Study groups bloom as adviser resource

When Christopher Cordaro recently grew concerned that he might not have enough errors-and-omissions insurance, the first place he turned for advice was his study group, the Blind Squirrels.

“I sent around an e-mail to the group and immediately got six responses,” said Mr. Cordaro, a partner at RegentAtlantic Capital LLC, which manages $1.8 billion. “We had more coverage [a $10 million policy] than most of the other folks did, so we used that as a good benchmark.”

Mr. Cordaro is part of a growing number of advisers who are turning to study groups to tackle all the thorny issues their practices face — from hiring representatives and firing clients to succession planning and marketing to the wealthy. Since the market crash of 2008, these groups have also served as much-needed support groups as advisers have dealt with anxious — and angry — clients.

“These groups are definitely becoming more popular,” said George Tamer, director of strategic relationships for TD Ameritrade Institutional, who said he has seen a number of new groups spring up over the past year. “This is a great tool in challenging times because you get to bounce ideas off of advisers and firms that are in the same boat as you.”

Nancy Hradsky, special-projects manager for the National Association of Personal Financial Advisors, agrees that since the downturn, advisers are turning to one another for support.

Case in point: 10 of NAPFA's 30 study groups were formed in the past 18 months, she said.

Each of her organization's study groups typically has eight to 10 adviser members, but a few have as many as 20, Ms. Hradsky said. She said that the most successful groups typically have advisers with similar types of practices, so when creating a new group, she asks advisers to fill out a questionnaire (sample question: Do you think of yourself as a financial planning firm that offers investment management or an investment management firm that does financial planning?).

But perhaps the most important key to making a study/support group work is ensuring that none of the advisers in the group are competing in the same community or region.

Richard Brown, chief executive of JNBA Financial Advisors Inc., which manages $450 million in assets, said that he wouldn't be as willing to share his marketing tips or his firm's financial information if there were a rival in his group.

In fact, his group, the National Independent Financial Advisory Panel, has turned down prospective members because they worked too close to other members. The group, which was formed a decade ago, has 18 members.

The best-run groups also have a moderator to keep the discussions moving and on topic.

At Mr. Brown's group, for example, that responsibility belongs to Bryan Sadoff, partner at Sadoff Investment Management LLC, which manages $500 million in assets. Mr. Sadoff sets up the agenda for and moderates the group's biannual meetings.

Advisers pay their own transportation, hotel and meal costs. The location changes each year, and the group often will schedule its meeting a couple days before an industry conference.

Mr. Sadoff said that meeting topics have focused on hiring, employee compensation, client servicing, compliance and such technology issues as customer relationship management systems.

Equally important in creating a strong study group, he said, is bringing in independent advisers.

“We're not looking for insurance salesmen or a Smith Barney broker,” Mr. Sadoff said.

It is also helpful to recruit advisers with different philosophies, said Armond Dinverno, a partner with Balasa Dinverno Foltz LLC, which manages $1.5 billion. He is a member of a number of study groups but declined to identify them.

“You need enough differences to stimulate the conversation and have different views to have a good debate,” Mr. Dinverno said.

Although some groups are created with the help of NAPFA or advisory firms, many groups, such as the Blind Squirrels, got together on their own.

Mr. Cordaro said that 10 years ago, his group of eight advisers met at a Texas Rangers game during an industry meeting, hit it off and decided to make it a regular get-together. The advisers, each of whom has at least $1 billion in assets, meet twice a year and e-mail weekly with questions about their practices and clients.

“We would not be nearly as successful as we are without having been part of the group,” Mr. Cordaro said about the Blind Squirrels, whose name originates from the notion that even a blind squirrel gets lucky on occasion. “People are open and candid, and question what you say and do.”

Dan Mayer, an adviser and branch manager for Walnut Street Securities Inc., which manages $250 million in assets, joined a study group a year ago and said that he has appreciated bonding with advisers. His group doesn't have a name, but he was set up with other advisers by Curian Capital LLC, a registered investment advisory firm with $3.6 billion in assets.

“ONE BAD APPLE’

“When you walk out of the room at the end of the day, you believe you're doing a good job with the clients,” Mr. Mayer said. “Some days, the clients beat you down a little bit, but when you talk with other advisers, you realize you're doing a good job.”

Although these groups can be wildly successful, one negative member can destroy the chemistry, said Jeff Mount, a regional business consultant for Curian Capital who serves as a matchmaker for study groups and moderates meetings.

“You get one bad apple, and everyone starts whining and complaining,” he said.

Meanwhile, finding the right home among a group can also be a challenge for some advisers.

David Lewis, a partner with Resource Advisory Services, which manages nearly $60 million in assets, has searched, so far unsuccessfully, for the right group. He has gotten some helpful information from the different groups along the way but hasn't been able to forge a long-lasting relationship with any one group.

Some groups have been too large; in other groups, Mr. Lewis has found he has had nothing in common with the members.

Still, he isn't giving up. Mr. Lewis was invited to attend a meeting of another group in June.

“It's a matter of finding the one you fit into,” he said.

“Maybe for me, it's like the old saying: You've got to kiss a lot of frogs to find a prince,” Mr. Lewis said. “That's what I'm starting to feel like.”

E-mail Lisa Shidler at [email protected].

Related Topics: ING Group, Practice Management