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Is Portfolio Management Slowlane or Fastlane?

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Hayek

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<div class="bbWrapper"><span style="font-size: 12px"><span style="color: #000000"><span style="font-family: 'Times New Roman'">Just finished MJ’s book, and I am not sure if my plan is Slowlane or Fastlane. I think maybe a bit of both. Would love to get your feedback. </span></span></span><br /> <br /> <span style="font-size: 12px"><span style="color: #000000"><span style="font-family: 'Times New Roman'">So, a quick synopsis: I am a Certified Financial Planner at an independent fee-only investment advisory firm. I have a website that pitches the service that I offer: comprehensive financial planning for a flat fee (currently $600). I differentiate myself from my competition – primarily insurance agents and stockbrokers – by my focus on financial planning and my ability to be objective. To wit, my firm does not sell any commissioned products and I am getting paid for the financial planning, so my conflicts of interest are minimal. I utilize Google AdWords to drive traffic to my website. The plan I put together for clients recommends a passive buy-and-hold investment strategy that just about anyone can implement on their own. But I also make clients aware of peer-reviewed academic research about an active investment strategy that has historically outperformed buy-and-hold with much less downside potential. Typically about half the clients I present plans to prefer the active strategy to the passive strategy and ask me to manage their portfolio in that style for them. I charge them a fee based upon a small percentage of their assets under management to do so. </span></span></span><br /> <br /> <span style="font-size: 12px"><span style="color: #000000"><span style="font-family: 'Times New Roman'">It seems to me that the first half of this equation, financial planning, is Slowlane. I am selling 8-10 hours of my time for a $600 flat fee. The second half, portfolio management, is much closer to being Fastlane. It is scaleable in that I will spend the same amount of time providing portfolio management to 1 client as I will to 100. And, by the way, the investment strategy I use does not require a ton of my time to follow. Further, I typically only need to meet with clients once a year when I am managing money for them, so while the portfolio management fees I collect are not 100% passive money, it does not take a huge time commitment per client. When all is said and done, I think I can personally handle 360 clients (2 a day, 4 days a week, 45 weeks a year) with a minimal supporting cast. If the average client has a $500,000 portfolio and I charge 1%, that will provide me with $1.8 million in annual revenue. Plus, I will have built a business that I can sell to another advisory firm for a 2-3x multiple if I wanted. </span></span></span><br /> <br /> <span style="font-size: 12px"><span style="color: #000000"><span style="font-family: 'Times New Roman'">The biggest problem is that it takes time to build up to 360 clients. Even if my marketing system is really cranking, I probably cannot put together more than 90 or so financial plans a year. And if half of those result in portfolio management clients, it will take 8 years to get to 360 clients. </span></span></span><br /> <br /> <span style="font-size: 12px"><span style="color: #000000"><span style="font-family: 'Times New Roman'">There are, I believe, two ways around this time constraint. First, I could just become the CEO and Portfolio Manager of the firm and hire other Certified Financial Planners to put together the plans and meet with the clients. I could even expand beyond my current locale and make the business regional or even national. Of course, this is a lot more administratively challenging and would tie my time up in other ways. </span></span></span><br /> <br /> <span style="font-family: 'Times New Roman'"><span style="font-size: 12px"><span style="color: #000000">Or second, I could simply try to work with individuals with more assets for me to potentially manage – maybe by building a specialty practice working with entrepreneurs, for instance, since as MJ informed, most penta-millionaires made their money as entrepreneurs. I also have some ideas as to an investment strategy I could use to start up a hedge fund, and attract the really big money, but that is probably more of a “windshield wiper†project for the moment.</span></span></span><br /> <br /> <span style="font-family: 'Times New Roman'"><span style="font-size: 12px"><span style="color: #000000">So, any thoughts? Am I on the Slowlane, Fastlane, or some weird amalgamation of the two? Maybe what I am doing is an example of Intentional Iteration?</span></span></span><br /> <br /> <br /></div>
 
<div class="bbWrapper"><blockquote data-attributes="" data-quote="Hayek" data-source="post: 214778" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=214778" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-214778">Hayek said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> First, I could just become the CEO and Portfolio Manager of the firm and hire other Certified Financial Planners to put together the plans and meet with the clients. </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote><br /> I think in order to make this Fastlane, this is the way you need to go.</div>
 
<div class="bbWrapper">Are you any good?<br /> <br /> How much have you made for yourself?<br /> <br /> I am sure you are investing your own money into your own system and making a killing.<br /> <br /> Use your results as advertising.<br /> <br /> And then start asking your current clients for referrals.<br /> <br /> Get one client, prove you can deliver what you say you will, and this client will tell others pretty soon.<br /> <br /> And you can use hi/her testimonial to attract more customers.<br /> <br /> I would worry about having a &quot;proven&quot; system before worrying about the the scales and number of clients.<br /> <br /> But... it sounds to me you know what is the right path.<br /> <br /> don&#039;t you need to have some especial license and years of experience to run a firm like the one your want to have? If so, do you meet that requirement?</div>
 
<div class="bbWrapper"><blockquote data-attributes="" data-quote="BrucetonGuy" data-source="post: 214831" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=214831" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-214831">BrucetonGuy said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> I think in order to make this Fastlane, this is the way you need to go. </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote><br /> Once I get my marketing system really cranking, I will have to decide whether or not to go this route. Quite frankly, my issue with bringing on other advisors is control. Once I share my business plan with them, what is to keep them from starting their own firm based upon that strategy. Or, even worse, work in my firm for several years and then breakaway, taking clients with them. It might be less of a headache to limit myself to the number of clients that I can personally comfortably handle. <br /> <br /> One way to handle this concern is to bring aboard advisors who lack entrepreneurial drive, i.e. who were working in a support position prior to my bringing them aboard. This would make it less likely that they would decide to start up their own competing firm. And, of course, I could utilize no-compete provisions to make it more difficult for advisors to leave with their clients in tow. But no-compete provisions are not fool-proof, there are ways to work around them. <br /> <br /> Without a doubt, lack of scale and time is what keeps portfolio management from being a true fastlane enterprise. Superior advisors typically make up for it using magnitude, i.e. serving wealthier clients. <br /> <br /> Covester and other online investment advisory platforms are also an interesting way to try to break out of the scale and time limitations. But most people still want to work with someone that they can meet with in the same room.</div>
 
<div class="bbWrapper"><blockquote data-attributes="" data-quote="andviv" data-source="post: 214856" class="bbCodeBlock bbCodeBlock--expandable bbCodeBlock--quote js-expandWatch"> <div class="bbCodeBlock-title"> <a href="/community/goto/post?id=214856" class="bbCodeBlock-sourceJump" rel="nofollow" data-xf-click="attribution" data-content-selector="#post-214856">andviv said:</a> </div> <div class="bbCodeBlock-content"> <div class="bbCodeBlock-expandContent js-expandContent "> Are you any good?<br /> <br /> How much have you made for yourself?<br /> <br /> I am sure you are investing your own money into your own system and making a killing.<br /> <br /> Use your results as advertising.<br /> <br /> And then start asking your current clients for referrals.<br /> <br /> Get one client, prove you can deliver what you say you will, and this client will tell others pretty soon.<br /> <br /> And you can use hi/her testimonial to attract more customers.<br /> <br /> I would worry about having a &quot;proven&quot; system before worrying about the the scales and number of clients.<br /> <br /> But... it sounds to me you know what is the right path.<br /> <br /> don&#039;t you need to have some especial license and years of experience to run a firm like the one your want to have? If so, do you meet that requirement? </div> <div class="bbCodeBlock-expandLink js-expandLink"><a role="button" tabindex="0">Click to expand...</a></div> </div> </blockquote><br /> I have my Series 65 license. That is all you need to become an Investment Advisor or to open a Registered Investment Advisor firm. The Certified Financial Planner designation proves I have undergone rigorous training in financial planning, and have passed a comprehensive 2 day 10 hour exam on that topic. (The national pass rate is 56%.) It also signifies I have at least 3 years experience in financial planning and that I have sworn to serve my clients as a fiduciary - meaning I am legally required to provide recommendations that put their interests first and foremost. But it is not required to become an Investment Advisor. <br /> <br /> I certainly agree with your thought that I should build a proven system first and then worry about scaling it. I am in the midst of doing that. <br /> <br /> With regard to utilizing my personal track record, I do share that, but I also utilize academic research that shows the track record of my investment strategy over 80+ years as opposed to my much more limited personal track record.</div>
 

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