FUSION’S BEST
THE MANAGEMENT
PRACTICES OF
FUSION’S TOP
FIRMS
FOR FINANCIAL ADVISOR USE ONLY
2011
Success in business is a combination
of carefully considered strategy and
persistent implementation effort.
Contents
In this report, we detail the strategy and management practices of the
top firms in Fusion Advisor Network. The firms in this report represent the
largest and most successful firms in our network. The report was compiled
based on interviews and data provided by the firms. It is meant to help
advisors throughout the industry implement critical management practices
in their business.
Business Development and Growth Practices..................................................................10
Executive Summary........................................................................................................... 4
The Critical Decisions that Shape Success....................................................................... 7
Services and Service Process..........................................................................................14
Organization and Responsibilities.....................................................................................18
Compensation and Performance Management............................................................... 22
Technology and Operations..............................................................................................25
Financial Management......................................................................................................27
Building Equity................................................................................................................. 29
Conclusion........................................................................................................................31
FOR FINANCIAL ADVISOR USE ONLY
FOR FINANCIAL ADVISOR USE ONLY
Executive Summary
EXECUTIVE SUMMARY
Fusion’s Best Firms have consistently demonstrated excellence
as professionals and business owners.
Despite the severe crisis and the wild fluctuations of the stock markets, the last ten years have been
a time of growth and prosperity in the financial advisory industry. Today, more investors use a financial
advisor than ever before and financial advisory firms have grown larger and more successful than ever.
Financial advisors are recognized as professionals who make a positive impact in their communities and
as employers. They also provide career opportunities to many talented professionals. Although the last
decade has brought success, it has also tested financial advisors and their resolve to continue growing and
managing their practice. Managing and running a business, in addition to motivating and leading as the
employer of a large team, proved strenuous. It required tremendous effort for which independent advisors
should be admired and congratulated.
While the entire advisory industry experienced growth, there are select few firms that have gone beyond
the ebb and flow of the markets to take their independent wealth management business models to new
heights. They have achieved faster growth, greater profitability and higher equity values by focusing on
excellent client service, recruiting and retaining key associates and managing their business for efficiency
and effectiveness.
Fusion Advisor Network is proud to have a strong representation of well established and successful advisory
firms as members. Fusion’s Best Firms have consistently demonstrated excellence as professionals and
business owners. They have superseded industry standards and achieved higher levels of profitability.
Perhaps most important, they have maintained strong client relationships while remaining the employer of
choice for their staff. The management skills and methods of Fusion’s Best firms can serve as an example
and a guide for all of our member firms and the industry.
In this report, we captured the decisions and the
processes that have enabled the top Fusion member
firms and highlighted practical steps that any firm
can replicate to grow faster and be more profitable.
To compile this report, Fusion Advisor Network
interviewed the top 31 member firms, as measured by
their revenue and growth, and explored their business
management practices and financial results.
Our research found the success factors of our top
firms to be:
Recognize the opportunity and seize it – every firm
comes across opportunities – chances to develop a
niche market, to merge with another firm, to add a
valuable employee. Fusion’s top firms are especially
adept at “recognizing their pitch and swinging hard” to
take advantage of it.
Patient, motivated and persistent – The trials of the
markets and the strain and stress of managing a firm
affect everyone. Fusion’s top firms have learned that
success comes through patience and perseverance.
They use difficult times to stand out from the crowd
in a way that helps them move forward and remain
proactive.
Excellent, but selective, client relationships – Client
relationships are the foundation of our business. They
create future growth through referrals and a solid
financial foundation from recurring revenues. Nothing
is more important than cultivating strong client
relationships, but Fusion’s top firms recognize that
only select clients create profitable relationships.
Strategic, long-term visionaries – Fusion’s top
member firms repeatedly look at the long-term
strategy when making decisions and do not become
distracted or sidetracked. These firms will not sacrifice
the long-term vision of the firm in exchange for shortterm profits.
Recruit and retain great people – In order to
succeed, a firm owner must involve other employees
– operations staff, associates and possibly partners.
Fusion’s top firms have all recognized the critical
importance of hiring and retaining talented people and
devoting the time and resources to groom them.
True business owners and managers – The top
Fusion firms all realize that managing their business,
its structure and employees is just as important as
managing client relationships and financial plans.
Fusion’s top firms do not view managing the firm
as a distraction, but instead embrace their role as a
business owner and dedicate the time and the effort
required to do so.
Each firm and each business owner will have their
own personal definition of success and their own
strategy for achieving it. Still, Fusion’s Best provides
a template for success that others can follow. We
are proud to celebrate the successes of our top
firms, and excited to allow other firms to leverage the
processes they have developed that have made them
successful.
40%
30%
32.5%
20%
24.0%
10%
0%
-10%
-11.8%
18.3%
12.5%
-9.8%
-20%
2009
2010
FUSION'S BEST
INDUSTRY
GROWTH RATES OF FUSION'S TOP FIRMS
COMPARED TO THE INDUSTRY
YTD 2011
*Industry - 2011 FA Insight Study of Advisory Firms: People and Pay
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FUSION’S BEST 2011
The Management Practices of Fusion’s Top Firms
For Financial Advisor Use Only
The Management Practices of Fusion’s Top Firms
For Financial Advisor Use Only
FUSION’S BEST 2011 5
Fusion’s Best Firm List
FIRM NAME
CITY
STATE
Andrew Brief Retirement Strategies, Inc.
Elmsford
New York
Brotman Financial Group
Baltimore
Maryland
Central Coast Wealth Management, LLC
Pismo Beach
California
Christopher Street Financial
New York City
New York
Colarossi & Williams
Islandia
New York
Cyrs Wealth Advisors, LLC
Rockford
Illinois
Fenwick Financial Services, LLC
Baltimore
Maryland
Financial Solutions Midwest, LLC
Nashville
Illinois
Financial Catalyst Group
San Jose
California
Financial Strategies, LLC
Mobile
Alabama
Fish and Associates Financial Services
Memphis
Tennessee
Fusion Financial Group – Mappa
Glenview
Illinois
Gartenhaus Financial
Rockville
Maryland
Heller Wealth Advisors, LLC
New York City
New York
Henry Wealth Management, LLC
Pittsburgh
Pennsylvania
Houston Wealth Management, LLC
Stillwater
Oklahoma
ITI Strategies, Inc.
Peekskill
New York
Katz Zlotnick & Associates
Hauppauge
New York
Main Street Financial Group
Kings Park
New York
Marbury Wealth Management
Pittsburgh
Pennsylvania
The Potter Financial Group
Durham
North Carolina
Provident Financial Consulting, LLC
Orlando
Florida
Regal Capital Management, LLC
Bridgewater
New Jersey
Regent Financial Group, LLC
Pittsford
New York
Signature Financial Planning
Pittsburgh
Pennsylvania
Sinnott Wealth Management, Inc.
Elmsford
New York
Sopher Financial Group
Metuchen
New Jersey
Strategic Financial Partners, LLC
Suwanee
Georgia
Tycor Benefit Administrators, Inc.
Philadelphia
Pennsylvania
U.S. Financial Services, LLC
Fairfield
New Jersey
Wealth Management Strategies, Inc.
Pittsburgh
Pennsylvania
The Critical Decisions that Shape
Success
Strategies in
business are
never static – they
constantly change
with the shifts in
the competitive
marketplace.
The art of growing a practice is much like the art of hitting a baseball.
It is the combination of patiently reading each opportunity until you find
the right pitch and then pursuing it with all your strength and energy.
On the path to building a top firm, Fusion’s Best firms have come
across many crossroads and have carefully explored where each road
may take them. When they found the path that lead to their envisioned
destination, they pursued it with the passion and conviction of true
entrepreneurs.
There were many crossroads, but the key decisions that came to
define our top firms were as follows:
Going independent – Not every firm in Fusion Advisor Network started
as an independent one. In fact, many Fusion firms originated in large
insurance or wirehouse firms and eventually came to the conclusion
that they wanted to manage the business and fully control the client
experience. While the change was usually precipitated by a specific
event, the decision was driven by a vision of building equity and
creating an organization that can service clients better. The desire to
service clients in a better and more objective manner is what drove
Kurt Jackson from Central Coast Wealth Management to leave a
major wirehouse and create his own firm. Similarly, the same desire
for objectivity and open architecture was behind the decisions made
by many of the founding partners of Fusion who joined the network in
2003 and 2004.
Reinventing themselves and changing their business model –
Strategies in business are never static – they constantly change with
the shifts in the competitive marketplace, the needs and preferences
of investors and the change in the interests and passions of the
entrepreneurs themselves. Many of Fusion’s top firms have gone
through a process of reinventing themselves by changing their firm’s
positioning as they saw opportunities, and thus responded to the
market. Some of Fusion’s top firms, Potter Financial for instance,
recognized the trend of affluent and high net worth investors
demanding a more holistic approach to advice and transitioned
to a fee-based advisory model to answer the demands of their
clients. Other firms entered into the wealth management business
through a different career or a related business. For example, Katz
Zlotnick & Associates and Financial Solutions Midwest added wealth
management to their retirement and benefits business in response
to client needs. Steve Gallo from U.S. Financial Services and Jordan
Heller from Heller Wealth Advisors came from a CPA firm background
and saw the opportunity to combine wealth management with their
traditional expertise.
Fusion’s top firms were not afraid to exit business lines that no longer
fit their firm’s strategy or their client base and their goals. Christopher
Street Financial, a firm in New York City, stopped acting as a brokerdealer for dozens of professionals and instead, recreated the firm’s
mission and vision based on the owner, Jennifer Hatch’s, own desire to
personally help clients versus just conducting transactions for them.
6
FUSION’S BEST 2011
The Management Practices of Fusion’s Top Firms
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The Management Practices of Fusion’s Top Firms
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FUSION’S BEST 2011 7
THE CRITICAL DECISIONS THAT SHAPE SUCCESS
Merging with another advisor when they recognized
the fit – Many of Fusion’s top firms are partnerships.
Recognizing the opportunity to create a successful
partnership has been one of the most significant
milestones in their firms. Pete Peters and Mike
Barnett, from Financial Strategies, joined together
because they complement each other’s skills. They
created efficiencies by combining their operational
resources. U.S. Financial Services’ Steve Gallo, Altair
Gobo and Gerard Papetti became partners. By doing
so, they put together an all-star team consisting of a
CPA, a financial planner and an investment expert.
Signature Financial Planning, a partnership between
Marc Tannenbaum, Scott Tobe and Aaron Leman,
combined their skills, allowing them to provide a
collegiate atmosphere and a team-based approach
to servicing clients. Scott Oehrle, of Marbury Wealth
Management, added Denise Quinn to his firm through
a merger that created a larger presence and better
client service.
Acquiring a firm when they found the right deal
– Acquisition opportunities can provide a firm with
numerous benefits: a larger local presence, an entry
into a new market or an entry into a new geographic
location. In some cases it can immediately add to
the profitability of the firm. Brian Heckert, of Financial
Solutions Midwest, approaches acquisitions in the
same way he approaches new clients. He proactively
EXECUTIVE SUMMARY
looks for opportunities and then “markets” his firm
at industry associations. Brian makes sure he
puts himself in the shoes of the other advisor to
understand their motivation and goals before making
any acquisition.
Taking a chance on a talented individual – Some of
the most dramatic improvements in a firm have come
from adding a talented individual in order to build a
quality team. However, finding talented individuals is a
task with challenges.
client at a time. What we found differentiates Fusion’s
top firms is that even in the hardest of times, they
never lost faith in their strategy and they never lost
sight of their clients. They patiently built relationships
and waited for the right time to embark on the next
step of their growth. Scott Oehrle learned that it is
important to maintain a level headed approach. He
says, “I don’t want the high’s to get too high or the
low’s to get too low.”
Choosing the right path at critical junctions has been a
key driver of growth for Fusion’s top firms. Growth and
opportunity continue to be on top of their business
priorities.
The Management Practices of Fusion’s Top Firms
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FUSION’S BEST 2011 9
No matter how careful a business owner is, it is
difficult to judge the skills, personality and character
of a candidate through two or three interviews.
We found that Fusion’s top firms, however, are not
afraid to take risks with qualified candidates when
their initial experience is positive. Brotman Financial
Group added Brent Weiss- first as an employee
and eventually promoted him to partner. Brian
Heckert hired Leo Barczewski. Today, Leo leads the
investment services for the firm. In both cases, the
owners recognized great talent and we not afraid to
take a chance.
Preserving their strategy – Success does not always
come quickly. Each of Fusion’s top firms has gone
through a period of slower than expected growth
where they’ve had to patiently build their firm one
Managing Complex Structure
Institutionalizing the Business
Business Construction
Institutional vs. personal reputation
Emphasizing organizational structure
Beginning of departments
Building executive decision-making process
Career paths for staff
Partnership structures and equity process
Promoting firm culture and values
Growing leaders and defining leadership
Operating locations or profit center groups
Promoting cohesion and unity
Dealing with divergent strategies and ideas
Expanding in new lines of business or markets
Building a team-based service
Specialized roles and responsibilities
Selective client additions in target markets
Establishing Reputation
Differentiating
Establishing a market
Reaching critical mass
Structuring client service model
Under $500,000
8
$500,000 to $300,000
FUSION’S BEST 2011
$300,000 to $5,000,000
Over $5,000,000
The Management Practices of Fusion’s Top Firms
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Business Development and Growth
Practices
Fusion’s top firms
maintain a stellar
rate of growth and
are progressing
faster than industry
averages and their
Fusion peers.
Growth is essential for any business. Growth creates opportunity
and opportunity attracts and retains employees. Growth also creates
excitement and enthusiasm. The combination of enthusiasm,
opportunity and satisfied employees leads to more growth. In this
sense, growth is a self sustaining cycle that nourishes a business.
Once interrupted, however, it is difficult to restart. Fusion’s top firms
understand the importance of growth and seek to maintain their
momentum, even if it means swimming against the currents of the
financial markets.
In 2010, Fusion’s top
firm in the industry
grew at a rate of
24.0% compared to
18.3% for the typical
firm in the industry.
Fusion’s top firms maintain a stellar rate of growth and are progressing
faster than industry averages and their Fusion peers. In 2010, Fusion’s
top firms grew at a rate of 24.0% compared to 18.3% for the typical
firm in the industry. This trend continued through the first half of 2011
with the top firms growing by 32.5% compared to 12.5% for the
average industry firm.
The strategies used by the top firms are not unique, but they do require a
balance of passion, timing and patient execution. The strategies used by
Fusion’s top firms can be broken into three different categories:
Positioning the firm and its services – Long-term approach to how the
firm builds its brand and what it becomes known for, including niche
strategies and service specialties.
Lead generation strategies – The sources of business development
and how each firm uses those sources effectively.
Business development techniques – Best practices for executing the
marketing and sales initiatives of the firm.
We have summarized the key success factors for each category in
more detail below.
Positioning the Firm and Its Services
One characteristic that Fusion’s top firms share is a strong emphasis
on what makes them unique. There are many different strategies used
– some firms emphasized the niche they serve, others focus on their
people or a technical specialty. Each strategy creates its own unique
set of opportunities and the differentiation drives the growth of the firm.
Your team is a powerful differentiator – The expertise and
credentials of the associates who service the clients are often leading
differentiating factors for Fusion’s top firms. U.S. Financial Services
presents clients with a team-based service model. This model
introduces each client to two, or even three, partners of the firm- each
bearing multiple designations like CPA and CFP. The client does not
depend on just one person to service him or her allowing for more
efficient client servicing. Similarly, George Sinnott, of Sinnott Wealth
Management, emphasizes his team of professionals comprised of
a JD, CFP®, CPA, and MBA who can provide complex solutions to
10
FUSION’S BEST 2011
The Management Practices of Fusion’s Top Firms
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BUSINESS DEVELOPMENT AND GROWTH PRACTICES
any level of wealth. Not only does Sinnott’s team
have depth of expertise, they are also family. With
his daughters Debbie and Sandy they are able
to enhance relationships with each professional
delivering advice in their area of expertise. “If you
want to work with wealthy clients,” says Steve Gallo
of U.S. Financial Services, “you have to demonstrate
that you have the sophistication and knowledge to
handle their financial affairs.” That sophistication,
once implemented, will set the firm aside. “We tell
clients that they receive the level of sophistication
that is expected at the ultra-high-net worth market,
but we deliver it to the working millionaire and the
affluent professional as well,” says Scott Tobe whose
firm, Signature Financial Planning, has professionals
with the CFA and CFP® designations and also has an
attorney in the same office.
Tapping into the power of niches – One source of
success for several of Fusion’s top firms is becoming
well known for niche market expertise. Jennifer Hatch,
of Christopher Street Financial, is nationally known as
the preeminent expert in working with gay and lesbian
couples. Jen has been featured in publications such
as the Wall Street Journal and The New York Times
and is a columnist in the magazine The Advocate. Jen
says, “… being in a niche allows you to be passionate
about what you do and to focus on that passion. It
helps you deliver to clients solutions that they would
otherwise never see from a ‘generic’ advisor.” Chip
Roe of Potter Financial agrees. Potter Financial has
a long track record of working with physicians and
physician groups. Chip says, “The more different
the financial issues are, and the more complicated
they are, the more our unique knowledge of the
niche helps us differentiate and attract clients as
well as serve existing ones better.” Developing niche
expertise however requires a lot of patience. “You
have to do the things that will bring you prestige in the
niche. You have to devote time and patience to it – it
will not work right away,” says Jen Hatch. Scott Tobe
of Signature Financial Planning can vouch for that
statement. His firm is patiently developing a market in
socially responsible investing. While the influx of new
clients is slow, and the effort is substantial, it brings
him and his partners a higher level of satisfaction
knowing they are not just building their firm, but
contributing to what is personally important to them.
Niche example: taking pride with the mass affluent –
The search for larger client relationships and wealthier
clients is often the priority of many advisory firms. As
a result, the mass affluent are often overlooked and
underserved. Firms like Fenwick Financial Services,
Fusion Financial Group - Mappa, Henry Wealth
Management and Regent Financial Group incorporate
The Management Practices of Fusion’s Top Firms
For Financial Advisor Use Only
a unique strategy targeting this market segment
and have become successful working with the mass
affluent clientele. They have positioned themselves to
increase market share in this segment over the long
term, without compromising the premium service they
provide. “My clients work hard” says Ann Fenwick,
“They expect me to be as hard working as they
are and, more importantly, they really appreciate
everything I do for them.” Mark Mappa adds this
often means that he can’t say “no” to smaller client
relationships, but the benefit is an enthusiastically
referring client base that is also very loyal.
Specialized services: working with clients in
retirement – As more baby-boomers retire, the
specialty of working with retired clients is becoming
more of a differentiator. Advisors that can become
experts in this segment have become extremely
successful. Andrew Brief, of Andrew Brief Retirement
Strategies, and Larry DeNoia, of ITI Strategies, are
just two examples of firms that focus on this market.
“The investment approach and the client relationship
management in the distribution phase of planning are
very different than in the accumulation phase,” says
Andy Brief. Understanding these differences and
focusing on the unique needs of his retired clients has
allowed Andy to grow steadily in the last five years
and his clients are very apt to refer new clients. “They
understand well what I specialize in and it makes it
easier for them to communicate to their friends and
acquaintances why they should consider working with
me,” adds Andy.
Lead Generation Strategies
Differentiation and positioning create a powerful story
for why clients should consider the firm. In order for
the story to be heard though, someone (a person they
trust) must introduce the prospective client to the firm.
Referrals, thus, are critical for the growth of the firm.
The foundation of referrals: existing clients – More
than 75% of all new clients in the industry are fostered
by referrals from existing clients. Fusion’s top firms
understand the importance of referrals and actively
engage their clients to facilitate this process. Larry
DeNoia, of ITI Strategies, says that giving the clients
the opportunity to provide you with feedback and to
see the feedback implemented makes them much
more likely to introduce their family and friends to
the firm. Many Fusion firms agree with Larry. One
way they facilitate referrals from existing clients
is to run advisory board meetings and execute
client satisfaction surveys. Both of these tactics
have proven to be successful in allowing Fusion’s
FUSION’S BEST 2011 11
BUSINESS DEVELOPMENT AND GROWTH PRACTICES
top firms to tap into the personal relationships of
their existing clients. Another successful tactic is
to host client appreciation events. In this scenario,
existing clients invite their colleagues and friends
to meet their advisor. Firms like Provident Financial
Consulting carefully organize and structure their client
appreciation events to precipitate referrals. Finally,
reminding clients to refer others to the firm is often
enough to accelerate the process. For instance, Phil
of Henry Wealth Management ends almost every
meeting with such a reminder.
Referral source: developing CPA alliances – CPAs
are the second most important referral source after
referrals from existing clients. All of Fusion’s top
advisors understand the importance of creating these
alliances. However, few firms are willing to devote the
time and the effort necessary to work successfully
with an accounting firm. Mike Wertheim, of Main
Street Financial, is exceptional in creating a deep
relationship with an accounting firm. His process
includes taking the extra step of actually working
as a preparer in the office of one of his alliance
firms during tax season. This helps his CPA partner
complete the challenging task of filing all returns. The
result of this process is the creation of a deep and
successful relationship between the two. It also gives
Mike extensive knowledge of the accounting firm’s
clients. Dan Zlotnick, from Katz Zlotnick & Associates,
also primarily generates business from accountants.
He agrees with this strategy. “You have to speak their
language, follow up and be thoughtful and informative
with your answers” he says. “It is important to be
reciprocal in the relationship,” says Mike Wertheim.
“You have to help them grow their business too.” Mike
notes that he and his CPA partner are looking actively
to grow the CPA practice by possibly buying other
CPA firms.
Working with financial institutions – Financial
institutions have proven to be a great source of new
clients for Mark Mappa and George Sinnott, two of
Fusion’s top firms - Fusion Financial Group – Mappa
and Sinnott Wealth Management, respectively.
Both advisors have spent a lot of time developing
relationships with local banking colleagues. As
a result, they have been successful in creating a
specialized firm that serves the needs of the financial
institution’s clients. Mark and George do not turn
down any referrals from the credit unions they work
with. They make sure all clients receive top notch
service and care. The result has been exciting growth
in the referral relationship.
12
FUSION’S BEST 2011
Services and Service Process
Business Development Techniques
Even the best strategy and the best referral sources
will not be effective without good implementation.
Some of the techniques that Fusion’s top firms use to
sustain their business development effort are detailed
below.
Engaging the next generation – Firms who begin
thinking about future growth of their firm far in
advance realize that the high-net-worth clients they
are servicing will eventually transfer their wealth
to their children. It is critical to create a strategy to
ensure you keep the assets with your firm once the
next generation receives the inheritance. Andrew
Pincus, of Regal Capital Management, has developed
a strategy that seems to be working. Andrew tries
to meet with his clients’ children and begin working
with them early on; even if they have less investable
assets than his minimum. Andrew says, “Not only is
this an opportunity for future growth, it is a way to
make my clients feel like family.”
Incorporating passions and values into the
practice – Sometimes the best sources of growth
professionally come from the same source where
we find personal growth. Kathy Fish, of Fish and
Associates, combined her personal passion for
yoga with her client service. Kathy teaches yoga to
her clients and often sees them refer friends to the
yoga classes first and then to the financial advisory
practice. Provident Financial Consulting incorporated
their faith based values into the business which
allowed them to reach clients on a deeper level to find
out more about their goals and values as it relates to
financial matters. Kevin Taylor says that “while it may
have diminished the number of people who listened
[to our story], those who did listen, listened deeper.”
Maintaining momentum – Lastly, as we mentioned
in the first sentence of this chapter, growth is selfsustaining when you achieve it, but difficult to restart
when you lose it. Creating momentum is not an
easy task. But once you have momentum, you can
tackle business initiatives easier and overcome
barriers faster. It can literally change the pace of your
business growth. “You have to keep your groove.”
says Ann Fenwick, Fenwick Financial Services, who
has grown steadily since joining Fusion in 2005 and is
enthusiastically looking at the future.
Growth means little, however, if it is not profitable and
Fusion’s top firms spend a lot of time analyzing how
they can service clients better and more profitably.
The Management Practices of Fusion’s Top Firms
For Financial Advisor Use Only
Maintaining
selective but high
quality clients allows
Fusion’s top firms
to achieve enjoyable
interaction with
clients and fuel their
future growth.
Fusion’s top firms know that relationships are the foundation of their
business. They all service their clients by focusing on careful financial
planning rather than transactions and opportunistic products. They
know the success of a wealth management firm starts with the quality
of the advisor’s clients and ends with the services delivered. We
demonstrated earlier that a firm’s existing clients are key to future
growth of the firm. We will now illustrate how the choice of services
and their delivery process are key to the profitability of the firm.
One of the most critical metrics to review in an advisory firm is the
revenue per client. That specific metric looks at the average size of
a client relationship and combines it with the number of clients per
advisor (or service representative) to determine the capacity of a
service team. Higher revenue per advisor (or service representative) is
not necessarily the key to higher profitability and growth. (We already
saw that many of Fusion’s top firms actually focus on blue collar
clients.) Instead, maintaining selective but high quality clients allows
Fusion’s top firms to achieve enjoyable interaction with clients and fuel
their future growth.
Here are some of the practices they’ve implemented to drive the
revenue per client metric:
Defining the client experience – For Fusion’s top firms, profitable
client relationships start with the advisor’s ability to articulate what the
client can expect from the relationship. Fusion’s top firms proactively
educate the client on what to expect from them so there are no
misunderstandings. For instance, Rich Colarossi of Colarossi &
Williams requires new clients to list three reasons why they came to
see him in their first meeting before he will ever look at their financial
situation. Rich says, ”once people understand I am more interested in
learning why they need help instead of rushing to show how I can help
them, they realize the relationship will be based on sincerity and trust.”
Once the foundations of the relationship are established, the transition
to defining a service process becomes easier. A well defined service
process eliminates confusion for the client and specifies exactly what
services the client will receive. It also allows the firm to systemize and
define its standard set of services for all clients to create a consistent
client experience. As an example, Cyrs Wealth Management, one of
Fusion’s top firms, takes every new client through a highly structured
financial planning process. David Cyrs believes in this methodical
approach because “once people see the value, they are comfortable
with our fees and our process.”
Structuring a team-based service model – Fusion’s top firms have
recognized that clients enjoy working with a team rather than a single
individual. A team-based service model allows for specialization
(each person can focus on something they do well), continuity (not
vulnerable if one person is not in the office) and is more responsive
(there is always someone to help the client). A team-based service
model does not necessarily require multiple professionals. Larger firms
like Signature Financial Planning and U.S. Financial Services, two of
The Management Practices of Fusion’s Top Firms
For Financial Advisor Use Only
FUSION’S BEST 2011 13
SERVICES AND SERVICE PROCESS
Explaining the investment philosophy and approach
of the firm – There is no single investment approach
that fits every firm. Some of Fusion’s top firms
are active managers using individual securities to
construct their portfolios. Others use mutual funds but
perform the allocation and portfolio management on
their own. The largest percent of Fusion’s top firms
outsource all investment management to a third party.
You can see while the investment approach may
differ dramatically, the common ground lies within the
fact that all of Fusion’s top firms practice the diligent
exercise of educating their clients on the investment
philosophy of the firm and how it applies to their
portfolios. Andy Brief puts it succinctly, “Training
clients in your investment approach is extremely
important and requires tremendous consistency.”
He adds, “Sometimes that means training them
to appreciate that doing nothing is also a valuable
strategy.”
Segmenting clients and determining points of
customization – Fusion’s top firms understand not
all clients have the same needs and the same level
of customization. Virtually all of the top firms employ
some level of client segmentation. Segmentation not
only helps advisors allocate resources based on the
complexity and size of the relationships, but it also
allows the firm to manage their internal workflow.
While the most common method of segmentation is
determined by client revenues or assets, firms like
Christopher Street Financial and Wealth Management
Strategies also look at specific circumstances that
create complications or may require a higher level
of involvement from the advisor. Examples include
clients with unique tax considerations for whom taxadvantaged investments may offer multiple benefits,
and clients with concentrated stock positions that
require a portfolio design that blends both tax and
investment factors into an effective strategy.
Communicating often – Clients expect to hear
from their advisors not just on a routine basis,
but during times where they need reassurance.
Fusion’s top firms continuously reaffirm their value by
communicating to their clients regularly and making
it a top priority. “I schedule time in my calendar for
all deadline driven client communications - from
newsletters to market activity updates,” says Phil
Henry of Henry Wealth Management. For moments
where a client reaches a milestone or a special
anniversary, “you enhance the client experience
through recognition and celebration,” says Phil.
REVENUE PER CLIENT
INDUSTRY
$5,521
$2,000
$2,025
FUSION'S BEST
$3,000
*Industry - 2010 InvestmentNews/Moss Adams Financial Performance Study of Advisory Firms
14
FUSION’S BEST 2011
200
150
$4,000
$1,000
Selectively choosing clients – The typical advisor
can tackle between 120 and 150 relationships on their
own. Once that limit is reached, the advisor no longer
has capacity. Most advisors would agree that working
with fewer but higher quality relationships is more
profitable and creates better quality of service for their
clients. Fusion’s top advisors are very selective in
who they work with for this reason. Most of Fusion’s
top firms work with 65 to 90 clients per advisor. Being
selective not only means defining and adhering to
minimum client requirements, but also making sure
that the quality of relationships is high. “Working
CLIENTS PER PROFESSIONAL
$6,000
$5,000
Specializing services – It can be tempting for high
caliber professionals like those in our top firms to
take on work that doesn’t fit their service model.
This ends up costing the advisor in the long run
because they spend an exponential amount of time
on activities that are not core to their business model
or service approach. For instance, Trish Houston,
of Houston Wealth Management, is scaling down
the CPA side of her business in favor of focusing on
the wealth management side. “Moving forward, I am
only doing returns for clients who are also on the
wealth management side.” Her decision to do this
has allowed her to focus on her core strength and
save time and money in the long run. Firms that make
this distinction are able to better direct energy and
resources to play to their strengths.
INDUSTRY
Acknowledging the link between front and back
office – Jennifer Hatch, Christopher Street Financial,
praises her director of operations, Rick de Beauclair,
for “being as good with clients as your best front
office person, except for the fact he works in the
back office.” The traditional separation between
client facing staff and associates behind the scenes
only worked for the sales oriented culture of the old
brokerage firms. In a wealth management business,
the client relationship is forged by many interactions
with multiple associates within the firm and over the
course of many years. This means the entire staff
will have a significant impact on the quality of the
relationship between the client and the firm. In fact,
they may ultimately be the reason why a client stays
or leaves.
The Management Practices of Fusion’s Top Firms
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158
100
50
101
FUSION'S BEST
Fusion’s top firms, always introduce multiple partners
to the client. Solo firms, like Andrew Brief Retirement
Strategies and Wealth Management Strategies,
make sure they introduce their operations team to
the client so they can service the client as well. In
fact, even in the largest wealth management firms
in the industry, a service team often consists of one
advisor and multiple service specialists. Clients not
only accept that their primary advisor is not always
the person performing all of the tasks, but they enjoy
the interaction with the staff. They also understand
that other associates in the firm may be more
knowledgeable in some areas of the business than
the advisor him or herself.
SERVICES AND SERVICE PROCESS
*Industry - 2010 InvestmentNews/Moss Adams Financial Performance Study of Advisory Firms
The Management Practices of Fusion’s Top Firms
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FUSION’S BEST 2011 15
SERVICES AND SERVICE PROCESS
with clients who do not understand or accept your
approach can be draining and does not help the client
either,” says Larry DeNoia from ITI Strategies. For this
reason, many firms “coach out” clients who are not
good fit for the firm.
Carefully choosing strategic partners – Advisors rely
on a number of third parties to provide investment
services to clients. Investment managers play a key
role in the success of the financial plans created and
have a large influence over the relationship between
client and advisor. Fusion’s top firms scrutinize the
strategic partners they work with and perform heavy
due diligence on the investment performance of the
strategic partner (investment manager) as well as
review the investment firm’s operational processes
and its service habits. As a rule of thumb, we found
that strategic partners that took the time to understand
the advisory firm, and the clients, and built processes
to facilitate frequent contact with the advisors were
not only easier to work with, but also allowed the
advisor to create an integrated investment strategy
and communicate it successfully to his or her clients.
“Using a strategic partner is a direct reflection on
our firm and our reputation. A strategic partner’s
operational difficulties that lead to errors can negate
the benefit of their good investment performance
in the eyes of our client,” says Bud Kahn of Wealth
Management Strategies. “You are who you do
business with” says Steve Gallo of U.S. Financial
Services, “that’s why we are very careful in choosing
the companies we introduce our clients to.”
Servicing the “old fashioned” way – “At the end of
the day, old fashioned relationship protocol works and
people notice that stuff” says Alan Edelstein of Regent
Financial. The small gestures and the daily effort to
be responsive are recognized by clients and over time
create the strong and durable relationships enjoyed
by the top firms.
No matter how brilliant the service strategy, it will
never succeed without a talented team. Fusion’s top
firms acknowledge that a talented, seasoned team is
mission critical and they devote extensive resources
to create an organization capable of providing “raving
fan” service to clients.
Organization and Responsibilities
The team of
professionals and
staff that service
the client are crucial
for the success of a
practice.
According to
Fusion’s Best, 75%
of all expenses
in a firm are
compensation
related. Getting the
highest return on
that investment is,
therefore, a must
to achieve financial
success.
Growth requires a firm to staff up. As a firm adds more staff, it tends
to create new opportunities for growth. Each associate that joins
an advisory firm brings a unique set of talents, experiences and
capabilities that allow the firm to achieve more, to be more efficient
and to pursue new services and clients. Neglecting to add additional
staff at the right time is perhaps the single greatest hindrance
to firm growth. Adding staff should be done strategically, with a
careful examination of the current capacity and the structure of the
organization.
The revenue per staff ratio provides a good view of the staffing of the
firm and can provide some insight into staff productivity. Fusion’s top
firms have revenue per staff of $235,000 compared to $107,000 for
industry averages. In general, Fusion Advisor Network recommends
that the ratio of revenue to staff does not drop under $200,000 or
exceed $400,000. The revenue per professional can also be very
telling, especially for firms with multiple professionals. Fusion’s
top firms have revenue per professional of $515,000 compared to
$213,000 for all other Fusion member firms.
Fusion’s top firms have become experts in managing their organization
based on the following principles:
Hire good people – Hiring a new employee and adding a new position
to the payroll is a very difficult decision for every business owner.
Increasing your staff from one person to two or from two to three
$600,000
$400,000
$200,000
$515,086
$213,049
$234,927
$107,000
$0
REVENUE PER PROFESSIONAL
FUSION'S BEST
INDUSTRY
PRODUCTIVITY RATIOS
REVENUE PER STAFF
*Industry - Quantuvis Best Practices Study Series: Business Performance Findings 2009
16
FUSION’S BEST 2011
The Management Practices of Fusion’s Top Firms
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The Management Practices of Fusion’s Top Firms
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FUSION’S BEST 2011 17
ORGANIZATION AND RESPONSIBILITIES
seems like a giant step. After all, you are making a
significant financial, operational and management
commitment that seems like it will require you to work
harder, longer and take more risk.
Fusion’s top firms, however, know that adding quality
employees will enable them to achieve more, have
better quality of service and better quality of practice.
Brian Heckert tells us, “The decision to hire a CFA
was the best move I made in my business. Not only
did that hire pay for himself within six months, but it
allowed me to build a true investment service that
meets the needs of my clients.” Mike Barnett of
Financial Strategies concurs. “We have great people
in our firm and it is difficult to imagine practicing
without them, not to mention growing a practice
without them…”
Don’t compromise talent – At times, it may be
tempting to hire people who are available right now,
or do not require high compensation, or who are low
hanging fruit (family and friends). Kathy Fish, Fish
and Associates, advises against this tactic. Kathy
says, “A qualified person who is an expert at their job
will make everyone around them more productive,
while someone who is lacking in skills will hurt the
performance of everybody else. It is always worth
looking for the best possible candidate because
they will provide you with the best return on that
investment.” Kathy and others have been amazed at
the quality of candidates available when they tapped
into the job market.
Define responsibilities clearly and carefully – One of
the biggest challenges smaller firms have is creating
job descriptions for staff that allow them to specialize,
but at the same time do not inflate the staffing of the
firm. A $1 million in revenue firm will not require the
same number of associates and staff members that
a $5 million in revenue firm will. Many employees in
a smaller firm will be “hybrid” – the associates will
combine responsibilities where in a larger firm those
same responsibilities may be a separate position.
Regardless, every advisory firm should create job
descriptions and try to be as specific as possible on
the role of each employee in the firm. Tim Corle, of
Tycor Benefit Administrators, has developed a system
to remove himself from certain client relationships
and allow his employee advisors to take over most of
the daily servicing. Tim says, “The value of my firm
is discounted if clients are not willing to work with
anyone but me.”
Promote specialization – Every growth minded
advisory firm comes to a point where the staff can no
longer have the generic job descriptions of “advisor”
18
FUSION’S BEST 2011
and “assistant”. The firm must start developing
higher levels of specialization. The specialized roles
allow employees to cultivate deeper knowledge and
expertise in specific areas and thus increase the
capabilities of the firm. Typically, the same happens
to the owners of the firm. At some level of growth, it is
wise to explore conceiving specialties for each advisor
too. At U.S. Financial Services, the three partners
specialize in areas that best fit their backgrounds,
interests and experience. Gerard Papetti practices as
the planning expert and creates sophisticated plans.
Al Gobo is the primary business developer for the firm
and Steve Gallo focuses on the firm management
and acts as a managing partner. Similarly, at
Signature Financial Planning, Aaron Leman acts as
the Chief Investment Officer for the firm, while Marc
Tannenbaum and Scott Tobe focus on business
development and client relationships.
Mentor and provide opportunities to grow – Every
employee you hire will demand time and training to
be effective in their job and achieve higher levels of
responsibility. “You can’t just put someone in your
firm and expect them to know what to do,” says Scott
Oehrle of Marbury Wealth Management. “You have
to train them first so they can do their job. You have
to mentor them so one day, they can do your job.”
Mentoring can take many forms. Eric Brotman, of
Brotman Financial Group, says that you are mentoring
“every time you bring an associate to a meeting.
That’s the best chance for them to learn – in a real life
situation when then have a chance to do something
that benefits the client under your supervision.” The
mentoring process applies not only to professional
staff. In fact, each operations employee should have a
mentor too. “It took us a bit of time to communicate to
the more experienced employees that ‘you need to be
the mentor for our new staff’. They struggled with that
at first and needed help. When they started actually
mentoring, well, that’s when we felt like our operations
area just took-off,” says Tim Corle of Tycor Benefit
Administrators.
ORGANIZATION AND RESPONSIBILITIES
them to the next level of responsibility and income,
and that we are committed to this process.” Eric adds,
“If you promise a career path, you have to live up to
that promise. If you fail, you lose credibility with that
individual and, most likely, you lose the employee
soon after.” Eric’s firm has demonstrated this process
by taking an employee of their firm from entry level to
recently making him a partner.
Add an associate advisor position – Hiring associate
advisors is the single most important step towards
taking a firm to the next million in revenue. Associate
advisors provide the firm with capacity to service more
clients per senior advisor and, ideally, will serve as
the training ground for the advisors of the future. More
and more, young professionals graduate from CFP
programs and look for opportunities to directly enter
into the advisory industry. Fusion’s top firms have
hired associate advisors and have achieved excellent
results. Steve Gallo, from U.S. Financial Services,
says, “The associate position allows us to focus on
the most important aspects of the client relationship
and also makes sure that nothing falls through the
cracks.” Kathy Fish concurs, “Many advisors put the
associate advisor on their smallest clients,” she says
“I actually want to involve my associate with my best
clients – that’s where I need the most help and that’s
where they will learn the most.”
Hire a Chief Operating Officer (COO) – Jen Hatch
from Christopher Street Financial, and Howard
Gartenhaus from Gartenhaus Financial, both agree
that past a certain level of growth and complexity a
practice needs a real COO, someone whose fulltime job is thinking about the efficiency of the firm
and its processes. Howard says, “We use so many
technologies, comply with so many regulations and
use so many vendors that unless you have someone
who is passionate about operations, you can’t
possibly grow your firm over $1 million in revenue.”
A dedicated office manager can be responsible for
defining the optimal process, training everyone to
follow that process, choosing the technology that
supports the processes and measuring the financial
impact of its implementation. In the absence of a
dedicated operations manager, few advisors have the
time, patience and knowledge to achieve the same
results.
Define partnership responsibilities – Determining
how partners divide the work of managing employees,
researching investments, bringing in new business,
organizing the office resources and countless other
requirements of partners can be extremely time
consuming. The power of multiple partners effectively
dividing and conquering these responsibilities can
have a tremendous impact on the productivity of the
firm. Mike Hyser, of Strategic Financial Partners,
meets with his partner, Eric, each quarter to discuss
the firm’s quarterly goals as well as the individual
goals they had set for themselves.
Consider an investment specialist – Firms that focus
on providing internal portfolio management to their
clients should consider following the example of
Marbury Wealth Management, Signature Financial
Planning and Financial Solutions Midwest. These
firms have all hired a CFA to act as the investment
specialist. The investment specialist allows the
firm to become an expert in portfolio management
services and gives the advisors the ability to focus
on client relationships rather than wear two hats.
However, the investment specialist position can be a
significant investment that not every firm can afford.
These professionals tend to be more difficult to find
and highly compensated when found. The tools of
the trade (research, trading, reporting, etc.) can also
increase the cost of having the in-house capability.
Create career paths for everyone – Regardless of
firm size, every employee wants to know what their
future at the firm looks like. Every position in the
firm should provide the employee with a path and
the ability to expand on their level of expertise and
responsibilities. Otherwise, associates start to feel as
if they have maxed out their potential and the firm will
risk losing its best employees. Eric Brotman’s firm,
Brotman Financial Group, is nationally recognized for
creating career paths for their associates. “The career
path is like a business plan for both the firm and the
individuals we hire. It gives them the confidence that
we will help them grow, that we know how to take
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The Management Practices of Fusion’s Top Firms
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FUSION’S BEST 2011 19
Compensation and Performance
Management
The Typical Top Firm
Organization Chart
Partner
Managing the
environment and
culture of the firm
is just as important
to the owners of
Fusion’s top firms
as the use of payroll.
Partner
High Level Relationship Management
Business Development
Firm Management
May Specialize as CEO, COO or CIO
High Level Relationship Management
Business Development
Firm Management
May Specialize as CEO, COO or CIO
Creating a culture
that increases
employee
engagement with
the firm is critical to
the success of their
business.
Associate Advisor
Extensive Client Contact
Maintain Existing Relationships
Seek Referrals and Portfolio
Share
Portfolio and Product Responsibilities
Paraplanner
Draft Financial Plans
Maintain Client Data
Prepare Analysis of Portfolios or Products
Sit in Client Meetings
20
Client Service Administrator
Client Service Administrator
Interface with Broker-Dealer
Maintain Account Data
Contact Client on Routing Issues
Perform Routine Service Requests
Often Licensed
Interface with Broker-Dealer
Maintain Account Data
Contact Client on Routing Issues
Perform Routine Service Requests
Often Licensed
FUSION’S BEST 2011
Admin Assistant
Open Accounts
Maintain CRM
Mailing
Scheduling
Reception
The Management Practices of Fusion’s Top Firms
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Fusion’s top firms spend 18% of their revenues on staff compensation
and 35% on professional compensation. Given the fact we know the
critical role that staff plays in the delivery of services to clients and the
operations of the firm, it is easy to see that compensation decisions
and performance management are two areas that deserve significant
attention. Fusion’s top firms have devoted much time to determine
the proper process to use to reward their employees and help them
achieve more. Some of the key findings are:
Performance starts with recruiting – For Kathy Fish, of Fish and
Associates, the first factor for good performance is making sure that
the right person is hired for the position. Kathy emphasizes, “If you
don’t have a person with the right skills and motivation, it does not
matter how much you pay them. You will never get the performance
you need.” Brian Heckert agrees, “You have to think not only about
how much you are going to pay, but more importantly what the return
will be on that salary.”.
Pay a position, not a person – Advisors often face situations when an
employee expresses his or her goals or his or her past compensation
and asks the firm to meet those goals or match the compensation.
Statements like “I would like to make $100,000 in five years” or “I need
$100,000 to live here …” are not uncommon. Similarly, “I used to make
$120,000 when I was at …” is a common statement in firms throughout
the country. The owner of the firm should respond by designing the
compensation for a specific position - not for a specific person. A
position in your firm, as described in a job description, carries with
it a certain compensation package. Each employee can decide to
what degree this position and this career path meets their goals and
requirements. Fusion’s top firms realize that catering to individual
goals creates an environment of arbitrary decision-making and makes
it difficult to establish a standard of fairness. If one employee receives
a compensation package of $100,000 because that’s what they “need”,
how will the firm respond if another employee declares that they need
$120,000?
Define your compensation philosophy – The starting point for any
compensation decision should be the “compensation philosophy” of
the firm. A compensation philosophy is a statement about how the firm
compensates employees and what the logic behind the compensation
decision is. It includes the factors considered and how they impact
the outcome. Ric Haas, from Financial Catalyst Group, provides
us with a good example of a compensation philosophy. “Our firm
sets compensation to be at the median of the market (derived from
benchmark surveys). Then we take care of our employees through
an annual bonus that rewards their individual performance along with
annual increases to their salary for being loyal to the firm.” Note how
the statement defines the standard – “the market (as represented by
surveys)” and the factors influencing the decision – performance and
loyalty (tenure). Not every firm will choose the same factors. We found
the most common factors that were measured to be: designations,
degrees, licenses, years of experience, level of responsibility and
The Management Practices of Fusion’s Top Firms
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FUSION’S BEST 2011 21
COMPENSATION AND PERFORMANCE MANAGEMENT
Firm
Strategy
What sets the firm apart
from the competition.
Compensation
Philosophy
How the firm
sets compensation
and the logic behind
compensation
decisions.
Market
Information
Surveys and information
from other firms.
The specific
performance
and history of
the employee.
22
tenure. A compensation philosophy will also typically
define the role of bonuses in total compensation.
For example, Howard Gartenhaus of Gartenhaus
Financial says, “We pay very competitive salaries
and we reward generously for team and individual
performance through our bonuses.”
Be consistent and make ensure the compensation
philosophy is understood – A compensation
philosophy is only effective if it is consistently applied
and is understood by employees. Preserving the
integrity of the compensation decisions is an important
part of managing compensation and performance. It is
often tempting for owners to establish individual deals
with employees offering perks of pay that are unique
to just them. The result, however, is an erosion of the
overall pay and performance system. For example, if
a newly hired employee has a higher salary because
they do not use the benefits package of the firm, there
will be a discrepancy that will be difficult to explain if
it were to ever become known by other associates. It
will also undermine the credibility of the owners. While
the salaries of employees should remain private, in a
small firm, you have to act as if they were an “open
book.” In reality, they often are.
Benchmark and analyze – An industry benchmark
survey can allow you to see how you compare
to the rest of the industry and will give you a
good sense of how the industry is structuring
compensation packages. Fusion Advisor Network
highly recommends that firms undergo this process at
least once every two years. There are many credible
surveys available. The results of benchmarking your
firm should always be interpreted within the context of
your compensation philosophy rather than in isolation.
Checking the surveys before adding a new position is
also highly advisable.
Compensation
Package
Develop incentive plans as a valuable tool –
Incentive compensation (bonuses) are an integral
part of the total compensation package. The incentive
plans give the firm the ability to reward individuals
beyond their salary. Incentive plans are a delicate
though. They can quickly become a perceived
entitlement for employees if they are not managed
carefully. Employees begin to expect it. They can also
reward the wrong objectives if they are not properly
designed. Brotman Financial Group has a plan that
rewards employees for the success of the firm not just
individual results. Eric Brotman thinks highly of the
performance plan they implemented. “It really makes
sure that the employees are on the same page with
me and that they have some sense of investment in
the overall results of the firm.” Eric’s firm’s incentive
plan focuses on revenues and new assets under
FUSION’S BEST 2011
The Management Practices of Fusion’s Top Firms
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COMPENSATION AND PERFORMANCE MANAGEMENT
management that come to the firm. Remember that
compensating the same bonus, or an ever-increasing
bonus, with little explanation leads to the expectation
of employees that they will always receive the bonus.
Mike Wertheim, of Main Street Financial Group,
notes that sometimes, it is “almost better to surprise
employees with recognition or gifts in addition to end
of the year bonuses.” This allows the employees
to recognize that they were rewarded for their
performance.
whether the unsatisfactory results are due to choosing
the wrong individual for the job, insufficient skills of
the employee or the employee’s lack of motivation,
it is important to act swiftly and decisively. Fusion’s
top firms do just that when faced with this type of
performance issue. “It is painful to have to tell an
employee that they are not a good fit for the firm and
the position” says one advisor, “but in the long run it
is much more painful to have to deal with the lack of
performance or poor attitude every day.”
Use performance evaluations and coaching –
Incentive plans are especially effective when
combined with a system of performance evaluations
and coaching. When tied to performance evaluations,
bonuses can directly tie together performance and
pay and clearly show employees what they can
do to improve their incentive pay. Performance
evaluations also set the stage for effective coaching
as they provide an excellent forum for discussing
and setting goals for each employee. It gives the
owners a chance to ascertain that the goals set forth
for the employee are clear and that they contribute
to the overall strategy of the firm. The performance
evaluation answers the question every employee is
asking – “What can I do to be more successful in this
firm?”
Recognize staff – While Fusion’s top firms use
compensation thoughtfully and carefully, they also
recognize at the end of the day employees are not
“coin-operated.” There are many factors influencing
performance including recognition, prestige, genuine
caring for clients and colleagues, a sense of belonging
and accomplishment and satisfying one’s intellectual
ambitions. As a result, managing the environment and
culture of the firm is just as important to the owners
of Fusion’s top firms as the use of payroll. Creating a
culture that increases employee engagement with the
firm is critical to the success of their business.
Deal with performance issues decisively – There are
times in every firm when the owners simply cannot get
satisfactory results from an employee. Regardless,
The Management Practices of Fusion’s Top Firms
For Financial Advisor Use Only
So far, everything we explored from Fusion’s top firms
led them to a continuous system of strategy, planning,
people and processes, that when combined, produced
superior results. As we see, people play a critical role.
Technology and operations, though, enable those
people to be efficient and effective.
FUSION’S BEST 2011 23
Technology and Operations
Client experience is
extremely dependent
on technology and
processes.
Operations and technology go hand in hand. The presence of a well
thought out operations process leads to the appropriate choice and
implementation of technology. At the same time, technology enables
and empowers the process and makes it efficient. Fusion’s top firms
recognize the importance of operational excellence and dedicate a
great deal of their time and resources to becoming more efficient.
Some of their techniques implemented are as follows:
Technology does not work without a process – The foundation of
operational efficiency is not the technology itself, but having a good
process. If the advisory firm understands what happens every step in
the processes of servicing a client, it becomes much easier to choose
the technology to support that process. “It is impossible to decide what
technology to implement unless you know exactly what you will be
using it for,” says Kurt Jackson of Central Coast Wealth Management.
“When you don’t have that basic understanding, you end up chasing
new technology all the time and thinking it may solve your problems.
The reality is that most of the improvement will come only after you
understand the process for servicing clients in your office.” Technology
is a powerful tool, but it only works if there is a plan for what the new
technology will do and who will be responsible for each step.
TECHNOLOGY AND OPERATIONS
with a client and who is supposed to do it.” In the
implementation of CRM systems, Fusion’s top firms
have found that “consistency is just as important as
activity,” says Andy Brief of Andrew Brief Retirement
Strategies. “Regardless of what system is used, you
have to make a commitment to being consistent, but
continually find ways of leveraging your technology to
increase efficiency.”
Train, train, train – Process and technology will
never work without training and reinforcement. Eric
Brotman, of Brotman Financial Group says, “Every
time we go through operations training we find things
we can do better and we find information that we
should communicate to each other. We send all of our
employees to training each year and the investment
is all worth it. In fact,” says Eric, “we won’t be able to
function unless we complete this training.”
Understand that the client experience is extremely
dependent on technology and processes – Customer
service is often the key differentiator from one firm to
another and clients often measure this during routine
meetings or market volatility. Optimizing the client
experience is an integral part of the business mission
for top firms. By establishing a process early on,
you gain efficiencies while simplifying the process. “I
know how my clients like their coffee and the names
of all their children,” says Phil Henry of Henry Wealth
Management. By empowering each associate to
deliver the best possible customer service, advisors
and staff members personalize each interaction
and build on client loyalty. Mike Hyser, of Strategic
Financial Partners, spent a lot of time developing
the processes and systems to easily explain their
investment process. Mike says,”…our investment
process is unique and we have worked to make it
easy to explain.”
The result of combining a thorough operations
process and good technology should be lower
cost and better quality of service. In a nutshell, this
combination should make the firm more profitable and
more valuable.
Appoint a Chief Technology Officer (CTO) – Currently, most firms’
operations functions are managed by advisors who are often short
on time and may not have the skills to be true operations leaders.
Few advisors have any operations background and many maintain a
high client load while leading operations. The result is an operations
approach more focused on troubleshooting than on planning,
monitoring, and updating processes and procedures. Many of Fusion’s
top firms understand this issue and delegate the operations leadership
to a true Operations Manager or CTO. “We do too many things for
me to know enough to manage all of them,” says Tim Corle, of Tycor
Benefit Administrators. “Our CTO is focused on nothing else but
making us more efficient and better at what we do.” Potter Financial,
Christopher Street Financial and Gartenhaus Financial, three of
Fusion’s top firms, wholeheartedly agree with that statement. They
also employ professional management in operations.
Involve your staff – Involving staff in technology selection and
implementation ensures that they buy into the decision and feel
invested in the result. “I recognize that my staff knows more about
technology and operations than I do,” says Howard Gartenhaus.
“Empowering them to make a decision does not only help them accept
the decision. It actually improves the decision tremendously.”
Utilize your Customer Relationship Management (CRM) – The CRM
software can become the hub of all client activity. The CRM solution
serves not only to archive and document all client interactions and
relevant data, but it can drive activity within the firm by defining the
next step and communicating it to the right person. Kathy Fish, of
Fish and Associates says, “We do everything through our CRM. We
use the workflow functionality to define what should happen next
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The Management Practices of Fusion’s Top Firms
For Financial Advisor Use Only
The Management Practices of Fusion’s Top Firms
For Financial Advisor Use Only
FUSION’S BEST 2011 25
Financial Management
Profitability is what
drives the value of
an advisory firm.
Fusion’s top firms
have a profit margin
of 25.8% compared
to 20.2% for the
industry. Fusion’s
top firms also have
lower overhead
compared to their
industry peers.
FINANCIAL MANAGEMENT
It is said that the cobbler’s children run around bare-footed and,
unfortunately, it is true. Often, financial advisors do not pay enough
attention to the finances of their own practice. Fusion’s top firms
achieve higher profitability as a result of robust firm growth, careful
operational and service decisions, and a high return on human capital.
Fusion’s top firms have a profit margin of 25.8% compared to 20.2%
for the industry. Fusion’s top firms also have lower overhead compared
to their industry peers, as seen below.
Best practices in financial management focus on careful budgeting and
planning, ensuring financial performance ties in with expectations, and
vigilant financial analysis as part of all decisions made for the firm. Some
ways Fusion’s top firms have excelled in financial management include:
Creating a budget and cash flow forecast – A budget is a fundamental
tool for planning and measuring performance. A comprehensive budget
can assist a firm in making good decisions on how much to spend on
various resources. The budget then becomes a vital instrument for
measuring performance. The owners of the firm can monitor whether
or not they are hitting revenue targets or if there has been too much
spending. Steve Gallo and his partners, U.S. Financial Services, create
a budget and a cash flow forecast each year. They review the budget
each month at the partners meeting. Substantial deviations from the
budget are analyzed carefully and prompt the partners to take action.
Controlling expenses carefully, especially when
revenues decline – The expenses of an advisory
firm are not subject to wild fluctuations and should
never surprise the owners. That said, items on an
income statement have a way of “bleeding” small
amounts over the budget. These small amounts add
up and may eventually result in overhead higher than
expected without a single source of that overspending
being visibly to blame. This can be particularly
troubling at times when revenues decline. Many
of Fusion’s top firms create “worst case” scenario
budgets and also closely scrutinize line items on the
budget such as travel, entertainment and others to
make sure they do not find themselves in a situation
with shrinking margins.
Timing investments in senior staff with caution
but with ambition – As we discussed earlier,
compensation is the largest expense for an advisory
firm (as a reminder, over 75% of all expenses in a
firm are compensation related). To Eric Brotman of
Brotman Financial Group, this means that “you have
to time your hires very carefully to make sure that you
are creating capacity for growth but not getting caught
ahead of yourself.” Eric advises advisors to plan for
“what will happen if the markets turn against you while
you are building your firm up.” Being prepared for that
possibility will protect you against a knee jerk reaction.
Analyzing profitability of different business lines –
Finally, many Fusion’s top firms have multiple lines
of business, or other profit centers (e.g. personal
financial planning, retirement services, insurance
services, investment management, etc.), and as a
result they carefully analyze the effects of each profit
center on the combined profitability of the firm. For
some this means looking at their insurance services
and investment services. Others analyze the effects
of retirement services or benefits. Some firms can
separate their investment management services as
a profit center. Analyzing the profits by service line
or revenue model can be an educational exercise
that allows the owners to understand the dynamics
of each business line and helps optimize their overall
performance.
Profitability is what drives the value of an advisory
firm. By implementing these strategies, Fusion’s top
firms are achieving high valuations. They have built
significant wealth in the equity of their businesses.
80%
60%
40%
38.9%
43.9%
20%
25.8%
20.2%
FUSION'S BEST
INDUSTRY
OVERHEAD AND PROFIT MARGIN
0%
TOTAL OVERHEAD
OPERATING PROFIT AFTER
OWNERS COMPENSATION
*Industry - 2010 InvestmentNews/Moss Adams Financial Performance Study of Advisory Firms
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FUSION’S BEST 2011
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For Financial Advisor Use Only
The Management Practices of Fusion’s Top Firms
For Financial Advisor Use Only
FUSION’S BEST 2011 27
Building Equity
Fusion’s top firms
have derived high
valuations and
multiple options for
future liquidity.
BUILDING EQUITY
A profitable, well managed advisory business will have many options
to capitalize on the equity value. Fusion’s top firms have excelled at
taking steps to solidify high valuations for their firms and thus created
multiple options for succession. Options include:
Selectively merging with a new partner – The addition of a new
partner in the firm can add the energy of another professional, the
marketing prowess of another business developer and the resources
of another business to increase the ability of the entire firm. “Merging
with the right firm was the best step I made in my professional career,”
says Mike Barnett of Financial Strategies. The addition must be very
selective and the professional joining the practice will have to meet
a very high standard of client service, professionalism and character.
Such mergers cannot be rushed as Chip Roe can attest. His firm,
Potter Financial, just added another partner and is very excited at what
the two firms can do together. “You gain a colleague, a friend and a
driving force to help grow your firm. Finding a good partner though is
difficult and you don’t want to rush the process.”
Promoting a partner internally – The ultimate goal of a professional
career track is becoming an owner in the firm. One of Fusion’s top
firm owners, Eric Brotman, Brotman Financial Group, has designed a
systematic process for grooming his associates to become partners.
Eric has created a comprehensive five-year, focused curriculum
geared towards young professionals in becoming a partner within
the firm. The program strengthens their technical investment skills
and also embraces the competencies of a business leader. Major
milestones include mastering the firms’ investment process, running
the investment department for a minimum of two years, earning
their securities licenses and Certified Financial PlannerTM (CFP®)
certification, and training their successor in the investment department
after they assume the paraplanner role. After working with a few clients
on their own, and if it is the right fit, Eric offers them an opportunity to
become a Principal of the firm.
Finding a buy-sell partner – A buy-sell agreement
is not a succession plan but it provides protection
should something unexpectedly happen, as well as
helps answer the question many clients would ask
– “What happens if you step in front of the bus…?”
Finding a buy-sell partner should not be treated
lightly. “It requires someone I respect, who shares
my values and how I service clients and who I can
perhaps envision taking over my practice someday,
“says Ric Haas, of Financial Catalyst Group. Ric
has approached finding a partner almost like a
business development effort. Through networking
he has identified several professionals who he has
interviewed and vetted out in order to select the best
partner.
Adding income partnerships – Giving someone
equity in your firm can be a very big decision and
a significant financial commitment for both parties.
In situations where the employee does not have
the funds to buy into the firm, or where the time
has not yet come for the full benefit of ownership to
be shared, an income partnership or profit interest
can be a good intermediate solution. “Giving Aaron
an income partnership allows him to participate in
the success of the firm without having to write a
check and be concerned with all the details of equity
ownership,” says Scott Tobe of Signature Financial
Planning. Scott notes that “as long as you treat
someone as your partner, the legal details of how they
participate in the ownership of the firm are not very
relevant. It is all about how you approach that person
and how you treat them on a day to day basis.”
Finding the right acquisition – Many firms in the
industry express interest in becoming acquirers but
very few actually ever go through a deal. Dan Zlotnick,
of Katz Zlotnick & Associates and Brian Heckert, of
Financial Solutions Midwest are both exceptions. Both
have acquired other firms successfully and have used
the acquisitions to increase their size and marketing
reach. “You have to network, research and get to
know the other side before you buy a practice.” says
Brian. “Your study group, your industry meetings and
coaching classes are all good forums to get to know
another practice and advertise the fact that you are
looking to be a buyer.” Dan Zlotnick adds, “You need
to put yourself in their shoes and think with the same
mindset – what is important to them, how do they
want to be treated in this deal?”
Fusion’s top firms have derived high valuations and
multiple options for future liquidity. In September
2011 most of Fusion’s top firms went through a formal
valuation process with FP Transitions (the industry’s
leading valuation service) and earned top multiplies
on their business in recognition of their sound
business practices and their optimal profitability.
Adding a professional with an eye towards succession – Business
succession is a process, it is not an event. Many professionals tend to
delay adding colleagues to their staff for fear that this will “force them
out” and create unreasonable expectation that they will be retiring.
In reality, the presence of a younger professional may allow an older
advisor to practice longer than they can on their own and still retain
the value of the business. Having a young associate who could be a
successor does not limit your options, it may create more. “As long as
you are honest with yourself and with your colleagues, you don’t have
to paint yourself in a corner by adding a younger advisor. They can
help you grow the practice, not just help you exit,” says Ann Fenwick,
of Fenwick Financial Services. Dan Sopher, of Sopher Financial,
added another professional who has become an important part of
his team. “She helps service my clients in addition to spending time
developing her own relationships,” says Dan.
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The Management Practices of Fusion’s Top Firms
For Financial Advisor Use Only
FUSION’S BEST 2011 29
Benchmarks and Key Ratios
Conclusion
The pursuit of excellence requires continuous adaptation to keep pace with
rapid change in the industry.
AVERAGE INCOME STATEMENT
Each business owner will define individually what their personal and professional goals are – this is what
independence means. Still, there is little doubt that Fusion’s top firms have achieved levels of success
beyond the average and have provided an example for other firms to follow. They have done so despite
difficult markets and despite the challenges they face. They have charted their own path through the industry
and have done so through patient and careful planning and implementation.
All Firms
2010
1,022,377
REVENUE-NET OF BROKER-DEALER
DIRECT EXPENSES
Owner Base Compensation
Owner Bonuses
Owner Benefits
Employee Advisor Compensation/Other
Total Direct Expense
OVERHEAD EXPENSES
Salaries – Staff
Bonuses to Staff
Benefits - All Staff
Other Staff Expenses (Payroll, etc)
Staffing Expenses
Total Operating Overhead
Operating Profit
277,514
50,350
30,889
147,173
342,497
27%
5%
3%
14%
34%
122,493
19,852
46,688
25,930
169,601
389,245
318,438
12%
2%
5%
3%
17%
38%
31%
Defining excellence is a difficult thing to do. It comes in many forms and is achieved in different ways.
It cannot be tied to a single tangible standard such as size, profitability or efficiency. As Fusion’s top firms
may attest, the pursuit of excellence requires continuous adaptation to keep pace with rapid change in
the industry while achieving a reputation as one of the nation’s best firms. Perhaps Aristotle described it
best – “We are what we repeatedly do.” Excellence, then, is not an act, but a habit.
Key Ratios
Total Owner Compensation
Overhead
Operating Profit
38.9%
25.8%
Number of Professionals
Number of Staff
Total Head Count
2.4
2.7
5.1
Revenue per Professional
Revenue per Staff
515,086
213,049
Clients per Professional
Clients per Total Staff
Number of Clients
30
2010 AVERAGE
519,313
FUSION’S BEST 2011
101
48
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The Management Practices of Fusion’s Top Firms
For Financial Advisor Use Only
The Management Practices of Fusion’s Top Firms
For Financial Advisor Use Only
FUSION’S BEST 2011 31
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