good for the client 2. Clients want professional money management 3. Competitors are showing it to them 4. Adds to your professionalism execute immediately. A platform allowing clients to transition from one strategy to another without their funds remaining in limbo means their money is working for them. 5. Logical fee model 6. Professional money managers act on your client s behalf 7. Eases compliance concerns 8. Asset-allocation friendly 9. Advisor and client on the same side of table 10. Liquidity as needed 11. Advisor compensation 12. Recurring revenue for advisor 5. Speed of Enrollment and Executions Your client is interested. Can their money be easily put to work? Can assets held away be transferred in to fund the account? Can more money be added? along with providing easy-to-read paper statements at periodic intervals. Good for the client: Online account access allows them to get answers 24/7. Good for the advisor: Advisors want clients to share responsibility for monitoring account activity and performance. Paper statements keep them in the loop. 7. Advisor Compensation No one is expected to work for free. Rationale: Platforms make money. You provide value on an ongoing basis. Are you paid for your efforts? Good for the client: If your compensation is fee-based instead of by commission, there s more transparency, making it easier to communicate to clients. Good for the advisor: By earning a fee across assets under management, the advisor is compensated for giving the client advice and attention, even if transactions aren t involved. Advisors see the need to provide investment alternatives comparable to those provided by mass-market financial services providers. They also want to maintain their independence and objectivity. The ideal platform allows this to happen. Good for the advisor: You continue to help your client address their investment needs even if their objectives change. 4. Liquidity Clients need money from time to time. Investing may involve a long-term time horizon, but can they get at their money if necessary? Rationale: A good platform allows clients to make occasional withdrawals or periodic distributions without encountering transaction costs or being forced to conform to a quarterly liquidity schedule. Good for the client: Their money is working, yet they can access it. They can finance their retirement by making periodic withdrawals at levels and intervals they choose. Good for the advisor: No need to explain surrender charges or adhere to a time schedule to liquidate securities. Rationale: The ideal platform can provide a streamlined, consolidated approach to investment selection, account administration and performance reporting. Good for the client: They make the decision to invest. The advisor does the rest using a seamless procedure with the platform provider. Lag time is minimized. Good for the advisor: Once the signed paperwork and funds are submitted, the process is underway. If the client has chosen to add funds to a strategy or to withdraw funds, their money is available shortly afterward. 6. Client Communication Clients ask: How is my money doing? and Is that manager performing to expectations? Rationale: A good platform makes current account information available online for both clients and advisors, THE PATH TO A BETTER ADVISORY BUSINESS STARTS HERE www.theriaguide.com 4 February 2015 February 2015 5
BROOKSTONE BRIDGES ADVANTAGE TURN-KEY ADVISORY We offer risk-management investment solutions with an all-inclusive infrastructure and support to help start, build, and grow financial businesses smartly and efficiently. Financial professionals can leverage our userfriendly platform, year- round training events, investment solutions, operational support, and full-range marketing services. These flexible resources allow them to gain access to all our proven methodologies and economies of scale while finding more time to spend servicing their clients. LATEST SOLUTIONS We actively pursue new technologies, strategies, and investment managers to offer BCM advisors the most current advisory solutions and platforms to help streamline your business. We provide ongoing training so you can stay up-to-date on these innovative technologies and developments. EXTENSIVE TRAINING / EDUCATION We offer a streamlined process for advisor training, education, and business expansion so advisors can make the most informed decisions for their clients and their business. From an established onboarding process to ongoing online and in-person outreach, we help advisors understand and leverage our universe of investment vehicles, market their practice, conduct sales appointments, make the close, and build long-lasting relationships. BROOKSTONE CAPITAL MANAGEMENT BROAD INVESTMENT OPTIONS Under the vision and direction of Founder and CEO Dean Zayed, BCM delivers a proven methodology and high-quality investment solutions based on a riskmanaged approach. We supply a flexible and powerful range of investment options BCM strategies, separately managed accounts, and Morningstar Managed Portfolios to meet the diverse needs of clients, from conservative to moderate to growth. ROBUST RESOURCES INVESTMENT APPROACH f STATE-OF-THE-ART TECHNOLOGY grow wealth in any market. f ALL-STAGE OPERATIONAL SUPPORT RISK-MANAGED METHODOLOGY f COMPREHENSIVE INFRASTRUCTURE Our approach is directed toward defending against the f CONTINUOUS TRAINING & EDUCATION significant impact large drawdowns can have on the longterm growth of an investment portfolio. We therefore develop and implement strategies focused on minimizing risk. Specifically, our strategies emphasize low correlation f FULL-SPECTRUM INVESTMENT SOLUTIONS to broader volatile market activity, whether through hedged equity with the use of protective options, tactical f COMPLETE MARKETING SERVICES strategies to dynamically adjust to market conditions, or other risk management practices. f OPEN COMMUNICATION POLICY STRATEGIC DIVERSIFICATION We believe that diversification across multiple riskcontrolled strategies helps manage wealth for both performance and protection. While each of our model strategies has its own methodology and diversification, f STRATEGIC PARTERSHIPS all incorporate some form of risk management to guard against large-scale losses. Our strategies encompass conservative, moderate, and growth-oriented performance goals to offer a full spectrum of investment options to meet each investor s tolerance for risk. COMPREHENSIVE INVESTMENT OPTIONS We provide a robust money management platform comprised of well-diversified, risk-adjusted portfolios. We offer both customized BCM wealth management solutions and strategies from specialized money managers (sub-advisors) who pursue a complementary risk-managed philosophy. This broad selection allows for effective long-term strategies customized to each investor s specific risk/reward profile. BROOKSTONE CAPITAL MANAGEMENT ADVISORS OUR COMPREHENSIVE PLATFORM PROVEN INVESTMENT MANAGERS BCM has partnered with additional independent investment firms that each bring an exceptional strategy to our platform. As sub-advisors, they RISK-MANAGED INVESTING STRATEGIC DIVERSIFICATION FULL SPECTRUM OF OPTIONS offer a diverse range of investment strategies that are managed by firms with proven excellence in managing money. PARTNERING WITH MORNINGSTAR BCM has partnered with Morningstar to harness multiple strategies from their Managed Portfolios Series, allowing us to offer investors a broad range of investment options whether conservative, moderate or growth-oriented. BCM STRATEGIES We also provide customized BCM wealth management solutions to help advisors develop and implement an intelligent long-term investment strategy geared toward unique client goals, resources and tolerance for risk. OUR WRAP FEE PROGRAM BCM s Wrap Fee Program wraps both the advisory services fee and the transaction fees into a single fee charged to the client. This means a client s costs are the same regardless of the number of transactions in an account (as opposed to a non-wrap program where a client pays these fees for each transaction). This could be extremely cost effective if your clients plan to experience frequent trading or rebalancing. YOUR PATH TO ATTRACTING AND RETAINING MORE CLIENTS SUPPORT TOOLS PLATFORM STATE-OF-THE-ART TECHNOLOGY DYNAMIC TRAINING & EDUCATION EFFECTIVE MARKETING PROGRAMS PERFORMANCE- BASED INCENTIVES 360 OPERATIONAL SUPPORT MARKET REPORTS & COMMENTARY STRATEGIC PARTNERSHIPS PORTFOLIO MANAGER THOUGHT LEADERSHIP INVESTMENT PLANNING TOOLS MORNINGSTAR INSIGHTS ALL-INCLUSIVE INFRASTRUCTURE PROVEN INVESTMENT MANAGERS FULL-SPECTRUM INVESTMENT SOLUTIONS STRATEGY DIVERSIFICATION OPEN COMMUNICATION Our Brookstone advisor program supplies you with an all-inclusive platform for long-term support, learning and growth. We ll provide all the tools, training, marketing resources and incentives you ll need to successfully build your business. LEARN MORE ABOUT HOW BROOKSTONE CAN HELP YOU BUILD YOUR BUSINESS Visit www.theriaguide.com to get your Why Brookstone Information Kit, for free. WIDE-RANGING SERVICES. GUIDED SOLUTIONS Our Brookstone Bridges advisor program supplies you with a platform for longterm support, learning, and growth. We ll provide all the tools, training, marketing resources, and incentives you ll need to build your business. BALANCED PERSPECTIVE. We focus on managing investment risk to preserve and