Complacency seems to be epidemic among Financial Advisors in this long-winded bull market and it is easy to understand why. Most accounts have reached their high-water mark and most Financial Advisors are earning a great living..so why disrupt a good thing?
Evidence of their current complacency:
1. Accounts tend to be out of sync with their initial allocations given the rise of US stocks vs International stocks
2. Client interaction/education is at an all-time low (my opinion) given the euphoria of making money
3. Advisors no longer want to meet with wholesalers because, in their minds, they aren’t providing useful information
4. Advisors aren’t prospecting like they were years ago simply because they don’t have to
5. Has anyone walked through a wirehouse branch at 5:00pm? It’s a ghost town.
Opportunistic Trading:
So, as a wholesaler, how do you raise money when Advisors are so numb? First let’s start with the premise that you can get in front of the Advisor and have their undivided attention for 30 minutes. The content of your discussion has to cause enough disruption that they are willing to act. Given the length of this bull market, I think it is highly unlikely that Advisors will move money out of cash and into your strategy. Most advisors I talk with are happy with their cash positions and don’t want to make additional “bets” in this market. So, that only leaves you one option: the “Opportunistic Trade”. This is where you need to prove that your strategy has the potential to offer a substantially better outcome than what they already own. This will seldom work when comparing your US Growth Fund vs their US Growth Fund. That conversation does not cause enough disruption to effect change. Plus, you really aren’t adding content to the conversation, but, rather, just “pitching product “. Perhaps, highlighting why Emerging Markets are poised to potentially offer more alpha than US Equities? If done convincingly, this gives them enough reason to pick-up the phone and have a meaningful conversation with their clients.
Some strategies that have raised assets in this environment: Option Overlay, Tax Efficiency, Emerging Markets, ESG, International Small Cap. These strategies offer an opportunistic trade versus what they currently own…and they help the FA to distinguish themselves versus their complacent competitors.
You have to have a high level of conviction in an effort to get their attention. Your story has to be compelling enough to cause disruption. You need to give them enough content to pick-up the phone and convince their clients to make the trade. This will only occur if they believe it is worth disrupting their habitual activities.Your goal is to make them look smarter.