8 Rules for Marketing Independent Advisory Firms

By Jack Waymire, President & CEO, Paladin Registry on Thursday, February 23rd, 2012

Wall Street firms and their advisors used to have a major marketing advantage. Just a few years ago the majority of investors selected advisors from major firms because they felt safer. That feeling of safety has largely eroded because headline after headline has documented industry abuses that resulted in billions of dollars of fines. Several of the abuses were perpetrated by the biggest, most trusted names on Wall Street (Goldman Sachs, Citigroup).

The result of the negative publicity is a major marketing opportunity for smaller, Independent Advisory Firms that no longer have to compete with the perception that bigger is somehow safer or better. Wall Street greed has leveled the playing field.

However, you still have to convince investors to select you and your firm. Your best approach is to practice full transparency when you market financial advice and services. Only advisors and firms with nothing to hide can afford to practice full transparency.

In case you don’t know this about big firms, they spend millions of dollars per year on lobbyists who make sure politicians do not pass regulations that require full disclosure. This is a winning strategy for Wall Street because politicians are more interested in being re-elected than protecting the public from predatory advisors and firms.

Following are the eight cardinal rules for marketing smaller investment advisory firms.

1.) Assumptions

Do not assume investors know how to select advisors or firms even if they have used their services in the past. There is a high probability they used a flawed selection process, which is why they are looking for new advisors. Do not assume they know what CFA® or CFP® stand for. Or, how fees, versus commissions, benefit them. You are going to have to take time to educate them.


Be sure to point you are an RIA or and IAR. Then explain the significance of this registration. RIAs and IARs can provide investment advice and ongoing financial services for fees. In the absence of one of these registrations, advisors are limited to selling investment products for commissions.

3.) Fiduciary

You will also have to explain that RIAs and IARs are financial fiduciaries. You should acknowledge your fiduciary status in writing. Then explain how fiduciaries are held to the highest ethical standards in the financial services industry. You are required to put investors’ financial interests ahead of your own. This is a much higher standard than the vague one for sales reps called suitability.

4.) Certifications

You may have a lot of letters after your name. The media likes to call them alphabet soup. With the exception of CPA®, and to a lesser extent CFP®, investors don’t have a clue what these certifications and designations stand for. And they certainly don’t know what was required to obtain them. You will have to explain the certification, the prerequisites, the type of examination you took, and the continuing education requirements. Keep in mind your less scrupulous competitors buy certifications to appear more competent than you are.

5.) Fees

Wall Street makes advisor compensation a very confusing topic for investors. In an ideal world the investor does not ask about advisor compensation and the professional does not volunteer any information. Consequently, the investor has no idea what the advisor makes from their relationship. You should document in writing how you are compensated and what the investor receives for paying you the compensation. If you are paid an asset-based fee point out that the only way your fee goes up is if the value of the investors’ assets go up.

6.) Independence

Independence is a major benefit if it helps investors avoid advice that is loaded with potential conflicts of interest - for example, the Goldman Sachs’ advisors who recommended the $1 billion CDO that lost 70% of its value in less than two years. As it turned out, GS actually bet against the success of its own product. Independent advisors do not have these types of potential conflicts. Therefore, they are the lower risk choice, not the advisors from major firms who sell these types of products.

7.) Principals

Investors never meet the principals or the behind the scenes decision-makers at the big firms. Most often they are being advised by one of thousands of sales representatives. At a smaller firm there is a good chance the investor receives advice from one of the principals: advisor, chief investment officer, or portfolio manager.

8.) Unrestricted Choice

In general, smaller advisory firms do not manufacture their own investment products. This means they can offer investors unrestricted choices when they select money managers and other products. Independent advisors frequently use the services of a brand name custodian (Schwab, Fidelity, Pershing, TD Ameritrade) to hold investor assets. This is an important sales point for smaller firms. Make sure investors know you never come in contact with their assets except for the payment of your fee.

Jack Waymire spent 28 years in the financial service industry. For 21 of those years he was the president of a Registered Investment Advisory firm. He left the financial service industry in 2004 to promote a book he wrote titled Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor.  Later that year he launched a website www.PaladinRegistry.com that used the principles in the book to pre-screen financial planners, investment advisors, and money managers for investors who used their services. In 2008 he also founded www.InvestorWatchdog.com, a website that gathers data from financial advisors and produces reports that investors use to make informed decisions when they select financial advisors. Additional reports on the Watchdog website also enable investors to monitor current advisors for performance, risk, and expense. Waymire is a columnist for Worth magazine, frequently quoted in the media, and a regular contributor to major blog sites.   

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