It’s still early days for financial advisors adopting social media. There are compliance issues, structural issues and just questions as to the ROI. There are a few early adopters investment advisors, though, who have seen the light and are not only using social media, but building their practices via new media.
EPIC Advisors and its Social Media strategy
Sean Hannon, founder and CEO of EPIC Advisors, is ahead of the game. After cutting his teeth at Goldman Sachs and JP Morgan, he set out two years ago to found his own Registered Investment Advisory (RIA), EPIC Advisors. I had a chance to speak with him today.
EPIC’s business
Sean’s firm has over 90 clients ranging from high-net worth individuals to families beginning to grow their retirement nest eggs.
- Transparency: Sean believes in a uniquely competitive level of transparency and runs his business accordingly.
- Communication: Communication is extremely important for him and he works hard to ensure that clients are never surprised by his activities.
- Personalization: The RIA structure and the Separately Managed Account (SMA) provides many investment advisors with a scalable solution to servicing numerous clients. The adviser manages a model portfolio which is replicated out in client accounts on a prorated basis. Hannon works hard to overlay client-specific activities on top of his portfolio so that each client has a customized portfolio inline with their individual objectives and circumstances.
- Value add: While such transparency may be a double-edged sword, he ensures that he provides real value at every step of the investment process.
3 Ways to Grow an RIA
How he’s building his business is a how-to guide for financial professionals looking to build their business beyond the boundaries of their traditional extents of influence (community, city, state and even country).
According to Hannon, he’s got a three pronged strategy to grow his assets:
- Performance: Hannon is no slouch when bringing home the bacon for his clients. He believes that in a sideways market,
financial advisors must perform or clients will defect to cheaper internet trading. Hannon uses the Covestor platform (see his profile) to audit his trading performance. Since August 2007, he’s returned almost 200% using a long-short strategy (with about 20-30% equity exposure) that has evolved into more of a short-term trading strategy attune to this market. He ranks at or near the top of all investors on Covestor. - Service: Clients have different requirements and needs. EPIC designs trading and communication strategies in different ways to match client specs. Social media plays a role here as Hannon attributes some level of customer retention to the fact that clients can log into Covestor at any time to stay abreast of trades in their account as well as ongoing blog commentary published by Hannon on Covestor as well as on SeekingAlpha. For other clients, he’s using an inhouse email newsletter to keep them apprised of this current views on the market.
- Reach: Sean’s got about 3000 people signed up to EPIC’s newsletter (see the most recent newsletter: Epic Insights 2009-05-11) and numerous others see his commentary and performance on Covestor and a similar site, MarketGuru. This broad coverage, blanketed wider via syndication of his content on SeekingAlpha, has enabled EPIC to land investors in tens of states and in four countries. As investors consume Hannon’s content, a certain percentage become actual clients. Combined with traditional networking and local seminars, Sean’s got a steady stream of prospects.
EPIC’s How-To Guide of New Media for Financial Advisors
To summarize, Hannon and EPIC are definitely leveraging new media to build their business. They do this in a variety of ways:
- Syndication: For a small outfit in New Jersey, Hannon is literally reaching millions of potential clients by sharing his content with third-party aggregators.
- Different Media Formats for Different Clients: Hannon believes that investors are turning to internet investing in the wake of poor performance and poor professional value. EPIC’s newsletter addresses these investors who want to manage things themselves but need professional support. He gives investors activities to implement the beginning of each week — active but not too onerous.
- Broad Sales Funnel: Between the newsletter, Covestor, and SeekingAlpha, Hannon has essentially blown open the sales funnel to not only broaden his reach but to fill his sales pipeline with the right people, the type of people who appreciate his value offering. Better and quicker match for both sides. (See my post on Sales 2.0 and how to implement this for your business.)
Future of the Financial Advice Industry
It was clear that Sean Hannon understood his business very well and how to leverage social media to get there. I asked him about his views on the brokerage/financial advisory business in general and he had some interesting views:
We’re moving away from overpaid brokers using poor performing mutual funds and headed towards a market of value added services for the bulk of investors. Many investors will adopt do-it-yourself Internet investing and still require professional support.
Hedge funds, RIAs with good performance — they’re OK. In some way, outside of that, at the macro level, we seem to be headed back to the 70’s, retrenching in a way that niche-y, non value-added pieces are falling away. Investment advisers will be paid for performance and risk mgmt, Financial Advisers will get paid more on structuring asset allocation, and brokers will be paid for good stock picking advice. The rest will go away.
Interesting stuff.
Additional Resources
- Don’t forget to subscribe to receive free daily updates from NewRulesofInvesting.
- EPIC Advisors
- EPIC Insights Newsletter
- Covestor
Image is a Stonehenge predawn panorama in the public domain, available on Wikimedia Commons.
