What if CNBC launched a reality series? The producers put a group of independent, entrepreneurial financial advisors under one roof and tell them not only to get along, but to work together--to collaborate for the greater good. They must share their knowledge and grow and advance as professionals. In that scenario, TV execs could do no better than to focus on the Alliance for Wealth Management LLC, a group of six wealth managers in the New York/New Jersey metropolitan area who have already pulled this off. Moreover, they have even managed to get through the demanding task of writing a book together and remain on speaking terms. And six years after their founding, they continue to spend a full day together 10 times each year, demonstrating just how powerful small firms can be when they join forces.
Seeking Peers
Larry Heller, CFP, CPA and president of Larry Heller & Associates in Melville, N.Y., founded the AWM in the fall of 2000. At that time Heller, who was working as a sole practitioner with a broker/dealer affiliation, decided to look for other planners with whom he could "bounce ideas off and grow with." He contacted several advisors he knew through his broker/dealer and others he had met at industry conferences. Heller found that he wasn't alone in his desire to share ideas with his peers; other members recall having the same wish. "I'm sure many of the individual advisors out there have the same problems as those in the group," says member David Schwartz, CFP and president of First Capital Equities in Great Neck, N.Y. "We receive a lot of information, so it's hard for any one person to pick up all that information and understand it. We're also alone in the sense that most of us are in small firms, and there aren't many people to speak to in-house. Additionally, most of the firms have one owner. So if you want to speak to another owner, the study group gives you a forum to do so. It's also an outlet for talking about the markets and what people are doing with clients. As the world changes," Schwartz continues, "it's nice to have a small group of people with whom you can talk about these changes."
Heller had a design in mind when he started the group. He wanted members who would commit to and actively participate in the group as "givers, not just takers." Because he operated a small practice, he wanted owners of similar-sized firms, but with a variety of target markets and approaches to practice management. He also wanted to avoid focusing solely on technical planning topics. "I didn't want this to be just a technical study group," he says. "Although we do have conversations and meetings on those topics, I wanted to focus on growing our practices: What everyone is doing with practice management, technology and so on. Also, everyone had to do financial planning in their business, agree to the CFP Code of Ethics, have no violations on their CRD, and sign a confidentiality agreement. The group I invited had an initial meeting. We threw everything on the table, and everyone said, 'We're in.'"
Getting Started
Agreeing to form a study group was the first step, but the concept's value would not be realized without the requisite follow-through. Although the group members did not have formal titles or duties, Heller assumed responsibility for organizing the early meetings--a critical role the other members readily acknowledge. "The whole group isn't going to do the work in the beginning," says Patricia Powell, CFP and owner of Powell Financial Group, Inc., in Martinsville, N.J. "Someone has to do the work. If you want to put together a study group, you are going to be the point-man for a while. In our case it was Larry--he made it happen. He moved the ball forward. After a while he said, 'I don't want to do this anymore,' but the rest of us were ready to pick up where he left off."
Heller's efforts launched the group, but its adoption of bylaws and a series of guiding statements (see sidebars) helped to keep it running. The bylaws detail operational issues and members' responsibilities; the mission statement, vision statement and description of core values provide overall guidance. The group's organizational chart is flat by design because the members wished to minimize the risk of creating a bureaucracy. Early meetings were held at the offices of a custodian with whom several members did business. Eventually the meetings moved to a central location--member Gregg Fisher's Manhattan office. Most of the 10 "monthly" meetings take place in-person, but the group substitutes conference calls once or twice each year and inter-meeting conference calls as needed.
Agendas for the meetings cover a range of topics including practice management and technical planning discussions. Each meeting includes unscheduled time for open discussion, and members follow a rolling calendar for topics. At the beginning of each year and again at mid-year, they decide which themes they want to cover in upcoming meetings. One member is assigned to plan the agenda and locate speakers for a particular meeting. "Anyone can throw out an agenda item," Powell says. "We have a rotating agenda. If we don't get to something in one meeting, it stays on the list until someone removes it, or it comes up at another meeting. But there are some themes we always return to: practice management, asset allocation, investment management."
Joint Ventures
The group occasionally invites product vendors, such as software developers, to present live or online product demonstrations. Because these meetings provide the opportunity to pitch to six qualified prospects, vendors have been eager to participate. Fisher, a CFP, CFA and principal with Gerstein Fisher & Associates, Inc., in New York, says the group's approach to evaluating software yields multiple benefits. "Four years ago we discussed our needs for financial planning software," he says. "Those needs were similar, and we brought in salespeople from various vendors--either via WebEx or face-to-face--to talk about their programs. Ultimately, we all selected the same program. Staff in our organizations were then learning the software at the same time and sharing our experiences brought us up the learning curve much quicker. We also received a pricing discount because we bought at the same time," Fisher adds.
In 2005, the group entered new territory by publishing a jointly written book, Creating Prosperity: The Art of Integrating Individual Values & Financial Planning. Their goal, says Heller, was not just to increase the members' visibility: "We were trying to explain how we work and...what is important in life, rather than a technical book." Heller admits that taking the book from concept to print wasn't the easiest process. "We didn't want a completely ghost-written book, so we wrote much of it ourselves, but we needed help with editing and making it flow," he says. "We came up with the ideas and the table of contents and then we hired someone to help us write it and self-publish it. It took a lot longer than we anticipated."
Despite the work involved, the members say publishing the book was worth the time and expense, and they continue to explore other joint ventures. Daniel Teplitz, CFP and owner of Daniel Teplitz & Associates LLC, in Old Bridge, N.J., believes the project demonstrated the group's potential, and he considers another book or future joint media projects to be viable options. To increase its media exposure, AWM hired JC Public Relations, Inc., of Rockaway, N.J.
Business Benefits
The group projects and exposure are valuable, but it is the sharing of ideas for managing their businesses and advising clients that members point to as the primary benefit of the relationship. Robert Tilson, CFP and president of the Tilson Financial Group, Inc., in Watchung, N.J., uses the group as a sounding board whenever he faces a major decision in his practice. "We're sort of isolated at times in our own companies," Tilson says. "When I'm embarking on a change or making a strategic decision, I have five other planners in the group to discuss that change with me and allow me to pick their brains. Many of them have gone down the same path, so it's very valuable."
Teplitz also values the group's collective knowledge. He was affiliated with a broker/dealer when he joined AWM, but wanted to become an independent RIA. The prospect of changing business models was daunting, however, and Teplitz harbored reservations. "Coming from a B/D background, it was quite a step, one that I think I was afraid of for many years," he says. "What would the results be? What responsibilities would I have? I came into this group and at the time, there were already two independent RIAs in the group and several other members who were going through the same struggle as I was. Over the course of two to three years with them, I realized that many of my fears were groundless. In the group discussions, I [recognized] the process I would have to follow to achieve the goal. It took a few years, but I'm celebrating my first anniversary as an RIA."
The group has dedicated two meetings since its inception to a peer review of members' business plans. For example, Powell says a casual observation from Heller had a major impact on her practice. "During that meeting, Larry made a comment to me about how poor my profit margins were," Powell recalls. "I looked at the numbers and reconsidered how I was doing business. While I was profitable, I hadn't priced myself properly, and there was much inefficiency in what I was doing. It was a small comment--but it made a huge impact on my business."
Of course, in a group comprised of members who operate under different business models and range broadly in size, some topics occasionally will interest some of the members more than others. For example, Schwartz, who owns an independent broker-dealer, finds little value in discussions of topics relating to members who decided over time to drop licenses held through other B/Ds and establish RIAs. Similarly, Powell notes that some members use specific platforms, such as SEI, that she does not use. If the group spends an hour discussing SEI, it's of no benefit to her. But both Schwartz and Powell agree that these are not major problems: "When you belong to a study group, you have to go along to get along and take the bad with the good," Powell says. "I'm sure there are moments when a discussion has been wonderful for me, but of no use to someone else."
Looking Ahead
To date, AWM members are pleased with their work together, and while they're not resting on their laurels, they are cautious about making radical changes to the group. The consensus is that they would consider adding one or two new members, provided--and this is a critical condition--any new members could demonstrably add to the group's dynamic. That's a genuine hurdle, Tilson notes: "It's very difficult to add someone after you've been up and running for five years, because we have an understanding of each other's idiosyncrasies. You build up relationships and trust during that time."
Even if the group remains at its current size, the members are nonetheless considering how they can continue to derive value from their association and still discussing how they will achieve that goal. One possibility is to establish succession plans among the members to ensure business continuity in the event of disability or death. Sharing the cost of resources such as compliance attorneys, analysts and technology staff is another consideration. "I think we're at a crossroads and we're trying to find that next leg," Powell says. "We completed the book, we hired a PR firm, and now we're debating where we're going. I don't know where that will be, but we've been very good at finding our way as we move on."
AWM's Guiding Principles
Mission Statement
The purpose of this group is to share knowledge, expertise, ideas, special resources and experiences with the members of the group, and to create a common identity with name recognition as the premier financial planning group in the tri-state area.
Vision statement
We will be a financial planning powerhouse with $3 billion of client assets with a common approach to financial planning, systems and client service.
Core Values
Our group maintains a commitment to the financial planning process as the means of delivering financial services, as well as a commitment toquality, ethics and client service.--EM
Pointers and Pitfalls
What steps should a planner interested in starting up a study group take to increase the likelihood of success? AWM members offer the following advice:
Establish a common purpose: Have extensive discussions of what you want the group to accomplish to learn if the other planners are on the same page, Tilson says. One person might want to focus on case analysis, another on marketing, another on pooling resources--everybody needs to have the same goals. Create an outline of the themes you want to cover and discuss the outline at length. If it doesn't feel right, don't do it, because it takes up a lot of time, and you don't want to be in a group that won't accomplish your objectives.
Avoid competitive clashes: Two of our members in New Jersey are located fairly near each other geographically, but we felt that in this market it wasn't an issue, says Heller. However, you don't want to have too many members from one specific area.
Select members carefully: Make sure you and your peers have the right chemistry, Fisher advises. Spend some time together to make sure there is a good fit. You don't want to look only at the technical contribution someone might make, but also consider how well they might work with others, adds Powell. If one person overwhelms everyone else, the group doesn't go anywhere; it becomes a one-person agenda.
Value diversity: Look for differentiation among members. Avoid selecting members because their businesses and personalities match yours closely, says Teplitz, who has belonged to several groups. The groups that were least helpful to him, he adds, were those where everyone had similar practices.
Impose structure: You need strict bylaws to manage a group and ensure its efficiency, Schwartz says. For example, those bylaws should state how many meetings a year each member must organize. It's also important to ensure that each member carries his or her share of the workload, or there will be hard feelings. The cost of membership is another topic to discuss upfront: How much is each member willing to spend on the group's activities and for special projects?--EM
Ed McCarthy, CFP, is a freelance writer based in Pascoag, Rhode Island.
