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Wealth Managers Who Pinch Pennies May Be Own Worst Enemies

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Brokers, financial planners and other retail wealth advisors often exhibit a behavioral paradox: While encouraging clients to understand how investments will help them achieve their financial goals, many fail to articulate their own business growth goals and make the investments needed to achieve them.

The key reason, according to business consultants? Advisors are, bluntly, too cheap.

Examples range from the core failure to develop a business plan that can pinpoint where and how money should be spent to simple miserliness.

“If I put together a plan and know what I’m doing for marketing, technology and other expenses, then I would look at those as investments, not expenses,” said Ed Friedman, director of client services at Dynasty Financial, a New York firm that provides products, services and financing to independent advisors.

When presented with a business investment plan that spells out what they should be doing in terms of spending on technology, marketing, client support and research, the gut reaction of many advisors is to put their hands over their wallets.  They may not be cheap, Friedman says, but many are short-sighted.

“I think spending from your own pocket, you want to make sure there’s value, and that you’re not spending for the sake of spending,” Elizabeth McCourt, president of McCourt Leadership group, says in defense of the gut reaction.

But the executive coach and recruiter believes few advisors understand the value from a marketing perspective alone of spending today to get tomorrow’s returns.

Even something as simple as using a parent firms’ incipient social media marketing aides creates a startle reaction among many brokers when fees are attached.

Only about 200 of Stifel Nicolaus’ almost 2,300 brokers have signed up for the firm’s four-year-old SocialWare Voices program that allows them to send pre-approved content with customized taglines over third-party media, said Hope Gassier, the firm’s social media and web coordinator. The cost for the service is $15 a month.

“That’s just one example of how they can be cheap,” said Gassier, noting that she spends more on her Spotify music-streaming app.

One person’s cheap, of course, is another’s frugality.

“Nobody’s ever called me cheap,” said Kurt Rossi, an independent advisor affiliated with LPL Financial who has been a broker for 16 years and believes in spending on marketing.

He pays as much as $6,000 annually to host “educational seminars” at a hotel near his office in Wall, N.J., and is considering starting a podcast that could cost him $1,000 to $1,500 a month. He also invites some of his clients to participate in “advisory councils,”  but keeps an eye on the bill, saying it costs him less than $1,000 to host meetings at a local restaurant.

Advisors, of course, take advantage of production-tied expense-account bonuses some firms offer to invest in marketing, technology and business development. And many understand the value of spending money on prospecting.

Whether cheap or wisely frugal, many advisers preach the value of stretching dollars when it comes to their own practices.

Stifel advisor Bryan Ruder, 26, holds monthly client events at a public library and in a space at a local American Red Cross chapter.  “I try making my dollar go as far as I can,” said Ruder, who works with his father, Thomas, who had been with Edward Jones for 36 years before joining Stifel in 2015. “We’ve always looked at it that way.”

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Comments (1)
  • I have found that focusing on maintaining a skilled, experienced, and focused STAFF is the key. While only 1 of the 4 have a series 7, the other 3 have been with me 19 years, about 17 years, and about 10 years-such deep experience provides smooth operational support for taking care of my clients. Then, I try to take such good care of my clients that the CLIENTS themselves provides a constant stream of referrals. So, I agree with the overall concept in this article. My observation in this industry is that I have tended to see various advisors spend too much of their time on tasks they could readily delegate–which means they are not able to spend as much time TALKING to their clients as their clients might prefer../

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