For our initial blog posts, we interviewed our founders, Chase Weaver, CFA, AIF, and Maximillian Morgan, AIF. This is Part II of a two part introductory series. You can read Part I here. Answers below from Chase Weaver and Maximillian Morgan will be marked CW and MM, respectively.
1. Talk to us about the types of clients who benefit most from IDM services. What characteristics do they share?
CW: Simply put, we work well with advisors or advisor groups that want to operate in a cohesive way and care about differentiating their portfolio solutions from off-the-shelf solutions. This desire to offer quality solutions and not be “middle-men” participants is a common characteristic that our clients share.
MM: The type of client that benefits most are groups who value inclusion and want to increase margins within their own business. A larger group, in terms of assets, can either pay for services via a TAMP model, which becomes very expensive at scale, do it themselves among many advisors on a team, or hire someone in-house. We are priced in a way that increases internal margins and increases value when looking to sell a practice, all while increasing fiduciary stewardship.
2. When you have the initial discussion with a potential client, what questions should they ask to determine if you’re a good fit for their business?
CW: They should ask us to share with them our Investment Policy Statement (IPS) and Fiduciary File. The IPS clearly outlines the parts of the process that should be taking place and the Fiduciary File is an organized history of proof that the process is actually taking place. The process and proof of the process speaks for itself – and if a prospective client is wanting to get up to this level, then we can go from there and even if they are already doing all of this work, then maybe we can help reduce the workload.
3. Looking ahead, where do you see the best opportunities in finance? What are the biggest risks?
CW: Opining on financial markets and their opportunities is not something we really do. It really is a moving target, and we are not traditional asset managers. We focus on process and as such try provide as much information as we can to our investment committee to help them make educated decisions if there is a part of their portfolio in which they want to express their beliefs on the “best opportunities”.
In terms of higher-level opportunities for the financial advice industry, we believe we are experiencing a sort of return to the middle. What I mean by this is that over last couple decades or so we have seen a huge explosion in new innovative products that have really broadened and expanded service offerings financial advisors have been able to offer their clients – with more and more efficiency in cost and other frictions being mitigated. This in turn has caused the industry as a whole to alter their revenue models from transaction to asset-based revenue models.
There of course were companies hoping to capitalize on this by completely commoditizing the “asset management” function of financial advisors, call it “robo advisors” or “TAMPs” or whatever you will – and many advisors were complicit in this by charging fees on pre-packaged solutions they actually had no input into. Advisors do this for a variety of reasons whether operationally or cost, or some function of perceived liability reduction – but the bottom line is that the asset management function of financial advisors has been undermined by both external and internal factors.
What we noticed is that a majority of the advisors we have worked with were not happy with the all or nothing sort of model. They wanted the ability to differentiate themselves and their portfolio solutions – and maintain a real role in the process, while still experiencing the increased efficiencies that came from such outsourced solutions.
The real opportunity in the marketplace today is for us to be part of the solution for financial advisors who are seeking to have customized and unique portfolio solutions while maintaining operational efficiency and a best-in-class process. Many of these financial advisors have tried out the TAMP type models and are not fully satisfied – we hope to capitalize of being able to provide them the best of both worlds.
4. What qualities of a strong investment committee will enable them to seize the opportunities, and minimize the risks, you outlined above?
CW: Desire. Desire is the number one thing that allows financial advisors and Investment Committees as a whole to recognize new opportunities and act on them. If an Investment Committee does not care, then they won’t even recognize that there are other opportunities or solutions to the problems they face when they jump from TAMP to TAMP, always finding that they are dissatisfied with some aspect of the company they decided to work with.
MM: The involvement of our committees and their intention to be independent, separate from a TAMP, or a packaged solution from their BD, is huge. The clients we work with have a solution they had a hand in building. The restraints, beliefs, philosophy and changes made are their own.
5. In ten words or fewer, summarize your value proposition for financial planners and wealth managers.
CW and MM: Fiduciary processes for customized investment portfolio solutions.