Industry Roundtables

On September 12th, CFA Society Chicago hosted its Industry Roundtables event at The Chicago Club. There were ten tables that focused on different sectors of the investment industry and participants chose three topics they wanted to learn more about. Each round lasted 30 minutes and gave attendees the opportunity to engage in face-to-face interaction with colleagues in a small group setting. Here’s a recap  by Richard Schiller, CFA, Rida Iqbal, and Susan Zeeb of some of the featured tables!

Equity Research: RJ Bukovac, CFA, CPA – Partner & Equity Research Analyst, William Blair

Bukovac is a partner and equity research analyst at William Blair focusing on Large and Mid-Cap US consumer companies. His team focuses on tech companies like Amazon, Tesla, Facebook, Netflix etc. They focus on market share value add against alternatives. Bukovac highlighted some of the qualities that are required for this nature of work:

  • Knowledgeable – Understand Accounting & Finance;
  • Inquisitive – to add value on top of management forecast;
  • Risk-taker – Willing to take a risk and bet on the company’s performance;
  • Convincing – Ability to sell it to clients to take investment actions.

He briefly discussed Netflix valuations in response to table participant inquiries which enabled him to demonstrate the everyday work challenges.

 

Fintech: Jim Daley, CEBS, CFA, CFP® – Project Manager, Morningstar

Fintech is one of the most popular discussions in the industry but also a very broad one that further understanding by the market participants. Jim Daley, CFA, shared his experience working for the Retirement Planning team at Morningstar. He was associated with Ibbotson Associates and continued to work with Morningstar as a project manager after Morningstar’s acquisition of Ibbotson Associates.

Daley introduced the table participants on basic branches of Fintech: Block Chain; AI Lending; and Machine Learning. He emphasized on the efforts in this area and that CFA Society Chicago is planning a series of events on the topic and how this is becoming a part of the CFA curriculum.

Daley is engaged in the retirement planning platform which is based on robo-advisor model which serves retirement planning (401K plans) by automating the investment strategies for discretionary plans like savings plan allocation of funds, quarterly rebalancing etc. This platform is capable of deploying both active and passive investment strategies. He explained how the traditional process of investment strategies has eliminated a sizeable amount of human interaction which now is only needed to review fund portfolios. Although Morningstar is currently offering a very limited Fintech related service, this current robo-advisor model could be replicated and expanded to Morningstar IRA planning accounts and retail. Fintech appeals to an age group of 30+ with some accumulated assets but the scope is growing constantly as people develop a greater understanding of how Fintech can serve the markets. Daley noted that Programming/Developing Languages, Statistics and Product Management skills are highly sought for in this area of industry and people with Engineering backgrounds and knowledge of C++, R, Python may do well in this field.

 

Fixed Income – Research: Rick Tauber, CFA, CPA – Senior Vice President, Morningstar

Tauber described his experience for the group which included roles as general credit analyst, high yield analyst, bank loan analyst, private placement analyst, and corporate bond analyst.  He explained how his role at Morningstar evolved from credit research to the corporate bond rating agency at the firm where he also covers industrials and manages the corporate team.

Tauber explained the different dynamics between buy side research, sell side research and agency research. Fixed income research on the buy side is usually team focused and the client is the portfolio manager/trader. Sell side fixed Income research is marketing and publishing oriented, with the client being buy side bond investors. Agency research is highly regulated with no conflict of interest as ratings are unsolicited, uses a committee process and is focused on the filing documents. Tauber explained the different research techniques between hedge funds and long-term investors, where hedge funds would be potentially looking for short-term volatility trades such as capital structure arbitrage trades or bond issue covenant violation trades. Long-term bond investors would focus more on long term fundamentals of the bond issuer and where the bond could potentially move if it was upgraded, for example.

He was asked if quantitative analysis methods were used in his position and he noted that Morningstar’s corporate credit uses four pillars to evaluate credits including business risk (which includes Morningstar’s Economic Moat analysis), a cash flow cushion, a solvency score, and distance to default. Tauber noted that the analysts conduct due diligence interviews with companies that issue bonds.

 

Investment Consulting: Chris Caparelli, CFA – Vice President, Marquette Associates

Caparelli has 9 years of investment consulting experience serving primary consultant on several client relationships. His company is mid-sized with 50bn in AUM with 80% clients in the Midwest and competes with companies like Mercer, Aon etc. He discussed the structure of his organization with distinguished fee structures as being contract based retainer fee as against the popular performance based fee.

He pointed out that apart from research and analytical skills, sales and marketing skills are effective in dealing with clients and more of a consultant’s time is spent on such activities as the individual progresses. He discussed his day to day activities including quarterly client meetings, manager selection process etc. He advised the table participants to read extensively and to focus on behavioral finance for self-correction and client correction/dealing to be successful in this field.

 

Manager Due Diligence: Daniel Harris, CFA – Principal, Borealis Strategic Capital Partners, LLC

Harris reviewed his background in the investment consulting, fund of funds, and manager due diligence segments. His current firm is focused on providing seed capital to top tier, early stage investment talent in return for direct economic participation in their growth and success. Harris led a discussion of the hedge fund industry and manager due diligence. He noted that manager due diligence includes reference checks of managers/teams, a thorough track record analysis, and several interviews with managers/teams. It is very important to have an aligned fee structure at the outset and that managers should know their operational level or break even AUM (assets under management). He also noted that it is somewhat more difficult to evaluate quantitative managers but he would focus on their R&D efforts, or what the next alpha signal will be, for example. There are typically several warning signs that put managers on watch lists, including team turnover, AUM size (too big for the strategy), distrust issues, and knowing the reason that managers have sold their business, either to cash out or to get working capital to growth the business.

Harris said that 3 year performance track records are very important and are typical minimums for foundations and endowments for example. Patience is also required. His firm will help hire a CFO and investor relations person if necessary. A manager should also typically have personal money invested in the strategy and/or a large percentage of his net worth in the business, which speaks volumes in terms of alignment incentives. Harris noted that one skill required in manager due diligence is diligent note taking; logging all notes and discussions with individuals and in background interviews. Manager due diligence also includes networking within the industry.

 

Real Estate:  Jimmy Georgantas, CFA, CPA – Assistant Vice President, Asset Management, Boyd Watterson

Boyd Watterson is an asset management firm with a real estate portfolio invested primarily in office assets with over $2.0B in total assets. Boyd operates through three funds with the largest holding $1.5B, or 75% of total real estate assets under management. After a round of introductions, our roundtable discussion started with disruptions that we’re seeing in the real estate market. What many think of as a stable, low volatility, technology-light asset class, real estate is actually being massively impacted by technology. Companies offering shared office space such as WeWork, TechSpace, and Regus are taking large blocks of space in the office sector and then releasing space to smaller users for space ranging from as large as 1kSF to single offices and even just a membership plan offering access to a shared workspace. This dramatic change in the demand profile begs the question what the future of office leases will look like and further what will the tenants demand of their workspaces? What we have seen is that leases rates are getting shorter on average and as a result we’ve seen far less build-to-suit requirements.

The conversation shifted to a very topical retail sector and more specifically shopping malls which have been severely impacted as a result of ~15% annual growth in e-commerce sales. We delved deeper into the what is negatively impacted the sector and we concluded that market sentiment is overly bearish while the majority or retail real estate is experiencing steady occupancy with increasing rents particularly in well located areas. It is also important to realize that not all retail real estate is created equal. Grocery supported retail is still performing phenomenally well while the suburban big box malls in the tertiary markets are struggling. Smaller strip centers in well located areas remain fundamentally sound with the colloquial saying “you can’t get a haircut online”.

Finally, we wrapped up our conversation briefly talking about the commercial mortgage backed securities market (CMBS). This is particularly topical in today’s environment because these securities are typically written with a 10-year term and if you remember the peak of the market before the Great Recession was back almost 10 years ago (2007). Several of the CMBS’s that were issued in 2007 are looking to refinance with their debt coming due in 2017. So far with credit spreads near lows and increasingly low interest rates versus what the market offered in 2007, debtors are able to refinance these loans without much market interruption. To conclude, we can all agree that real estate is relatively illiquid asset class which makes the business a very personal business. Relationships with key leasing and investment sales brokers along with the tenant representatives can be the difference in finding success in this growingly complex marketplace.

 

Wealth Management: Brad Summers, CFA, CPWA, CRPC, Financial Advisor, Wells Fargo

Summers reviewed his background in the investment banking and capital markets before he eventually moved into wealth management. Summers noted several takeaways with regards to why one may consider a career in wealth management including 1) your client base is your own and will generally follow you to another firm if you make a switch, 2) there is flexibility on how to build your client base, 3) there is flexibility on what you do for clients in terms of investing strategies, 4) your career path is as long as you want to keep working with your clients. Summers stated that there are a variety of firms in the wealth management business and fee structures vary as well. A large reputable shop would provide compliance monitoring while a smaller registered investment advisor you may have to perform that role as well. There are also different tasks involved in wealth management including marketing and seeking out new clients to build your base, relationship building with existing clients so they are satisfied and would potentially give you referrals, and staying up to date on industry trends and continuing education. Estate planning is not typically covered in CFA exams but is covered in the CFP, so that would be one area where you would need to learn. There are also additional designations such as CRPC (Chartered Retirement Planning Counselor) and CPWA (Certified Private Wealth Advisor) that can help you differentiate yourself as well. There is no typical day in the job as the diversity of tasks is large but once you are established you will likely spend the majority of your time focused on what you like to do the most.  Summers noted that the career path requires very hard work for up to five years until you have built up a big enough book of business to be stable. If possible, starting your career with a private bank or wealth management firm or working with another advisor would give you good exposure to the holistic client management model.

FEATURED TABLE TOPICS & HOSTS

  1. Equity – International: Bill Fitzpatrick, CFA, Investment Analyst, Manulife
  2. Equity – Research: RJ Bukovac, CFA, CPA, Partner & Equity Research Analyst, William Blair
  3. Fintech: Jim Daley, CEBS, CFA, CFP®, Project Manager, Morningstar
  4. Fixed Income – PM: Brenda Langenfeld, CFA, Portfolio Manager, Nuveen Asset Management, LLC
  5. Fixed Income – Research: Rick Tauber, CFA, CPA, Senior Vice President, Morningstar
  6. Investment Consulting: Chris Caparelli, CFA – Vice President, Marquette Associates
  7. Manager Due Diligence: Daniel Harris, CFA, Principal, Borealis Strategic Capital Partners, LLC
  8. Quantitative Analysis: Shaheen Iqubal, CFA, Senior Quantitative Analyst, UBS Asset Management
  9. Real Estate: Jimmy Georgantas, CFA, CPA, Assistant Vice President, Boyd Watterson Asset Management, LLC
  10. Wealth Management: Brad Summers, CFA, CPWA, CRPC, Financial Advisor, Wells Fargo

Starting Your Own RIA Firm (Part 2): Tips for Marketing and Business Development

Many talented professionals some day dream of having their own business. In the financial industry this usually means being the trusted advisor and investor on behalf of individuals and institutions. On October 4, CFA Society Chicago and its Professional Development Advisory Group assembled a panel to discuss the challenges of building an RIA business for the second part of the Starting Your Own RIA Firm series. The process of business development, brand development and marketing were addressed by the panel.

  • Jennifer Aronson, CFA: Aronson, moderator of the panel, is managing partner with Mosaic Fi, LLC. In that role, she works with family offices and high net-worth individuals. Prior to founding Mosaic, Aronson had over 20 years of experience with Northern Trust and Brinson Partners. She is currently serving on the Board of Directors for CFA Society Chicago for a three year term (2017-2020) and is a member of the CFA Women’s Network Advisory Group.
  • Scott Bosworth, CFA: Bosworth is vice president and regional manager in the Strategic Relationships group of Financial Advisor Services. He is responsible for sales, leadership and management of some of Dimensional’s larger advisory relationships.
  • Andy Kindler: Kindler is managing partner at Xcellero Leadership. Xcellero is focused on facilitating solutions for developing individuals, teams and organizations to spur growth. Kindler has a wealth of experience from different industries both on the corporate side and consulting.
  • Laura Sage: Sage is director of marketing and investor communications at Castle Creek Arbitrage, a relative value hedge fund. Prior to joining Castle Creek, Sage was an independent equity options trader.
  • Mark Toledo, CFA: Toledo has over 40 years of experience providing investment advice to individual and institutional investors. He began his career at Aetna Capital Management and after leaving Mesirow Financial in 2003, he founded Total Portfolio Management, LLC, his own RIA firm. In 2013 he merged his business with Chicago Partners Wealth Advisors.

 

Aronson began the discussion by asking the panel to address the critical tasks of marketing and business development for newly formed RIA firms.

Marketing and Business Development

The panelists agreed that as in any business, a business plan must be created, and that plan must include a path to an effective marketing strategy. The leader of the new advisory firm should spell out his role and have goals. A statement of investment philosophy is critical to the process. Advisors should focus on why they want to do this, what is their passion? You need to stick to your expertise and not try to be everything to anybody. It is important to be true to yourself and be able to tell your story. New RIA’s should attempt to have client meetings scheduled weekly and if you believe a prospective client’s needs are outside of your expertise, refer them to someone else. Client referrals will be critical to your success; often you will get a referral back. It would be useful for a new RIA to have a five-year plan where years one and two would be devoted to getting your story out; you will probably need to pay bills from some other source. Years three through five is when you can expect your business to ramp up.

Targeting Institutional Clients

The universe of potential institutional clients is much smaller. Sage was the panelist with the most experience in this arena. Most pension funds and sovereign wealth funds employ consultants. You will market to the consultant, not the fund directly. There are proprietary databases that contain information on these funds which can be accessed for a fee. There are other platforms similar to “speed dating”, which can gain you some introductions.

Methods to grow the business

  • Social Media: The use of social media is a critical skill to garner and keep clients. Retirees are ubiquitous on social media sites. LinkedIn is a site that can be helpful. Congratulate clients and potential clients on life-events they post online. Follow their work and offer assistance if there are sudden interruptions in their careers. They will remember you for it. A clear and concise website for your business is a must.
  • Referrals: Referrals are the way in which you will grow your business. A vast majority of clients would be happy to give you a referral, however not enough RIA’s ask for this. It is wise to spend time teaching your clients how to sell you. Don’t be shy about asking your client for a referral, however, you never want to put your client on the “spot”, be clear as to why you are asking for this.
  • Public Speaking: The panelists encouraged prospective RIA’s to burnish their public speaking skills. When you present yourself to other people, either publically of privately, be passionate about your expertise. It is important that you are able to communicate your conviction. You may suffer some setbacks, but show no fear in your demeanor. If you are able to keep your level of enthusiasm high, people will want to be part of your success. Clients are more motivated to put their trust in someone who can communicate vision and strategy with confidence.

There was a brief question and answer session with the audience at the end of program. There were inquiries on how to “close”, whether to remain independent or affiliate with an institution, and what functions to outsource. The panelists termed “closing” as the natural outcome of a positive meeting, once again there should be no fear in the “ask.” Typically affiliating with an institution is something that is done after establishing your business. Outsourcing functions can be expensive, but pay dividends down the road. You must look at your skill set to determine if some functions are better left to others.

 

How CFA Charterholders Can Become Investment-Grade Writers

CFA charterholders are by de facto investment writers; Writing is the primary way of communicating investment ideas and we are judged by the quality of our ideas in written format. Bad writing can be a major career risk and it is a skill that we should focus on. There are a few reasons why we financial types typically resist improving our writing skills. One, we say “I’m a numbers person, not a words person.” While you may be a numbers person, you live in a world where you need to be able to be both types of people. Two, you feel that writing is an innate skill and you don’t have it. This is not true, if you focus on writing and practice it, you can become a better writer.

On August 15th, CFA Society Chicago welcomed Scott Wentworth, founder of Wentworth Financial Communications, to help attendees learn how portfolio managers, analysts, and other investment professionals can enhance the returns of their writing efforts by following a disciplined, repeatable process.  Wentworth explained six keys to improving your writing.

  • Trust the Process
  • Tell your Alpha story
  • Don’t bury the Lead
  • Overcome the Curse of Knowledge
  • Attack the Misconceptions
  • Narrow the Scope

Mr. Wentworth noted that in the same way you have an investment process; you also need a process for writing. There are several steps to the writing process including brainstorming, researching, making an outline, writing, and editing. When brainstorming, putting ideas down on paper will help you start identifying themes. When researching, gather your inputs and narrow the focus of the article. Be sure to make an outline, which will help organize the ideas, identify headlines and sub-themes, and will create the roadmap for the article. For the actual writing portion, he suggested getting “chunky” and setting aside blocks of time to write. Writing takes a lot of concentration and you should eliminate as many distractions as possible. Find a different location or empty office, and then just pull the trigger and do it!  The last process of writing is editing. You should first take a mental break and then come back and read your piece out loud. Also have a friend or co-worker edit the article, as it is hard to edit your own work.

When you tell your Alpha story, you need to focus on a compelling way to articulate your thesis, explaining why it exists and telling where it came from in a qualitative manner. You can be more creative in this step. Story telling should incorporate anecdotes, examples, and analogies that help the reader visualize what you are writing about.

The headline is valuable real estate in your article, so don’t bury the lead. You need to be able to capture the reader’s attention span so that they read the article and don’t just skim it. You should write like a journalist: give the conclusion at the beginning and then back it up with your facts and insights.

To overcome the curse of knowledge, put yourself in the reader’s shoes.  Avoid writing over their heads and say things clearly and plainly; be sure to avoid jargon. When you make a complicated topic accessible, you appear smarter to your audience. Be sure to spell out your line of reasoning and take them through your thesis step by step.

When attacking the misconceptions you should be aware of what the audience knows. Then focus on completing their level of knowledge by addressing the myths and facts. It will also allow you to make the topic relevant to your audience. This also saves time and will keep your article focused and shorter in length.

To narrow the scope of an article, it is better to go deep into the subject to showcase your expertise. If the scope is too broad, your article will be too big and too long. Smaller pieces allow more specific insights and avoid high level general insights.

In review, the six keys to improving your writing are trust the process, tell your Alpha story, don’t bury the lead, overcome the curse of knowledge, attack the misconceptions, and narrow the scope.  If you are able to follow these key items, you will be able to produce good writing and improve your writing skills and communication with your clients.

Four Tips to Launch a Successful Finance Career

If you’re just beginning your career in finance, you might feel your career path is defined; head down, work hard, and eventually the real career choices will present themselves down the road. This is of course true to an extent – the finance industry certainly demands earning your stripes – but that doesn’t mean you can’t begin opening up doors during those early years.

You may already be studying for the CFA exams, which is an important milestone in the career of most investment professional’s careers. As you navigate the roughly four years that it takes to complete the three levels of the CFA Program, it’s important to do whatever you can to make these as meaningful as possible.

These tips should help you do just that:

Read, and read ravenously.

Read everything in our field that you can get your hands on (including and beyond the CFA curriculum). Try to read broadly across topics and disciplines; for example, if you’re in equities, take time to learn about credit or commodities to make yourself more well-rounded. Ask people you meet what they read and what they enjoyed learning.

An incredible array of opportunities exist in finance, and the more areas and disciplines you know the more opportunities you’ll have. The most successful people spend a good portion of their day devouring information, asking questions and listening.

Avoid networking at your own peril. (And put the phone away).

Not everyone is an extrovert, and that’s okay. Everyone, though, can benefit from the opportunities made through networking, whether for friendship, commerce or career.

You’ve been reading (you have been reading, right?), so you have strong points of view and pointed questions to ask. Put the phone away, be confident and ask smart questions. Most folks love the opportunity to explain what they do, and they will see you as someone willing to take initiative if you initiate a good conversation.

Don’t procrastinate getting an advanced credential.

I think you need at least one advanced credential (if not two) to compete in today’s job market. Both a CFA charter and MBA are highly useful for financial professionals, so avoid a long, protracted process on deciding which one to get. The earlier you begin the process, the higher the lifetime dividend.

In my case, I immediately plunged into the CFA curriculum just a year into my career, and that gave me a big boost. It helped me interview for jobs that I would never have the opportunity to land otherwise. I strongly believe having a CFA charter in your 20s or early 30s will offer more career optionality down the line.

Listen to yourself.

In those first few years, keep a keen eye out for moments where you feel in the flow, or when you are the happiest during your job. Ask yourself what were you doing during those moments and what about that project or job aspect you really liked. How can you structure your future career to include more of those types of situations?

I’d also suggest taking time to reflect on what you want out of a career. While having money and a challenging, important job is great, many folks find that they are happier with more of a work-life balance, and understanding how much of each aspect you need to make yourself happy is key.

So, hit those books! And remember to keep these tips in mind – when that door does open for you, you’ll be poised to take full advantage of the opportunity.

Big Ideas: Evolving Trends and Skills on the Minds of Investment Professionals

What is happening to the investment industry? Where are we heading? How can I keep up? And, more often, how can I stay ahead of the curve? I attended more than 100 events for CFA Society Chicago in the last year, and nearly every time I find that small talk between CFA charterholders quickly turns to big ideas such as these.

We’re an analytical group, so it comes as no surprise to me that most of our members already understand that the investment industry is rife with change. Many already feel it in their daily work. And as I move between conversations and events, I know that no professional is more prepared for the future than a charterholder.

Take technology, for example. Blockchain, robo-advisors, high-speed trading, you name it; it’s impossible to deny their growing presence in our industry. These forces, along with the emergence of passive investments and ETFs, have put downward pressure on fees. This is great for investors as they will be able to gain more from their investments. However, these forces also put downward pressure on investment companies’ revenues. This leads to an arms race to collect assets, increase use of collective investments (as individual stock analysis is expensive), and ramp up technological investments.

Technical competence is essential to help investors navigate this rapidly changing environment. Starting in 2019, the CFA program curriculum will contain questions on data mining in order to keep this technical edge sharp. For future years, CFA Institute is even considering artificial intelligence questions. At CFA Society Chicago, we have and continue to explore these topics for professional development sessions that keep our members up to speed.

However, technical competence is not enough. As the needs of investors and the nature of investment practice change, ‘soft skills’ are becoming just as essential. Skillful client communication and presentation, brand building, networking, leadership, and improvisation are often needed to provide maximum value to clients. CFA Society Chicago members have already begun taking advantage of the new soft skill workshop developed by our Professional Development Advisory Group.

Ethics, though, will be the skill that will keep us on the right track. Confidence in our profession can only be built through a commitment to a high standard of ethics and embracing rules that protect the rights of investors. Charterholders already lead this charge. Charterholders are already rigorously trained in ethics and embrace the Statement of Investor Rights as drafted by CFA Institute. Furthermore, CFA Institute is a staunch advocate of a universal fiduciary standard.

Whether technical, “soft,” or ethical, every challenge our members see presents an opportunity to demonstrate their skills to meet them – some new, and some old. It’s just another chance for charterholders to prove their value.

Executive Presence and Leadership Principles

Did you know it takes only four seconds to form an initial impression and 30 seconds to completely form a first impression? More shocking, 70% of workers are actively disengaged or not engaged per a 2012 Gallup survey. These statistics are not encouraging. On March 28th, after networking and snacks, Patricia Cook offered ideas on how to create better impressions and how to be in that 30% of truly engaged workers during CFA Society Chicago’s  Executive Presence and Leadership Principles event held inside the Vault at 33 N. LaSalle.

We know good leaders when we see them but what qualities should a good leader have? Attendees collectively offered Cook over 30 words and phrases. Building on that, we focused on six qualities and how we can individually build those out.

Great leaders:

  1. DSC_3647Have executive presence. People need to like you, trust you and want to be led by you. A leader with executive presence has charisma. The largest part of charisma is being present, self-aware and staying in the moment. Power poses increase confidence and charisma can be learned with practice.
  1. Leverage strengths and talents. Discover your strengths and the strengths of those around you. Develop and play these strengths. Your actual strengths may be different from your perceptions. A strength finder tool can help you separate perception from reality.
  1. Motivate others. Employees are most motivated by public appreciation and recognition of their accomplishments. Give employees a voice, make introductions for them, and let them know how their work impacts the bottom line.
  1. Communicate effectively. Ask “why” when working and problem solving. Also ask how you and your team can add more meaning to the work.
  1. Seek strategic opportunities. Make low points high points. Motivate and mentor. Reflecting is a key part of seeking strategic opportunities. Good leaders cannot be strategic without it.
  1. Drive for results. Set priorities and leverage relationships and teamwork. Ask for help with projects and tasks that are not your strengths. Focus on follow-through and ask for feedback.

This list may seem like common sense but may prove harder to implement in the hustle and bustle of our daily work lives. Remember, whether you are a junior staffer or the CEO, these leadership techniques can make you shine. In closing, Patricia noted that 85% of job success comes from people skills and the other 15% from technical skills.

Starting Your Own RIA Firm

DSC_3379

Many talented professionals some day dream of having their own business. In the financial industry this usually means being the trusted advisor and investor on behalf of individuals and small businesses. The CFA Society Chicago and its Professional Development Advisory Group assembled a panel to offer insights for people who are considering exploring this possibility.  This panel of experts was composed of the following RIA professionals:

Jenifer Aronson, CFA – Ms. Aronson, moderator of the panel, is managing partner with Mosaic Fi, LLC. Ms. Aronson is a member of the Steering Committee for the CFA Women’s Advisory Group. She works with family offices and high net-worth individuals. Prior to Mosaic, Ms. Aronson has over 20 years of experience with Northern Trust and Brinson Partners.

Chris Abraham, CFA – Mr. Abraham is founder of CVA Investment Management. Prior to founding CVA, he held positions at Nuveen Investments, Anderson Tax, Mercer Investment Consulting, Intel Corporation, and Ariel Investments. Mr. Abraham left Ariel to found his own investment firm.

Gautam Dhingra, CFA – Mr. Dhingra founded High Pointe Capital Management. Prior to founding High Pointe he spent most of his career at Hewitt Associates. Mr. Dhingra has served as a Lecturer of Finance at Northwestern, Chairman of CFA Society Chicago, and on the Board of Regents for CFA Institute. Mr. Dhingra left Hewitt to found High Pointe.

Robert Finley, CFA, CFP – Mr. Finley is Principal of Virtue Asset Management. Prior to founding Virtue, he held positions in wealth management at LaSalle Bank and at TIAA-CREF’s Trust Department. Mr. Finley founded Virtue after leaving TIAA-CREF.

GJ King – Mr. King is President of RIA in a Box. Prior to RIA in a Box, Mr. King held positions at Goldman Sachs serving as an advisor to high net worth entrepreneurs, families, and foundations. RIA in a Box currently assists nearly 1,500 RIA’s in helping to overcome the compliance challenges of having your own RIA firm.

Ms. Aronson began the discussion by asking a series of questions of the panel members. Below is a list of those questions and the responses of the panel.

DSC_3357

Why did you start and what was your biggest concern about starting?

The panelists were certain that they could provide a better investing experience for their clients. The people they were recommending on behalf of their employers appeared to add little value. Their corporate jobs were becoming more demanding, but their salaries were not reflecting the added responsibilities. They expressed a fascination with the markets and a drive to obtain upper quartile performance for clients who would put their trust in them.

Their biggest concerns revolved around their families and the fact that they would not have a reliable paycheck for some time.

How did you develop your firm?

Panelists talked about a wide range of service providers that can be utilized. Interviewing managers and hiring the right legal help is critical. It is important to determine what fee structure will be needed given your costs. If you need a Bloomberg machine, that is a significant cost.  You can find firms that can provide all the services you need, or you can parcel it out.

What is a day in the life like?

The panelists stressed that there are two separate but critical roles, marketing and investing.  People with investing talent tend to spend too much time in that role. More time is needed in marketing which means finding potential clients amenable to your sales pitch. You must be able to separate cold leads from warm leads. Traveling is also essential to meet clients and evaluate companies you are thinking of investing in.

What questions should people ask themselves before starting an RIA?

Do you want to be an entrepreneur? You must be motivated to sell and be willing to hustle to accumulate assets. Has your family bought in? The few years will be difficult; can you handle the ups and downs? There is a leap of faith to leave an established firm.

What would you do different?

Look for partners, mentors and advisors, don’t be afraid to engage others. A trusted partner to share the burden would be a valuable asset. Don’t be afraid of compliance, but keep it lean. The client is trying to evaluate if he can trust you, you must be able to show responsible reporting and compliance.

What was your biggest surprise?

Institutions can be more short-sighted than individuals. Retail clients will be more loyal. The ups and downs were tougher than the panelists first thought they would be. People will be more helpful than you think. You must be disciplined in spotting bad deals and being able to say no.

How did you build your book?

The panelists stressed that you must be adept at marketing, or find someone who is. Friends, family, ex-colleagues, and people you have had relationships with over the past five years are potential clients. Walk-ins must be able to find you. How do you differentiate yourself from your competitors? If you have an edge in substance and style they will remember you. Can you get to the point where you can withstand a 50% hit in a bear market?

Current Market & Regulatory Environment

GJ King of RIA in a Box pointed to three regulations that directly impact this industry and that may see significant modification in the near future.

  1. DOL Fiduciary Rule. This rule will require that most advisors must be in a fiduciary role for their client. If implemented this should have little effect on RIA’s, but may be more disruptive to broker/dealers. This rule is facing delay and possible modification.
  2. Repeal of Dodd Frank. Modification may include that funds that previously were required to register with the SEC may be relieved of this burden.
  3. A new Form ADV will be required by October 1st. RIA’s will be required to reveal more about their company.

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Mr. King also spoke briefly about the need for a chief compliance officer (CCO) for every RIA firm. Typically the CCO is also the principal of the company. Companies with over $500 million in assets under management are required to have a full time CCO.

There was a brief Q&A session following the panel’s presentations that touched on the following topics:

  • CFAs are exempt from passing the Series 65 exam in Illinois.
  • Liability insurance is relatively cheap and does make sense.
  • Disgruntled clients can be avoided by doing quality control on prospective clients. Agree up front on what is expected of you.
  • Robo Advisors have not been disruptive to this industry. They have affected the brokerage industry.
  • Although the target market may be 60 years of age or above who have the most accumulated assets who are 60 years of age and above, do not leave their children out of the discussion as they are future clients.

The Art of Negotiating Compensation: Getting Paid What You Are Worth

Laurel Bellows is the Managing Partner of her namesake, boutique firm, The Bellows Law Group, P.C. whose practice areas include Executive Compensation, Business Consultation, Business Litigation, Employment Law & Human Resources, and Personal Legal Services.

Bellows focused on tips and topics for negotiating compensation packages, yet frequently widened the scope by noting these strategies are applicable in any type of negotiation.

dsc_3183A key takeaway was preparation is power. Bellows suggested writing out your own, ideal or dream deal to have as goal which you can test to ensure your expectations are realistic. Likewise, one must also take into account whether or not the company’s goal to determine your performance/bonus is also an achievable goal. To assist in this process, Bellows had a novel approach. In addition to using resources such as trade associations, public data (if one is lucky), and informational dsc_3159interviews, she suggested a brainstorming session. Inviting friends over for a candid discussion and feedback over drinks could enhance your preparations.

The key to negotiation is determining what you are worth, regardless of previous earnings. Determine your level of responsibility, skills, and efforts beyond simply whether you are generating a cost or revenue. Ideally monetizing your value will create leverage. More importantly, it will establish a connection to the employer’s perspective with your understanding of the position and potential role in the greater organization. Nevertheless, employers’ key challenges remain; identifying, motivating and retaining talent.

dsc_3162During the initial negotiations, if the employer asks for your compensation target, then assure them that they can come to an agreement. Emphasize you are really interested in joining the team and would prefer an offer before discussing specifics. With an offer in hand, force the employer to specify the numbers of the compensation package first. With a significant pause and a flinch or “hmm…,” counter with a nearly “blush-level” offer. From this dsc_3167point on, your research and preparation becomes your support to confidently negotiate with informed certainty. You have anticipated their counter argument and able to support your case. You may concede a lower initial package if you can have a six-month performance review to have the opportunity to earn a package closer to your initial offer.

Finally, always have a best alternative at any moment. If you are fortunate, it may be taking an offer from different employer or realizing the negotiation will not end in an agreement and walking away.

Check out Laurel’s 10 pointers below:

Bullets by Bellow: 10 Pointers for Successful Negotiations

  • Prepare, prepare, prepare
  • Determine the extent of your counterpart’s authority
  • Set a precise goal. Be able to justify your goal and quantify your demands
  • Put your dream agreement in writing
  • Keep your best alternative in mind
  • Identify other party’s principal goal and best alternative
  • Role Play: Practice your questions. Anticipate answers to questions you will be asked
  • Strategize Timing
  • Your name and your reputation are inseparable
  • Remember: Not every negotiation ends in agreement

Building My Brand: Soft Skills for Success

DSC_2838What is the difference between our social selves and professional selves and why would it ever be bad to be social? What do we need to be successful financially and professionally? Melissa Ford, a business and life coach helped us develop an outer focus leading to success and better outcomes.

DSC_2841The social self is the self that is created as we grow up. It is likely created by authority and is reactive, self-focused and needy; sometimes even to the point of being creepy. It represents the inner fear and doubt we might feel when our manager indicates they want to talk to us or when we are in a new group and want everyone to like us. Our professional aura concentrates on serving, contributing, being confident and creative. At the center of the professional self we find power, focus and energy. We are the creators of our professional selves.

So if the professional self is better for success, how do we shift to it and what should we be aware of? It is a doing versus being problem. Tips that can help us get into this mindset and stay there are as follows:

  1. DSC_2842Work on active listening skills. Move out of broadcast only mode.
  2. Put yourself in situations with people who are in professional mode.
  3. Work on empathy and give yourself a break. This may take time and practice.
  4. Notice how you feel and when you catch yourself in social mode, move to professional mode.
  5. Roleplay your professional self and then make adjustments based on feedback.

Melissa told us that the best thing is to just “flip the switch” and turn on the professional. We will know that we are in our professional mindset when we start overriding pre-programmed responses and we can do this easily on difficult days like Monday mornings. It’s all about getting out of the comfort zone.

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Creating a Stronger Career by Building Your Personal Brand

DSC_2568Managing a brand comes down to two main points:

  • How do others talk about you?
  • And even more importantly: How do you talk about yourself?

Executive coach and Make the Leap! Coaching founder, Curt Wang, brought powerful insight into how financial professionals can learn to brand themselves by finding their strengths and unlocking what they really want out of a career. As he made his way to the stage, Samantha Grant, CFA joked that “Curt is an overachiever and should fit in well with this crowd.”

Curt says “A lot of people hear the word ‘branding’ and say ‘Isn’t that something that corporations do?’” Corporations are certainly at the forefront of branding and messaging, but it’s essential for individuals to find their own brand identity too. Branding helps employers, clients and colleagues visualize who you are and what you do well.

“When you hear the word Volvo, what comes to mind?” Curt asked. “Safety,” everyone shouted out. What about your name? What do people think when they hear your name? There was a pause as the audience contemplated the question. Curt continued. “There are five tests of a great brand,” he said.

  • Value
  • Fit
  • Credible
  • Unique
  • Sustainable

DSC_2575If others don’t know what makes you unique as a person and as an employee, they may pass you by. Sears was one of the top retail outlets in the country for years. Now they aren’t. What changed? They tried to be all things to all people. Whereas most shoppers know that Home Depot is the best place for building supplies and Best Buy has all the latest and greatest electronics, Sears tried to do it all. This left a fuzzy impression in shoppers’ minds about Sears and what it represents. Sears represents an example of a bad brand strategy, the opposite of the clarity found in Volvo’s clear “safety first” messaging.

For those in transition, Curt advised them to not “use all of your best contacts right away, when you’re the least clear about yourself and what you want to do.” Instead, first you ought to figure out what your brand is and exactly what kinds of jobs you are targeting, thus avoiding the fuzziness that comes without having a clear brand identity. Every time you are networking, they really are interviewing you even if they say that they aren’t. If you do a good job and wow them in the conversation, then they may pass your name on to a hiring manager.

Curt showed a series of stock images of doctors and asked us which one we would choose. The audience was about an even split between the choices, with some selecting one because “he looked smart” and others choosing an older doctor because he “looked experienced”. The lesson was that if you don’t manage your brand, people will make assumptions about you. Your position or title alone is not your brand. It’s certainly part of it, but not all of it. Focus on your unique strengths and sell that to employers.

DSC_2572There is a sea of change currently taking place within the corporate world and how young people approach work. Specifically, within Big 4 accounting firms Curt noted that in the past you would see four out of five young hires looking to work their way up the ladder to make partner, working long days and nights in order to make that goal a reality. Nowadays, Curt says, four out of five young Big 4 hires do not want to make partner, with many desiring a different career path entirely. Some employees focused on work / life balance may only wish to work 40 to 50 hour weeks compared to the 80+ hour workweeks other associates might labor through in order to make partner. The shift in thinking has happened because there used to be one well-defined path to the top, and now there are many paths to success. Not all of these paths involve working long hours for many years at a single employer.

In building your brand, your number one goal should be articulating what you are great at. Companies actually want employees to take control of their career because it creates higher engagement and reasons to stay at the firm, not employee turnover as you might initially suspect. In order to articulate what you want from your career, it might be helpful to recall some of your favorite things that you have worked on and why. What do those favorite projects say about you and your ideal career? What strengths did you exhibit during these projects? When did you feel like you were ‘in the zone’ while working? What would it take to become a world-class version of yourself? What would others say you are the go-to person on and why?

After discussing these questions in small groups amongst ourselves, Curt left us with some homework. We were to determine what our top five strengths are, figure out what are our transferable skills for future opportunities would be, and answer the following:

What are the three main components of my personal brand positioning?

  • I am an expert in _____
  • The value of my expertise to people / organizations is _____
  • I am uniquely qualified because _____

For professionals of all career levels, developing branding skills is a great way to sharpen our focus for job opportunities, determine our passions, and further engage with our work. Curt gave us the tools to do just that.

For more information, please visit http://www.maketheleapcoaching.com/.