Advisers differ on whether in-house investment management is a plus

Brodeski says advisers should advise; Carson insists that it's possible to generate alpha

Feb 5, 2014 @ 1:11 pm

By Liz Skinner

+ Zoom

To pick stocks or hire others to pick — that was the question that recently divided two successful financial advisers who were sharing business secrets with the profession.

The ongoing debate among advisory firms about whether the asset management piece of wealth management is a commodity or an essential value that advisers deliver surfaced again at last week's TD Ameritrade Institutional national conference in Orlando, Fla.

Brent Brodeski, chief executive of $3.8 billion Savant Capital Management, is in the camp which holds that investments themselves are a commodity.

“We can pretend asset management is a differentiator, but what drives growth is when advisers advise,” Mr. Brodeski told about 100 advisers at a panel discussion on adviser growth secrets last Thursday.

He said the key to building an advisory business is to drive toward “an extreme value proposition,” not the investment solution.

Ron Carson, founder and chief executive of $4 billion Carson Wealth Management, disagreed.

“It takes a lot of work, but you can generate positive alpha,” Mr. Carson said, referring to the extra value a portfolio manager can add to investment returns.

He told advisers, however, that that doesn't mean a firm should have one person trying both to create client plans and do the investing piece. Advisers also should not try to distinguish themselves just by promoting their investment performance.

“Don't let your performance define who you are,” Mr. Carson said. “Give yourself as many ways as you can to win.”

Firms that outsource the investment management piece typically use turnkey asset management programs that combine research and other administration services like billing and portfolio management. Today about 20,757 financial advisers use 34 different TAMPs to manage about $147 billion in assets, according to research released in August 2013 from Tiburon Strategic Advisors.

Other firms sell advisers just investment research.

0
Comments

What do you think?

View comments

Recommended for you

Latest news & opinion

Fidelity wins arb case against wine mogul but earns a rebuke from Finra

In the case of investor Peter Deutsch, Fidelity doesn't have to pay any compensation, but regulator said firm put its interests ahead of his.

Plaintiffs win in Tibble vs. Edison 401(k) fee case

After a decade of activity around the lawsuit, including a hearing before the U.S. Supreme Court, judge rules a prudent fiduciary would have invested in institutional shares.

Advisers get more breathing room to make Form ADV changes

RIAs can enter '0' in some new parts of the document before their annual filing next year.

Since banking scandal, Wells Fargo advisers with more than $19.2 billion leave firm

Despite a trying year, the firm has said it will sweeten signing bonuses for veteran advisers.

Is LPL's deal sweet enough for NPH's 3,200 reps and advisers?

They will have to decide if the signing package they are being offered by LPL makes sense. A lot is hanging in the balance.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print