Tips and Tricks for Negotiating for Yourself

“So much of life is a negotiation – so even if you’re not in business, you have opportunities to practice all around you.” – Kevin O’Leary

When we think of negotiations, we tend to restrict our thinking to business situations like deals, compensation, office location etc. However, we negotiate in our daily lives starting as early as toddlers when children hold their parent’s hostage to have their way. To talk about some tips and tactics to help us amp up our negotiation game in every walk of life, the Society’s CFA Women’s Network hosted Laurel Bellows on November 27, 2018, at The Standard Club.

Laurel Bellows, founding principal of The Bellows Law Group, P.C. is past president of the nearly 400,000-member American Bar Association, past president of The Chicago Bar Association and past president of the International Women’s Forum Chicago and The Chicago Network. Bellows is currently serving on the Executive Committee of the InterAmerican Bar Association.

Bellows began the event with a short video clip of a comic which was aimed to explain how brains of men and women work. It was good humor that shed light on how men and women think differently and hence negotiate differently. Overall, it was a great event with simple yet important takeaways we all should focus on while negotiating. Some key themes to discussed during the event are briefly described below.

Know your opposition

Knowing how the opposition thinks and anticipating their goals and their best alternatives for the negotiation can help you strategize your efforts.

Determining the goal of negotiation

By determining what constitutes a successful negotiation to you can help you decide what works for you and how flexible you could be during the process. It is important to think about what kind of relationship you would like to have in the future with the counter party and how their non-performance could affect you. At the end of the day a successful negotiation is when you have a viable deal for both parties.

Preparation is Power

Key is to Prepare, Prepare and Prepare. Do not negotiate with your gut! Determine authority of the person you are dealing with and make sure they can sign off on the negotiated terms at the end of the conversation. You do not want to waste time negotiating with a person who would need approval from a higher authority which almost every time leads to a counter offer to your best negotiated terms. Gather knowledge, know your opposition and visualize your deal. This process will help you figure out motivation of the deal for yourself/client, define finite priorities and be able to articulate your position succinctly in 5-7 words. If you are dealing with a difficult person, be firm and don’t be afraid to walk out! If on the phone, respectfully let the other person know you are not comfortable with their behavior towards you (especially if they are shouting) and hang up. Deciding on where to hold the negotiations, your place or theirs? Your office will enable you to take control, their office would give you the ability to walk away. Whichever the case may be, own the room you walk-in!

Build a working relationship

Clarify your position, propose creative options and be consistent to establish trust/reputation with the opposition. Never lose sight of your reputation and listen closely to your opposition. Do not plan your response while listening to them, the brain can only focus on one!

Do not have more than one best alternative to what is on the table at any given time during a negotiation. The best alternative may change constantly as you may choose one over the other but avoid having more than one at any given time. If the BATNA is no deal you walk out! Make sure you are aware that walking out could be for good.

Control the Agenda

By controlling the agenda, you will be able to focus on objectives, control information exchange timing and who makes the first offer.

Persuade the Opposition

Be patient and listen to your opposition. Your tone of voice matters depending on who you are against. Mirror your opposition to engage with them and build trust and be prepared to have uncomfortable conversations. It is ok to be fearful, but you may be able reframe the situation with optimism and further the conversation with curiosity.

Conversational Techniques

Use accurate facts asserting informed certainty. Do not be afraid to interrupt to take control of the conversation but do so respectfully. It’s a good idea to have a default expression like a light smile to be unpredictable and be sure to practice a few default moods ahead of time. Power language is important. For example, using more ‘ands’ (positive) in place of ‘buts’ (negative) can make a difference. Try recording your ending sentence to see whether your statements have a hint of a question or uncertainty and address that. Use open questions to gather more information and use ‘blocking’ technique (answer with another question or refuse to exchange information at the time). Try to avoid impasses by talking past a ‘o’ by either stating facts or moving on to another subject.

Communication

Avoid negotiating on email unless you really must. It is easy for the opposition to say ‘no’ not leaving much room to negotiate. During team negotiations make sure you know ‘who is who’! A telephone negotiation can happen from time to time. Be prepared and have an agenda as small and simple as conveying a deadline or timeline or a mood. If you get a call suddenly, ask them call back in 5-10 minutes to make sure you are prepared and have an agenda. There is no excuse for not being prepared!

Reaching an agreement

Leaving a little bit something on the table sometimes during negotiations may help build long-term relationships. Attend carefully to the dates and time concessions. After the deal, the opposition party may come up with minor changes like a week or two early delivery dates or a minor design change in packaging. It is best to either refuse outright or ask something in return. It could be a small ask even if you don’t care much about the change but if not done at that time, expect many of such nuances down the road. Just be resilient!

Launch Your Search

The CFA Society Chicago Professional Development Advisory Group hosted the Launch Your Search program over the course of 4 weekly sessions in September and October. Over thirty participants gathered to develop or enhance the skills necessary to successfully navigate a job search, lessen the associated stress, boost confidence and stand above the competition to get hired faster. The program was conducted by Megan Walls who is a certified executive and career coach who provides professional guidance for all phases of your career: entry, advancement, and change.

Week 1 kicked off with participants learning How to Talk Confidently in an Interview. Individuals reviewed their personal strengths that were determined by taking the GALLUP Clifton StrengthsFinder 2.0 Assessment. Years of research suggest that the most effective people are those who understand their strengths and behaviors. A review of the knowledge and skills you have acquired can provide a basic sense of your abilities, but an awareness and understanding of your natural talents will provide true insights into the core reasons behind your consistent successes.

Each participant’s report listed his or her most dominant strengths from 34 themes that were measured. The strength themes include a broad range from Achiever, Communicator, Developer and Includer, to Learner Maximizer, Relator, and Strategist. Many participants agreed that they have difficulty talking confidently in an interview for various reasons – they’re modest, they feel like they’re bragging, or they don’t think their accomplishments are unique. But, we learned that leveraging these strengths into stories makes it much easier to talk about yourself and articulate your value proposition.

We spent time individually to develop Strength Success Stories based on our Top 5 Themes.The process includes listing a strength and providing an example of how you’ve used it in a business situation.Then a CAR (challenge, action, result) story is crafted on that strength. Having these stories polished and at the ready relieves anxiety, increases confidence and makes you stand out as self-aware in an interview.

An example CAR story:

CHALLENGE: There was no recording keeping system for the sales/orders that came in from the sales representatives.

ACTION: I developed an electronic submission form and organized a two-step process for the sales representatives to use on future orders.

RESULT: Company orders were processed 40% faster.

Week 2 focused on Crafting Your Personal Brand Statement. This one to two sentence statement conveys your uniqueness and competitive advantage to your target audience. It should be easily understood, memorable and benefit driven.  Your statement should answer 3 questions: 1) what value do you provide (describe your expertise); 2) what sets you apart from the competition (your unique attributes – use your strengths learned in the first session), and 3) who is your target audience or what is the position you are seeking? This statement will be the foundation for your marketing material and distinguish you from others in the same industry by creating differentiation in the minds of networking contacts and interviewers. Additionally, it establishes a consistent (versus broad) message, highlights your credibility/expertise and tells an organization why they need you.

Example Personal Brand Statements:

I use my passionate, emphatic approach to build key relationships with customers (sets you apart) that evolve into multi-year contracts (value) for high tech companies selling enterprise software (target audience).

I help small to medium size businesses (target audience) grow strong brands and boost organic growth up to 27% (value) by creating marketing programs that speak to customer needs (sets you apart).

Modernizing Your Resume was the focus during week 3. The group discussed many aspects of resumes, including the differences in today’s resumes, as well as the best ways to get your resume noticed. It’s important to make the best of your resume and grab the attention of your potential employer quickly. Typically, a recruiter or employer will only spend six seconds looking over your resume. With this being the case, the top third of your resume is most important. This section should include the highlights of your strengths, achievements, and value you will bring to an organization. Walls provided this example:

Corporate Finance Executive | Senior Finance Management Professional

Dynamic and resourceful problem solver who mitigate risk and addresses opportunities for profitable growth

Strategic about cost-savings: Eliminated, averted or saved $3M during tenure at XYZ Corp.

Adaptable to fast-paced changing environments: Partnered with cross-functional team to create financial model to calculate weekly one-year cash liquidity positions during financial crisis.

Extensive finance and management skills: Eliminated key man risk in department by creating cross coverage task list and initiating cross training of staff, allowing continuous workflow during absences.

Analytical approach to achieve results: Led development of database to consolidate disparate data sources so bankers could have accurate real-time picture of expenses, saving time and money.

Further, with job applications being submitted online, it’s imperative to have your resume make it past the ATS (applicant tracking system) so your resume makes it to a human being in HR, or better yet, the hiring manager. (In addition to applying online, you should always network into the organization to have someone at the company present you personally.) To pass the screening of an ATS your resume must contain keywords specific to the job! Scour job descriptions in your industry to gather those that best suit the position you’re looking for and incorporate them into your resume.

In addition to keywords, it’s important to use statements that are accomplishment driven. Beyond explaining what you were required to do in your role, you should expand on your successes. Your past experiences should enlighten prospective employers on what value you bring to the organization. Your CAR stories will be helpful in penning your achievements. To make your achievements pop, use powerful verbs in describing how you were effective.

The Powerful Verbs below will be helpful if for example, you:

Saved the Company Time or Money – conserved, consolidated, decreased deducted, diagnosed, lessened, reconciled, reduced

Led a Project – chaired, controlled, coordinated, executed, headed, operated, orchestrated, oversaw, planned, produced, programmed

Supported Customers – advised advocated, arbitrated, coached consulted, educated, fielded, informed, resolved

The final week’s topic was Structure your Job Search Plan, Set Goals & Take Action. In order to jump-start and conduct a successful search you need to be mindful of many factors and be honest about where stand personally in each area. To help you focus your time and effort in the right areas, rank each of the following components on a scale of 1-10:

  • Structured Plan & Goals
  • Time Commitment
  • Networking
  • Resume & Marketing
  • Mindset & Attitude
  • Personal Brand
  • Interview Prep & Skills
  • Self-Awareness

With an understanding of where you need to dedicate time, you can start setting goals for a systematic job search. Think about the strategies you will pursue to move toward this goal and establish specific action items.  Be aware that obstacles will arise along the way so think about how you can best overcome them.  Often times you will require support in various forms so don’t hesitate to ask for help – many people have been through this process and are willing to be of assistance.

Participants gained invaluable job search insights and left armed with many tools to help them throughout the process. Additionally, new networking contacts were made and all benefited from the ideas/support from others in the group.

Should you desire career coaching or help with your job search, you can find information about Megan Wall’s services from her website www.WallsCareerCoach.com, and she can be reached at megan@wallscareercoach.com or 847.490.5776.

Moving Beyond LinkedIn 101

Many within the business field have heard of LinkedIn as the professional business social media platform that business users use to connect with one another. After all, Microsoft’s $26.2 billion acquisition in June of 2016 made for quite the headline and further solidified LinkedIn as the premier business social media platform. But how many users are active on the site? How many professionals use the site to its fullest potential? Even if we are not job searching, a thorough update of one’s profile can be beneficial for everyone’s professional careers.On November 20th, CFA Society Chicago’s Professional Development Advisory Group brought in Kim Stapleton, founder of “The Network Effect”, to provide a crash course in how to get your LinkedIn up to par. Stapleton provided the following tips and tricks for maximizing your LinkedIn efficiency.

Keep your information up to date and remain active.

  • Keep your profile information up-to-date to foster dialog with future potential employers, industry contacts, and prospective clients.
  • Check LinkedIn at least weekly to see who you may have connected with that week and what people in your industry are saying through the LinkedIn NewsFeed.
  • Be active:  Add links to relevant videos and presentations users in your industry would find interesting and relevant.
  • Build your network: Connect with current colleagues, prospects, clients, referral sources, friends and alumni.  Personalizing your connection request helps the user remember how you’ve met.
  • Utilize “shared connections” to find ways to get introductions.  Users will be connected to each other in more ways than you think whether it be alumni connections or employment histories.

Optimize your profile.

  • Add your Full Contact Information.  It’s useful for users trying to make contact with you.  Phone number and email (work or personal) are helpful for connections trying to reach out.  Customize your URL: “linkedin.com/in/[firstnamelastname]”.  Your contact information is only shared with users you have accepted a connection with—cold calls from non-connections should be limited.
  • Adding your Professional Photo makes you 14x more likely to be found and 36x more likely to receive a message.
  • Add your Volunteer Experience—its helps to show employers and clients you are a well-rounded individual and which topics you are passionate about.
  • Listing “Skills” in your profile makes you 13x more likely to be viewed and 17x more likely if you have 5 or more skills.  Skills increases your google and LinkedIn search engine optimization.
  • Adding Videos and Presentations help turn your profile in a sales opportunity by enhancing your profile visually and adding relevant content for your clients.
  • Join “Groups” that are relevant to either the industry that you are in or the industry you want to be in.  Groups helps you connect with people directly in the industry.
  • Follow “Clients and Prospects”.  Follow industry leaders–both individuals and reputable companies.  Often industry leaders with millions of followers post relevant industry topics.
  • If you’re job hunting, enable “Job Alerts”. You can set job alerts specific to your target career path such as “equity research” or “accountant”.

Q&A session.

  • Users are not notified when you “un-connect” with someone.  Try to keep your connections to people you know to keep your rolodex of connections clean.
  • Export connection information into Excel. It is helpful to have a rolodex of you contacts all in E  It can be easier to search through your contacts in Excel versus on the web interface or phone.
  • Try Premium for 30 days for free. However, it is likely only recruiters or very active business development users will find the Premium version worth the monthly fee.

The largest takeaway from the event was that even if you are not job searching, it is important to remain active and keep your profile up to date on LinkedIn for networking purposes.  You never know when a connection may be relevant for a potential introduction, business lead, or new job opportunity and LinkedIn is a great way to stay relevant in the professional business world.

Transition Techniques

Eric Schweitzer, vice president, global outplacement and executive coaching consultancy at Challenger, Gray & Christmas, Inc. lead a panel discussion about employment transition on Tuesday, August 7 for members of the CFA Society Chicago. In addition to leading the conversation, Eric shared his experience transitioning from a bank trust department to an outplacement and coaching position. He emphasized the importance of preparation to identify relevant skills and brand.

Nancy Fehrenbach, CFA, a financial planning analyst with Phase 3 Advisory Services, Ltd. shared her process “re-entering” the investment advisory business after an extended time working as a mother, for non-profits, and as a school board president. Fehrenbach found that networking with friends and acquaintances helped her gain insights into how her experiences and skills could translate into a new role in the financial services industry. She found that investment advisory firms often look for new hires with “a book of business.” Her time away from the industry and skill set focused on analysis and customer service versus new business development. She eventually found the appropriate role for her providing financial planning services to individuals.

Daryl Brown, CFA, a director of market strategy at TransUnion, found self-evaluation tools and books, like What Color is Your Parachute, helpful in “boiling down” his skill set to effectively sell himself. Brown emphasized the importance of networking through LinkedIn. He used LinkedIn to find people that had a connection to employers that he wanted to pursue. He found that people wanted to offer assistance. Daryl encouraged the audience to reach out, even if it feels uncomfortable. Brown subscribed to the LinkedIn premium level and used the skills and endorsement features.

Phil Jandora, CFA, a senior transitions analyst in the Investments group at Willis Towers Watson, supported the critical importance of social media in his job search process. He used LinkedIn to learn about opportunities and to build out second and third level contacts. Jandora’s experience supports the advice presented in various “Jump Start Your Job Search” messages- your resume is a necessity but your network is critical. Jandora also noted that programs like Toast Masters or improvisation training can help build the communication skills necessary for the job search process.

Tim Byhre, CFA, director of business valuation at RSM, emphasized the importance of level two connections in the job search process. Most significant, he noted the importance of maintaining and building relationships before you need them. Byhre also noted his use of Glassdoor to learn about the culture of companies. He read Glassdoor reviews about what it’s like to work at the firm to determine if the firm would be a good fit for him. Tim emphasized the importance of writing down your skill set along with an explanation of how they can be used to further the success of a potential employer.  He found this preparedness very helpful when interviewing.

Eric Schweitzer supported the importance of networking and emphasized that you should know the answers to the following questions before making calls – why am I calling, what am I looking for, and why am I looking? He also noted that you should ask the individual to “do something”- offer a reference, referral, opening to a company, etc.

The panel emphasized the importance of finding a cultural fit. Fehrenbach noted her desire to work with people that she liked and enjoyed being around. Schweitzer noted that the right role at the wrong company can lead to failure. Brown said that potential employers will probably recognize a cultural mismatch, so don’t waste time compromising for a paycheck.

All agreed that a disciplined process with a focus on the future that reaches out to second level contacts can produce a successful employment transition. Throughout the process, focus on the audience’s perspective with an emphasis on “how” or “why” versus “what”. A final thought from Schweitzer – employers want to know how you are going to help them fix their problems without bringing any of your own along.

Starting Your Own RIA Firm (Part 3): Infrastructure and Regulatory Requirements

The final event of this three-part series was to explore the infrastructure and regulatory requirements new RIA’s need to satisfy. The two previous events focused on the initial personal challenges of starting your own firm and the marketing and business development challenges.

The four speakers featured for this event included:

Carson BoorasMr. Booras is vice president of Institutional Sales for TD Ameritrade. Booras has over 20 years of experience working within the Financial Industry and has been working directly with Financial Advisors for over nine years. Prior to joining TD Ameritrade, Booras built a fee based advisory practice working with Charles Schwab.

GJ KingMr. King is President of RIA in a Box. RIA in a Box currently helps nearly 1,500 RIA’s overcome the compliance and technical challenges of starting a firm. Prior to RIA in a Box, Mr. King held positions at Goldman Sachs serving advisors to high net worth entrepreneurs, families and foundations.

Joseph Mannon Mr. Mannon is an attorney with Vedder Price Investment Services Group, a legal firm with 35 attorneys serving independent advisors. He focuses his practice on legal and compliance matters for investment advisors, mutual funds and vehicles such as hedge funds.

Ravi Wadhwani – Mr. Wadhwani is the Illinois regional sales director for Morningstar’s Advisor Solutions Group, responsible for building relationships with startup and established RIA’s. His focus is on helping advisors build their practices by leveraging research, data aggregation and practice management technology.

Shannon Curley, CFA, began the event with a brief introduction of the speakers followed by a short presentation from each addressing how their firm helps newly formed RIA’s. King provided event participants with a presentation entitled “RIA Registration 101”, which outlined the steps needed for registration and licensing of an RIA. Wadhwani provided a questionnaire entitled “Taming Your Technologies” which helps evaluate the effectiveness of technology.  Carson stated that TD Ameritrade is a fast growing custodian with dedicated transition teams for RIA’s. As an attorney in his firm’s Investment Advisory group, Mannon has a wide range of experience aiding both new, and experienced, RIAs.

The four speakers spent the remainder of the event responding to questions from the audience, summarized below:

What is the biggest mistake new RIA’s make?

  • Mismatch between the advisory contract and the services you provide to clients.
  • Failure to make clear how your new firm will provide a better experience for clients and result in a better outcome.
  • Unexpected delays due to the ramifications of non-compete clauses with a previous employer. You may not be able to take data with you.
  • Technology does not provide the support envisioned resulting in “biting off more than you can chew”.
  • Using an attorney not experienced with this type of work, or not experienced in working with custodians.
  • Neglecting to create a detailed balance sheet for your new business.

 

What registration is required for trading in alternative assets such as real estate, bitcoin or private equity?

  • Real Estate is not a security, so registration is not a requirement.
  • Private Equity is usually done deal by deal using Special Purpose Vehicles (SPV’s) for each. Registration is not required until the aggregate value exceeds $150 million.
  • Educating clients about bitcoin, does not require registration, but participation in an ICO would require registration.

 

What would be the typical cost of setting up an RIA?

  • If there are no prior employment issues, a bare bones cost could be as low as $2,000.
  • Cost increases dramatically if there are prior employment issues concerning non-solicit and non-compete. In the extreme, costs could exceed $300,000.

 

What are the basics for effective cyber-security?

  • It is important to recognize that typically you are the owner of the data, not the custodian.
  • Ownership of professional business level security software is critical.
  • Stay on top of your vendor’s security practices.
  • If your data center goes down, where do you go? Log on to back-up sites.
  • Consider cyber security insurance and know what is specifically covered.
  • Quick reaction is critical if you suspect the worst. Train staff to deal with situations promptly.
  • Payment of ransom is not recommended, reputational issues may result.

 

What is the most effective way to calculate performance?

  • Use one system to generate ad-hoc reports and fees.
  • Reliance on custodial statements is more common.
  • Clients should have access to all their reports at any time.
  • The trend is for fewer reports (less is more). RIA’s are now involved in more holistic tasks for clients that typically do not require performance reporting.

The brief questions at the end focused on the different requirements for short-only RIA’s or those RIA’s that specialize in hedging or options. These activities are acceptable as long as they are spelled out in the advisory contract.

Charterholder Jobs of the Future

Where can CFA charterholders look for career opportunities outside of traditional roles like research analyst or portfolio manager? That was the focus of the Jobs of the Future event sponsored by CFA Society Chicago’s Professional Development Advisory Group on April 12th. Held in the spacious conference center at 1 North Wacker Drive, the event was comprised of two panel discussions preceded by a keynote speech on employment trends in the asset management industry. The topic was popular with society members with nearly 100 in attendance.

Tyler Cloherty, CFA, global head of research at the Casey Quirk Knowledge Center kicked off the event with a research report entitled State of the Industry: Strategic Change in Asset Management and its Impact on Practitioners. He outlined changes currently underway in the investment management field and the consequent effects they will have on the types of roles asset managers will be looking to fill and the skills they will need. To begin, Cloherty noted that employment in asset management is at an all-time high having grown 8.6% between 2014 and 2016.  However, there are meaningful changes in the makeup of the total:

  • Investment professionals (portfolio managers and analysts) have shown the largest growth from 24.9% to 26.6% of industry staff, driven by increases in illiquid capabilities and allocation teams. However compensation for this group has declined slightly.
  • Conversely, distribution has seen the largest decline (from 28.7% to 26.1%) which masks a shift from institutional channels to retail, and an increase in product development roles. Despite this decline, compensation in this area has risen about 5%.
  • Operations has increase share from 45.2% to 46.2% reflecting the build-out of risk management and compliance functions. Here also, compensation has risen by 5%.
  • Firm management has held steady at just over 1% of industry staffing, but compensation has declined by a significant 16%.

Cloherty then went on to describe three factors defining the changing landscape for talent in the industry:

  1. Evolving Client Expectations—Reflecting a general push for cost control, which is manifested in the shift from active to passive strategies, and also the demand for more consistent performance in active products. Clients are seeking value for the fees they pay. In addition, they want more digital engagement to increase their own efficiency.
  2. Industry Catalysts—Including a host of trends: fee compression, commoditization of products, slow growth (especially in developed markets) and rising fixed costs (for more compliance, technology, data collection, and regulations).
  3. External Catalysts—Increasing importance of technology, data, automation, and even artificial intelligence, are the primary external catalysts.

 

Tyler Cloherty, CFA

Cloherty’s research has defined four strategic paths managers may choose to address this changing landscape.  Each has unique consequences for career opportunities for industry participants. The first strategy is to differentiate on product which requires that products perform well relative to expectations. This in turn means clients must see consistent value for the fees charged. Success here will depend on the effective application of data analysis, risk management, portfolio customization, and/or trading enhancements. In addition, cost containment through process automation and systems rationalization will be important. This strategy is likely to offer increased job opportunities involving the collection, analysis, and interpretation of increased volumes of data; fewer roles for traditional investment analysts; a shift of research and portfolio management resources to satisfy the rising demand for illiquid capabilities and allocation strategies; and greater separation of compensation between top talent and the median performers.

The second strategy is to differentiate on client experience by offering a premium service level built around client outcomes. This will require firms to build effective distribution teams to establish and maintain client engagement over a long sales cycle. This begins with identifying prospects using insightful market segmentation and data analysis, and continues through multi-channel outreach, digital marketing, automated sales and client relations tools, thought leadership materials, cross selling, high touch client reporting with mobile capabilities/apps, and in-person client interaction to close the sale and retain business. This strategy will demand more talent in data management, digital marketing, channel expertise, client service, and advice delivery.

Firms can also decide to compete on cost which requires automation, outsourcing, and realignment of incentives. Automation and outsourcing can both be applied to data management, accounting and settlement processes, distribution (via sub-advisory), back and middle office functions, and clerical duties. Investment management and distribution staff are typically the most expensive and their incentives will need to change to make them more efficient. Shifting incentive compensation to long-term payouts and focusing on client retention rather than gross sales are key here. This strategy will boost employment opportunities at third party/outsource providers and internally toward project managers to drive the transformation.

Finally, firm management can choose to engage in M&A to achieve scale and efficiencies. This route has been increasingly popular in recent years. M&A within the asset management industry reached an all-time high in 2017 with over 200 deals worth nearly $3 trillion. Because cost synergies play a major role in the success of this strategy, it is unlikely to drive growth in employment. All aspects of the organization will feel the impact, but operations usually bears the brunt because it offers the quickest and largest cost reductions.

Two panel discussions followed the keynote address. The first featured three Society members whose career paths led to roles that would have been uncommon for portfolio managers in the past, although they are integral to asset management today:

  • Joan Rockey, CFA, principal and CFO for CastleArk Management LLC, a single family office managing $4 billion. She has special expertise in corporate events and transaction strategy within the private equity, finance, energy, and technology industries. While the investments she oversees could generally be labeled alternatives, or illiquid, Rockey’s role is much more expansive covering firm management, client service, staffing, pricing, product development, and analysis of the competitive landscape.
  • Jeff Kernagis, CFA, vice president and senior portfolio manager for Invesco PowerShares Capital Management responsible for a variety of income-based strategies housed in a new generation of exchange-traded fund products.
  • Warren Arnold, CFA, is a team leader in Northern Trust’s National Wealth Advisor Group. As such he is responsible for both the development of custom wealth management plans and their implementation, which requires an extensive amount of client engagement.

L to R: Joan Rockey, CFA; Jeff Kernagis, CFA; Warren Arnold, CFA

Moderator Andy Feltovich asked the panelists to offer advice to younger charterholders seeking to improve their chances at finding new positions leading to rewarding careers. Arnold, an electrical engineer by education, strongly endorsed broadening one’s skill set and continuously striving to learn more. Adding value often comes from outside one’s primary area of responsibility (in his case, tax or estate planning). Kernagis had two recommendations—looking for ways to marry technology to your job, and networking continuously. Rockey noted that no two people will follow the same career path, even if they end up in similar roles. However as a holder of numerous professional credentials (CFP, CPA, and CAIA among them) she advised attendees to grow their skills with additional professional training.

The second panel comprised three experts employed in corners of asset management that are new for charterholders:

  • Lisa Ezra Curran, CFA, co-founder of FinTEx Chicago, a non-profit organization bringing together FinTech and financial services firms seeking to expand Chicago’s role as a center of financial technology innovation.
  • Marcia Irwin, CFA, managing director of Portfolio Specialists at Manulife Asset Management. In that role she serves as the interface between portfolio managers and client-facing partners to ensure effective communication and positioning of investment strategies as well as top notch client service.
  • David Kiefer, CFA, managing director at J. P. Morgan in the Global Consultant Strategy Team where he services investment consultants who recommend J. P. Morgan products to institutional investors.

L to R: Andy Feltovich, CFA; Marcia Irwin, CFA; David Kiefer, CFA; Lisa Ezra Curran, CFA

Each panelist provided useful insight into their roles. Curran noted how FinTech can be viewed as the application of common technologies across multiple financial services, or the marriage of financial expertise applied with technology to create new roles or enhance old ones. As examples, she pointed out that FinTech has opened up alternative investments to new investors, as well as led to the digitization of mortgage records. This facilitates the flow of information and improves the process of mortgage securitization. It also better informs investors on the intricate details defining mortgage-backed securities. Irwin noted because she is positioned between the sales team (and their clients) on the one side and portfolio managers on the other, communication skills are very important. However, the CFA charter sets her apart and proclaims her investment expertise. Kiefer echoed that point by noting the charter stands out in the sales process. Because he deals with consultants–investment professionals in their own right–he can’t speak from a script about his products. He needs to project deep product knowledge and the charter helps with that.

In providing advice on career guidance, Curran said that was difficult to do because FinTech is so new; the roles within it are still evolving. Kiefer suggested that the RFP team provided an excellent entry point into the investment business. It requires strong communication skills and teaches broad knowledge about a firm’s product set. Irwin’s advice was to approach one’s job from the client’s point of view to understand their needs better and determine how to satisfy them.

Industry Roundtables

On February 28th, CFA Society Chicago hosted its Industry Roundtables event at the Standard Club. This event was an opportunity for members to join in-depth discussions with leading investment professionals and colleagues in a small group setting. Tables hosts covered 10 different sectors in the investment industry. CFA Society Chicago reporters Brad Adams, CFA, and Chris Fry attended the event and provided a recap a few of the discussions held at this popular event.

Emerging Markets: Kevin Ross CFA, Senior Vice President and Portfolio Manager, Advisory Research Inc.

Ross has been at Advisory Research since 2013, first as a research analyst and, since 2017, portfolio manager for the Emerging Markets Opportunities and International Small Cap Value strategies. He has twelve years of industry experience including positions at Driehaus Capital Management and Raymond James. He began with a list of key take-aways he wanted to emphasize for anyone interested in working in emerging markets;

  1. The importance of sound product development
  2. The importance of flexibility in seeking career opportunities
  3. The importance of matching one’s personal investment style to the firm’s

Ross went on to describe emerging markets (EM) as those characterized by an underdeveloped economy or financial markets. He singled out Portugal and South Korea as two with developed economies but underdeveloped financial markets. This puts them within emerging markets in the categorization of the MSCI indices. The index is approximately two-thirds in Asia, and one-third in Latin America, with small allocations to Eastern Europe and the Middle East. He expects the category’s weight in the MSCI All Country World Index to increase because its market cap weighting should rise to match its global GDP weighting. Additionally, impending regulatory changes in China will relax restrictions on trading by foreigners in that country. When MSCI reflects this, China’s index weight should increase by 3-4 percentage points.

Research Advisory is an active manager and EM strategies provide good opportunities to beat passive strategies because the markets are much less efficient.  There are approximately 7000 publicly traded companies within EM countries, about twice the number in the United States, and it is growing. Each is covered by an average of only four analysts compared to 22 analysts for large cap U.S. companies. The category has a history of long term outperformance relative to benchmarks and to developed markets, although it tends to be cyclical. From 2011-15, EM underperformed developed markets.  Recessions in Brazil and Russia, and declining growth in China were the primary reasons. These trends are reversing and the category has outperformed for two years.

Ross noted that his firm’s process relies more on bottom-up analysis (80-90%) than top-down, the better to identify undervalued companies. He also emphasized the importance of research into corporate governance. Most EM countries lack the laws and regulations that protect shareholders in developed markets. Corruption is more common as are complicated corporate structures with interlocking ownership connections. Getting just this aspect correct can form the basis for a success product.

 

Consultant Relations: Jason Brandt, Head of North America Consultant Relations, Global Client Group, AB

Brandt has been with the firm for 23 years in increasingly progressive and geographically expansive roles. He is focused on the firm’s institutional clients through his leadership of the consulting partners’ team, new business development and relationship management. As a leader with one of the majors within the industry, which includes Mercer and Willis, AB has a deep and diverse product portfolio to offer clients. Although product offerings may greatly differ, from alternatives to ones tailored to achieve certain targets within a particular economic clime, the focus on the client and the sales platform’s framework remain consistent. The framework of the “4 P’s” is utilized to differentiate and compete:

  • People
  • Process
  • Philosophy
  • Performance

Competition can be challenging, especially when the client is seeking a more generic product in which differentiation amongst offerings is miniscule, possibly only in the cost. Yet, Brandt emphasized a “friendly competition” environment in which one’s connections to competitors are important for providing the best service for clients as well as fostering a healthy referral environment.

Starting in the sector as an associate for outbound consultants, Brandt mentioned associates tend to be “data hogs.” In addition to supporting consultants in Performance category, Global Investment Performance Standards (GIPS Standards) compliance is a key part of an associate’s function.

 

Fixed Income Analysis: Jose Pluto, CFA, Aegon USA Investment Management

Pluto is a structured product research analyst with US centric, fixed income focused Aegon AM US which is under Transamerica Corporation’s investment arm, Aegon Asset Management. Aegon, headquartered in The Hague, acquired Transamerica in 1999. Pluto’s currently focused on asset-backed securities (ABS) research, analysis, and underwriting. Pluto has developed an interest in equipment leases as well as esoteric ABS. Within the later category, Pluto stated the emerging solar financing market and its complexities are of particular interest. He was previously a fixed income analyst with Thornburg Investment Management in Santa Fe. Initially, Pluto focused on interest rate derivatives and government bonds with JP Morgan Securities, Bank One, and Goldman Sachs. Before Thornburg, he was a fixed income portfolio manager with Stark Investments actively managing a G-4 interest rate products total return portfolio. Today, Pluto is personally responsible for $14+ million within the ABS subsectors.  He stated by focusing on smaller opportunities that come to the debt market less frequently, Pluto is able to find the best opportunities to generate total returns and capture alpha.

In addition to Pluto’s interest and focus on esoteric ABS, he has a particular enthusiasm for securitized aircraft leases.

For those interested in his thoughts on the future of Airbus’s A380, Pluto conjectures that the airlines’ decreased utilization of the hub-and-spoke model in favor of point-to-point will drive the A380 into niche markets with decreased route applicability.  This trend will keep the future of A380 program uncertain and likely reliant on the 13 current operators.

 

Fixed Income Portfolio Management: Ronit Walny CFA, Managing Director, Global Investment Grade Fixed Income, Neuberger Berman Investment Advisors, LLC

Walny is portfolio manager for multiple fixed income and inflation strategies at Neuberger as well as part of the team that sets portfolio strategy for global investment grade fixed income. Previously, she was a portfolio manager and trader at PIMCO, and had held various trading, analytical, and advisory roles at MSCI Barra, Northern Trust, MacroMarkets, and Kellogg Capital Markets. Her current functional title at Neuberger Berman is client facing portfolio manager, a role that requires a significant amount of face time with clients explaining the details of the firms fixed income strategies and performance, as well as collecting client feedback to report back to portfolio managers. She finds the role to be a good blend of her in interest in trading/portfolio management and client communication. This satisfies one of her primary keys to a successful career: being involved in something that interests one to a great degree making it easy to develop a proficiency.

Walny got her start in fixed income because of its dependence on the application of mathematics. The fact that changes in bond valuations are more easily explained by changes in the metrics that define the market appealed to her greatly. The “stories” that can affect equity valuations play much less of a role in the bond market (and also commodity and currency markets where she participates for inflation-hedging strategies).

Besides working in a field one finds naturally comfortable, her other keys to success include:

  • Working with a team one finds enjoyable to work with,
  • Learning constantly through observation and experience, and
  • Reading to improve oneself (both financial literature and general topics).

Her advice to someone seeking to make an entry into the business includes:

  • Taking baby steps to gain experience,
  • Networking to get referrals from people in the business,
  • Investing free time in learning on your own.
  • Learning not only your key products thoroughly, but also why your clients use them.

 

Private Equity: Michael Sullivan, CFA, Kinzie Capital Partners

Sullivan is an investment associate at Kinzie Capital Partners, responsible for evaluating and executing new investment opportunities, and for managing portfolio investments. He described Kinzie as an independent sponsor of private equity investing.  They use their partner capital to position them in the lead of new investments, but add in funds raised from the outside (primarily from family offices). In addition they use debt financing to lever up the firms they acquire. They seek to invest in firms that are in a transition, which might involve the exit of a founder, switch to a new generation of owner/managers, or a company ready to make a jump to a larger scale from a plateau in earnings. They focus on the consumer goods, manufacturing, and services industries, and limit technology investments to applications rather than development.

Before working in private equity Sullivan was involved in consulting at Accenture and fixed income analysis at CNA Insurance. Following those experiences he sought a role that combined what appealed to him most: the “Fix it” function of consulting, and investment management. Private equity offered both, as well as a constantly changing environment that Sullivan finds appealing. Sullivan is currently working on an MBA degree to complement his CFA charter. He sees the MBA as a marketing tool because clients recognize and value it.  However, it doesn’t offer practical training or experience that the charter offers. Having the charter “catapulted” his progress toward the masters degree by allowing him to skip introductory courses and take a greater number of higher level elective classes. That greater depth of classroom work allowed him to present a better profile when seeking internship positions.

Kinzie’s investment process is highly selective. In a given year the firm might research 300-500 potential investments but close deals on only 1-2%. Their keys to success are determining if the attributes Kinzie excels at can add value, and whether a target firm is the “right fit” for Kinzie’s management. They need to get emotionally invested before they are willing to make a financial investment.  The debt capacity of the target is also paramount, as leverage is important to their strategy. Sullivan noted the importance of working with a bank experienced in the target firm’s industry. This will make the bank more comfortable to extend credit on favorable terms and may also speed up the due diligence process. Relationship management is important in managing an acquired firm since the holding periods average 5-7 years, but can extend longer. It’s also critical for raising funds, arranging debt financing, and sourcing new deals.

 

 

 

How to Improve your Quarterly Investor Newsletters

Do you ever feel stressed out when it’s time to work on your investor newsletter or other client communications? Do you wonder if investors understand the key points and theses you want to drive home?  If you answered “yes” to one or both of these questions, you are not alone.

Read on to learn about techniques and tips that will tighten up your investor communications while giving you confidence and peace of mind.

Why versus How

Many of us are technical writers and are used to expressing large amounts of details that investors can use to help inform a buy or sell decision. In his second writing event offered by CFA Society Chicago, Scott Wentworth, Founder and Head Financial Writer of Wentworth Financial Communications, offered a new framework to use when creating investor communications. He encouraged us to always think of the “why” versus the “how”. Thinking about why you are putting out your letter or communications and using this as an opportunity to demonstrate your understanding of your investors and the markets can create a big win. What are the three key things we should focus on?

Three Focus Areas

One useful tip Scott offered was on engaging the reader by providing your conclusion first. This is different than the typical legal opinion approach of citing the facts first then following up with a conclusion.

There are three key areas to focus on when developing investor communications.

  • Telling a compelling story
  • Providing content that is easy to consume visually
  • Streamlining the process for creating investor communications

Final Tips for Stress-free Execution

During the question and answer session, we learned how to refine our communications. Below are some final tips.

  • Use questions to engage readers but be consistent with section headers. Make all the headers questions or not.
  • If you use infographics, make sure they help tell the story and are understandable.
  • Analogies are good but be consistent and don’t take them too far. They should be used to get attention and create branding.
  • Make your main thoughts actionable.
  • Keep it fresh. Look around the industry and garner ideas from communications you like.
  • Have a section highlighting a different perspective or a section you can change in each quarterly communication.

Finally, reading non-fiction and fiction can help you become a better writer.

Writing Tips for CFA Charterholders Video

How CFA Charterholders Can Become Investment-Grade Writers

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.