Can a recession benefit an advice firm?

Leon LaBrecque sees opportunity in recessions

Sep 21, 2019 @ 6:00 am

By Jeff Benjamin

To hear Leon LaBrecque talk about how to prepare a financial advisory firm for an economic downturn, one might assume he is actually rooting for such a scenario.

Truth is, the chief growth officer at Sequoia Financial Group has learned through decades of experience that recessions and market pullbacks present opportunities for those prepared to take advantage.

"I look at recessions as opportunities to kill the competition," he said.

Just as he advises his clients to have enough "dry powder" to get through an economic slowdown, Mr. LaBrecque has learned to prepare his business not only to weather, but to make the most of recessions.

"If you own an advisory firm, my advice is to sit down with your chief financial officer or CPA and do a gut check on the business to figure out what you need in terms of equipment and employees," he said. "Get some credit lined up now when you don't need it and have some dry powder to hire great employees or to make an acquisition."

Thinking of growth and expansion at a time when the economy is slowing and the stock market pulling back, is what often separates the winners from losers.

'hunkering down'

Ken Van Leeuwen, founder and managing director of Van Leeuwen & Co., said his decades of experience have taught him to shore up the foundation of his firm leading into downturns.

"We're going through all our expense categories and really hunkering down on our cash needs," he said. "We're looking at all of our resource costs, and if there's something we're not using to its fullest extent, we're putting that on a shelf for a while."

Mr. Van Leeuwen said his firm has a goal of reducing expenses by 10% by year end, which is similar to the strategy that helped him pull through the Great Recession of 2009 following the financial crisis and not have to lay off any employees.

Running a tight ship can mean the difference between success and failure during a recessionary period.

"You should be stress-testing your P&L and balance sheet and you should know it cold," said David Canter, head of the RIA segment at Fidelity Clearing & Custody Solutions.

"When your revenue erodes 20%, 30% or 40%, you need to understand how to react to that type of situation," he said, explaining that being armed and aware heading into a downturn can translate to strength.

"Times of economic downturn and stress are great times to get new clients," Mr. Canter said. "This is when people who have tried to muddle through on their own start looking for help, so don't overlook prospecting for new clients in a recession."

[Recommended video: Michael Kitces: Efficiencies become crucial for advice firms when they grow]

Jeffrey Powell, managing partner and chief investment officer at Polaris Greystone Financial Group, has worked in financial services for nearly 30 years and he said he plans to follow the same business strategy that got him through the financial crisis.

"I take full responsibility to protect the people who work for me, so I have to build in budget safeguards so I'm not laying off our newest employees who came to us and entrusted their livelihood to us," he said. "You've got to be the bank; you have to provide the buffer. As a firm, we grew in 2008 because we marketed our way through it."

beyond survival

The idea is to not just survive, but thrive during down market cycles, according to Mark DiOrio, chief investment officer at Brookstone Capital Management and a 20-year veteran of financial services.

[Investing in profitability, performance and people: Register for our Top Advisory Firm Summit.]

"Don't duck away from the markets or your clients, which happens a lot because nobody has good answers when everything is going down," he said. "Where you win business is being out there."

0
Comments

What do you think?

View comments

Recommended next

Upcoming event

Oct 22

Conference

San Francisco Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print