Author: Mike Walters

The Monday Plunge

Mike Walters

As the markets seem intent on adding to their volatility this week, this episode of Advisor Skinny is focused on commentary related to the stock market environment caused by the drop in oil prices, and accentuated by the fears surrounding the widening coronavirus outbreak. I share how and why the “circuit breaker” triggered in the S&P 500 on Monday of this week, and how you can use this information to help your clients better understand the market, and properly manage their concerns.

S2:E7 Driving Valuation Up and Down

Mike Walters

On this episode of Advisor Skinny, Mike Walters reviews many of the contrapositive actions advisors may be doing that are affecting the value of their businesses. Mike discusses how each has an inverse action and by targeting the activities that bring positive value, an advisor can make small changes that have a big impact.

Listen here:

S2:E7 – Driving Valuation Up and Down

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S2:E5 Buying a Practice

Mike Walters

On this episode of Advisor Skinny, Mike Walters discusses business valuation from the buyer’s perspective. He explains what it means to buy a business rather than a job and how that will ultimately lead to a more successful transition and future growth.

Listen here:

S2:E5 – Buying a Practice

iTunes

Google Play

 

Moving a Few Miles can be as Difficult as Going Cross-Country…

Mike Walters

Target Readers:

  1. Advisors struggling with change in their business.
  2. Advisors who are friends with Mike.
  3. Advisors who work with USA Financial.

Talking Points:

  1. Once you begin, you might as well keep the momentum going.
  2. Short-cuts are seldom short-cuts.
  3. Pruning & purging are liberating.

Here’s the Skinny,

I apologize for my recent absence.  Very unexpectedly, we have moved homes.

My two oldest are in college (so mostly out of the house), which leaves just me, my wife, and our youngest.  We had been halfheartedly (read as lackadaisically) looking for a new home over the past two years.  We were in no rush.  But then my wife stumbled onto a home she really liked and we could “see” ourselves in for many years to come.

And if you know the Walters, once a decision is made, we hit the gas pedal and get to high gear as quickly as possible.

Bang – bang real estate conditions in our area had a bit to do with the speed of things, but in a nutshell, we bought a new home in 24 hours and sold our existing home (of 15 years) in under 48 hours.  Bang – bang – done.  And to make things even more interesting, the previous owners of the home we purchased were relocating to Hawaii, so we bought their furniture as well.  Then the buyers of our home expressed a desire to buy our furniture as they were relocating from Chicago.  Bang – bang – done.

Its like we were in college all over again, throw the cloths in the car, bang – bang – done.

Or so I thought.  We soon learned, the traditional moving companies were not interested in “our small job” as there was no furniture involved.  That left us to do all the packing (not something we had anticipated) ourselves.  But the good news is that we were able to prune & purge 15 years of accumulated clutter.  This cut the moving job in half, literally.

In the end…

  1. It turned out that once we determined we were moving, it would have been just as easy (or easier) to tackle a full-on move, including the furniture.  I think many businesses underestimate this truth in managing their projects.  Once you green light a project, often times the small to mid-sized project isn’t any easier than the big monster project.  The hardest part is just starting and gaining momentum.
  2. Getting rid of clutter is good for EVERYONE.  Its liberating.  It increases productivity.  Satisfaction skyrockets.  And efficiency becomes the norm.  Again, I think many businesses (and advisors/executives/staff) overlook the need to prune & purge in order to keep focused on what really matters.

In that vein, below is a link to a great article from John Jones, Digital Marketing & Communication Manager at USA Financial.  He shares great insight on using Facebook as a marketing & seminar tool.  May I suggest you focus on John’s article while thinking how you could revamp, streamline and enhance your seminar/event marketing?

Here is the article link from July 24, 2018, Investment News, “Why advisors are turning to Facebook ads to fill seminar seats”.

I’ll be back at it with regular blogs and podcasts in August.

That’s the Skinny, 

 

 

 

How Advisors Get Left Behind (hint: it’s only by choice)

Mike Walters

Target Readers:

  1. Advisors seeking growth and direction.
  2. Advisors struggling to adapt and change as the industry evolves.
  3. Advisors looking to increase profits and/or the value of their practice.

Talking Points:

  1. How has your business changed over the last 10 years?
  2. Do you wish to retire or transition, but your practice valuation is stifled?
  3. Are you continuing to nurture your business successfully?

Here’s the Skinny,

We’ve all heard before the statement, “the only constant is change”…

Take a moment to reflect upon your business 5 years ago, even 10 years ago. Was it exactly as it is today? Or is it dramatically different?

Many in our industry started out as agents in the insurance/annuity business or as registered reps in the securities business. Yet today, a primary focus is more often directed toward assets under management. But even that segment has evolved.

Years ago, many advisors were managing their own portfolios for investors, Rep as PM (portfolio manager) is the common terminology today. Yet, now, the Rep as PM model is dwindling as advisors embrace the scalability of using third-party asset managers and TAMP programs like USA Financial Exchange. Indirectly, this new model has solved two crucial problems for advisors…

  1. Asset gathering (not asset managing) is the revenue lifeblood of a retail practice.  The more time an advisor spends managing money, the less time they spend growing the practice and attracting new assets. Therefore, profits often go up in direct proportion to reduction in directly managing assets.
  2. Rep as PM and/or advisor managed portfolios, stifle the value of an advisor’s practice. They choke out scalability, which can crush the valuation of a practice (no buyer wants to buy “a job,” they want to buy “a business,” and it’s impossible to climb inside the head of the advisor managing the money), but the advisor focused on gathering assets can turnover their systems and processes along with the scalability of third-part asset management. Therefore increasing the valuation of the practice.

The point is, to use another true cliché, “if you aren’t growing you are dying.”

If you do not adapt and remain agile, eventually the marketplace may diminish your worth to the point of disaster. I am not a close follower of Sears, but it did not surprise me to see hundreds of stores closing. (Sears previously announced 166 stores to close this year. Now they’ve added 68 more to the list. There are less than half the Sears stores today as there were just 5 years ago.)

Strictly from my own consumer perspective, they do not appear to have kept pace with digital or online sales, their storefronts have fallen out of favor and seem out of touch with today’s shopper, and the few times I’ve wandered into a Sears store they struck me as being almost vacant on product and in a state of disrepair. At some point simple math will grind such a business to a halt.

Similarly, in our industry, think of the advisors who have not evolved. Conducting their business as if it’s from the 1980’s or 1990’s. Trying to live on commissionable products alone. It’s an uphill battle and we’ve all seen their decline. Business models need to adapt and evolve as the business changes… Or you end up feeling like Sears in an Amazon world.

So how do you stay ahead? Keeping your business on the cutting edge?

  1. You continually enhance your offerings and services, making yourself indispensable to the investor/client.
  2. You continually strengthen the relationship you maintain with the top 50% of your clients, targeting replication of the top 20% (not the bottom 80%).
  3. You automate and utilize technology to reduce the mundane and increase the culture, value, and experience of your staff.
  4. You monitor trends for the future valuation of your practice, which almost always will parallel the future appeal to new investors and clients.
  5. You run an “experience-based” business model that delivers an elite client experience. Not a discounted fee, or diminishing returns model.
  6. You affiliate with institutions that help you accomplish everything listed above.

Things are not the same…  Thank God…  Are you ready?

Everything can (and will) always get better and better with time, as long as you continue to nurture your business as if it is a loved family member. It’s a mindset. And the beautiful option is that you get to choose… Adapt and grow rather than decay and decline.

That’s the Skinny, 

 

 

The Conundrum of Socially Responsible Investing

Mike Walters

Target Readers:

  1. Investors confused by socially responsible investing.
  2. Advisors considering additional emphasis on socially responsible investing.
  3. Advisors struggling to gain traction with socially responsible investing.

Talking Points:

  1. Is socially responsible investing as popular as the media promotes?
  2. Will millennials finally bring socially responsible investing mainstream?
  3. Should investors consider adding socially responsible investing into their portfolios?

Here’s the Skinny,

Socially responsible investing is great in theory, but lacks in real life traction.

Sad but true.

People talk a good game, but as I’ve always said, “If you really want to know what people think or believe, study their actions, not just their words.”

Nuveen just released a detailed study titled, “Investor interest in responsible investing soars.”  The study/survey includes great detail within its 9-pages of results, but one graphic including the core questions really caught my attention…

I do not question the validity of the verbal responses from those surveyed.  However, in answering questions number 2, 4, 6, 7, and 9…  I can’t help but wonder, do their “actions” really support their “words” in real life?

For example:

  • In questions 2 and 4, would the respondent actually be willing to take a pay cut to work for such an employer, or do they mean they would expect the same pay, but prefer such an employer?
  • In question 6, would the respondent be willing to pay more for a similar quality product, or do they mean given the same price and quality they would prefer such a product?
  • In question 7, I would propose a similar scenario, but then question 9 seems to cut straight to the point, unless they interpreted it as meaning given equal returns, which would you feel better about?

Human nature is tricky.

In real life, our asset management firm, USA Financial Portformulas, offers 30+ investment model strategies, and one of our least popular models (according to assets invested) is our socially responsible model based upon the S&P 500 universe.  Interestingly, investors seem to love knowing that we have such a model even though they may not invest in it themselves.  I find that predictable, but still intriguing.

Similarly, cigarette smoking is the leading cause of preventable disease and death in the United States, yet over 13% of adults age 18-24 still smoke and almost 18% of adults age 25-44 continue to smoke.  In the United States, over 70% of adults age 18+ drank alcohol in the past year (and that’s including ages 18-20, when age 21+ is drinking age).  With a growing trend toward marijuana legalization, 22% of adults admit to current usage (even more than cigarettes).  I believe it’s safe to say, most adults know these things are not good for their health and most would steer their children away from such things…  Yet these industries are all thriving.

Does investing work similarly?

I think, all things being equal, investors prefer the idea of socially responsible portfolios.  But if the socially responsible portfolio does not live up to its “less socially responsible peers” and/or it costs more to return the same or less, then investors generally tend to revert back toward traditional portfolio allocations.  And financial advisors know this, so many do not broach the subject unless the investor makes such a request.

Do I sound cynical or am I just a realist?

I love the idea of socially responsible investing.  And speaking as asset manager, it’s not that difficult to add socially responsible screening mechanisms in order to de-select the socially irresponsible stocks.  But until market demand supports the effort, the effort isn’t worth the price of mass deployment (at least not yet).  Like I said, we promote a socially responsible investment model, yet it is one of the least utilized models we provide.

Additionally, socially responsible investing can become a bit murky.  When does an investment cross the line?  If you wish to invest with social responsibility, but you enjoy craft beer or a nice glass of wine, do you re-include the alcohol industry even though it would normally be excluded?  Or what about a tech firm that has poor data security and/or outright sells data you would deem private – include or exclude?

I’ve read that the socially responsible investing category under professional management is currently as high as 22%, but again, that math is a bit murky as it does not include passive management (only active or professional management).

In the end, many lay claim to millennials being the force behind the ultimate push toward socially responsible investing.  And in many ways that argument makes perfect sense, yet millennials are also credited with the push toward marijuana legalization…  And it may be difficult for those two things to coexist.  Not all that different from previous generations wrestling with ways for socially responsible investing to coexist with the popularity of alcohol.

It’s an emotional subject and a trend to watch closely.  But I contend the trend is probably further off in “action” than it is in “words.”

That’s the Skinny,