Typically, most surveys and studies segment financial advisors into two groups: investment managers (IMs) and their counterparts the client managers (CMs).
Investment managers are those who focus most of their time and effort on the investment process itself, digging in on research and due diligence on the investments that they recommend for their clients. On the other hand, client managers are those advisors who typically delegate out the investment function to third parties so that they can concentrate their energy on recruiting new clients and building those personal relationships.
These advisors spend the time that would otherwise be consumed by investment management on asset gathering and retention activities.
For years, both of these models have proven popular. But the growing need for high-touch advisory services due to the ongoing transfer of wealth or in periods of high demand brought on by market volatility, as we are all experiencing these days, is changing this balance in favor of client managers, in part because that model has proven more effective in recent years.
As with any advisory practice, firm growth comes from three possible sources: New money from new clients, new money from existing clients, and overall portfolio growth. And, in all three areas, client managers outperform.
According to a 2016 report from SEI, CMs add an average of 14 new clients per year, bringing in nearly $4.5 million in new AUM annually, while IMs only add four new clients on average for $1.9 million in new assets. The report found a direct correlation between the time spent on client relationship activities like prospecting, marking and client meetings and overall asset growth. Client managers over the next 10 years are expected to grow 37% in terms of AUM and net client growth.
But this distinction between investment and client focus doesn’t have to be — or, rather, cannot be — an either-or designation anymore. Still, that’s easier said than done with limited time and resources.
Here is where platforms like Magnifi make it easier for advisors to find the time to take on those client-facing activities. Even more, these portfolio management and automation tools do the work even better and faster than human investment managers ever could. To be clear, this is not robo-advice or disintermediation…this is about giving advisors more power and velocity so they can deliver the best outcomes for their clients.
The Result: More face time with clients and prospects, more opportunities to grow AUM and more time to build strong, lasting client relationships.
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