2015 RIA GUIDE RIA Trends & Opportunities in 2015 PAGE 1 Which RIA Platform is Right for You? PAGE 3 Sponsored by
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Trends & Opportunities for the RIA ın 2015 With so many new trends that have come along in the RIA space, independent advisors are entering an era of opportunity like never before. Dean Zayed, president of Brookstone Capital Management, one of the top 30 fastest-growing RIA firms 1, shares his observations on several trends and opportunities facing the independent advisor in 2015. Trend #1: With returns on investments like Certificates of Deposit and Treasury Bills low, more and more people are looking to 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: One of the best ways to grow dollars is geometric compounding. When big firms or funds advocate 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 returns. 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 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 were fully committed to the stock market in 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 specific strategies with low correlation to broader market activity. One manager employs a hedged equity strategy while another focuses on a protective options strategy. Your client wants portfolio risk actively managed where possible, to avoid large losses while participating in the market s upward movement. Trend #2: Clients are living longer. Today s 65-yearold 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. 1 Advisor Magazine Fastest Growing RIA Firms for 2013 February 2015 1
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 taught 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. At Brookstone we have the tools and technology available to help advisors serve as income planning specialists. Today s retirees must understand that total return, not dividends or interest alone, is critical. Strategies provided by our sub-advisors include a covered call strategy to help clients focus on positive returns that are less dependent on a rising stock market. The client s portfolio is expected to grow through income from writing covered calls in addition to dividends collected and any capital appreciation. Of the 37 investment strategies we offer, several are focused on income. Advisors must be income-planning specialists if they want to remain relevant and have staying power for 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. 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. Advisors must be able to compete with the big boys. 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. 2 February 2015
How to Decide Which RIA Platform Is Right for You As an Independent Registered Advisor, you have a loyal clientele for your insurance practice. You do financial planning, implement strategies and measure progress to goals. Unfortunately, your tools on the investment side of the relationship are limited. Worse, their investment advisors elsewhere are asking them to take their insurance business across the street. Enough is enough. You ve got the licenses. Now you need to choose an RIA platform. What criteria should you apply? Critical Criteria 1. Manager Selection How many professional money managers are available on their Separately Managed Account (SMA) platform? How many strategies utilizing 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: Needs 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 February 2015 3
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 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 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. 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. 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? Rationale: The ideal platform has staff on-site issuing instructions to managers shortly after receiving them from the client s advisor. 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, 4 February 2015
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: Clients know the advisor is the point person in the relationship. They expect their advisor shares in the fees they pay. 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. THE PATH TO A BETTER ADVISORY BUSINESS STARTS HERE www.theriaguide.com 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