Posts in category: Transformational

How does Vertical Integration Benefit a Financial Advisor?

To answer that question let’s look at an example of Vertical Integration in corporate America.

What’s the difference between Kmart and Target? One of them is basically gone, and the other is having record same store sales every quarter. We know which of these two companies is thriving, or at least I bet you can TARGET the right guess.

Kmart distributes products. Target distributes products and created their own successful “Private-Labeled” lines.

DEFINITION OF VERTICAL INTEGRATION:

“A company utilizing two or more stages of production, normally operated by separate companies, to become both the Manufacturer and Distributor.”

Target’s Vertical Integration through Private-Labels:

Target started manufacturing their own private labeled products almost 20 years ago, and since 2016 have launched almost 40 brand new lines.

Their private labeled brands are in food, apparel, home decor, electronics, and personal care. These brands helped cement private label as a priority for Target. Over the last 12 months alone, they launched new brands in over 20 separate categories.

My wife, Judi, has a fifth-degree black belt in Shopping and can strongly attest to the quality and value of these Private Labels.

Here are some of the privately labeled Target brands:

Market Pantry, Archer Farms, Simply Balanced, Favorite Day, Good and Gather, Health and Hand with Magnolia, Universal Thread, and Goodfellow & Co.

They even have their own line of Cat and Dog Food.

Target’s newest line is: Up & Up – A line of products designed to deliver performance and value focused on consistently beating national-brand products.

NOTABLE EXAMPLES OF PRIVATE LABELS:

How does this Relate to an advisory Practice?

HERE IS AN ADVISORY PRACTICE’S DEFINITION:

A Vertically Integrated Advisory Practice provides both Asset Management (Manufacturer) and Financial Advice (Distributor.)

When an advisory practice “Out-Sources” their Investment Research, the cost tends to be loaded or marked-up to provide a profit portion to the manufacturer of the service, or in this case the research provider. That also applies to traditional home office provided research, whether it’s from a Hybrid Broker-Dealer model or from an outside RIA or from mutual fund companies.

There is a newly available and more economically attractive option. It’s now possible to “In-Source” investment research from a provider that uses an Institutionally Designed EcoSystem of fully customized model portfolios. These mathematically diverse models are White-Labeled and typically provided at about 1/3 of the cost of traditional research.

This allows you to drive significantly more revenue to your practice. Often your client will see the overall cost of investing reduced significantly.

Another benefit is this fully documented process assists in reducing your firm’s compliance exposure.

We welcome the opportunity to introduce you to the capabilities of one of the nation’s fastest growing research providers. You will receive a fully customized EcoSystems of White-Labeled Portfolio Models that are delivered directly to your Investment Committee. You are always in total control of the process.

The firm providing this Bespoke Service has grown to influence over $30 billion of advisor managed assets in less than 6 years.

Vertical Integration is a Powerful Advantage for Forward-Thinking Advisory Practices who want to be on the Disruptor rather than the Disrupted.

Jay Samit said… “Disrupt or be Disrupted. There is no Middle Ground.”

We say that Hanging on to the “Status Quo” could result in becoming the “Status No.”

Let’s share a brief 7-minute conversation about Vertical Integration.

Here is the link to contact us for more info at info@advisorssolution.com

Vertical Integration only works if:

⦁ The client can easily see the value (compelling)
and cannot get it anywhere else (unique)
⦁ It maintains or reduces the total cost of investing for the client
⦁ It increases revenue and/or reduces workload (creates scale and efficiency)

Here is the link to request a 7-minute conversation on Vertical Integration: info@advisorssolution.com

VERTICAL INTEGRATION

By: Ray Harrison (Advisory Transformer | Entrepreneur | Speaker |
Media Contributor| Thought Leader)
October 2021

One of my favorite business quotes is from author Jay Samit. His 2015 book titled “Disrupt You” is a must read for any financial advisor looking to exponentially grow their practice.

Jay said “The business world is littered with the fossils of companies that failed to evolve. Disrupt or be disrupted. There is no middle ground.”

Financial advisors have a unique opportunity directly in their paths, but are we so busy we fail see powerful trends developing around us? Thinking “Outside the Box”: may be difficult for advisors because we often put ourselves in our own comfortable boxes. And if we aren’t forward-thinking, we could become at risk of being Disrupted.

I built and operated a successful advisory practice for three decades, and in 2018 I completed a successful internal business succession plan. To accomplish my “Exit Plan” I needed to Disrupt my own practice. I started planning for my exit ten years in advance by recruiting an experienced younger advisor named Brian. He possessed both people skills and analytical skills. I am convinced that’s a rare combination.

The business model where advisors are both the portfolio manager and practice builder is outdated and inefficient. The highest and best use of our time is face-to-face with our clients? That’s where we develop the trusting relationships that are critical in maintaining long-lasting client relationships. Isn’t that what truly separates us from the Robo advisors that are concentrating so hard on capturing our clients?

It’s far better to be on the Disrupting End of a trend than the Disrupted End. Jay Samit powerfully captured this when he said, “Disrupt or be Disrupted. There is no middle ground.”

With a truly innovative technology you can apply a Disruptive Trend to your advisory practice. Traditionally, there been three distinct ways advisors receive investment research.

• We could do it ourselves
• Deploy a system of commonly used portfolio models that any advisor, specifically your competition, has available
• Use an “Out-Sourced” third-party asset manager

Let’s take a detailed look at each of these options.

• Doing it ourselves is rarely the best use of our time. An individual advisor or advisory practice cannot match the capabilities of a large analytical research team.
• Deploying an investment research model that’s readily available to other advisory firms could lead to being commoditized. If someone can get the same service from more than one firm, then the common denominator could be who will deliver it at the lowest price. At a recent conference I asked advisors, “What differentiates your practice from your competitors.” Over 90% of the answers were “Our Great Service.” Statistically, that’s an impossibility. Providing great service is not the most effective method of differentiating your practice.
• Utilizing an Out-Sourced third-party asset manager’s research is costly and doesn’t allow the advisor to have direct control over assets. And potentially the biggest issue is that commoditization challenges still exist in out-sourcing your asset management.

Where does the disruption come in? By embracing change and adapting to new technologies and services.

It was deploying a disruptive investment research capability into my practice that allowed us to complete our business succession plan. Brian was our Portfolio Manager for 10 years, and we needed to find a way for him to be more client facing rather than being responsible for research and portfolio management. We needed a solution and I asked some highly trusted wholesalers for their help.

My friend, Greg introduced me to the founder and CEO of one of the nation’s fastest growing investment research providers. In just over five years, this boutique firm has grown to influence almost $40 billion of advisor managed assets. Their hyper-fast growth is because they are the first provider to develop and deliver an institutionally based fiduciary-level research capability directly to retail advisors. This is a totally disruptive advantage for forward-thinking advisors who want to be ahead of a disruptive trend.

This capability is designed to be “White-Labeled” and is offered to advisors on a limited availability basis. This allows advisors to differentiate their practices from those using traditional research. The models created for advisors are customized to each practice to minimize capital gains and make transitions to new models as easy as possible. Often, applying this research drives significant new revenue to the practice while greatly reducing their client’s overall cost of investing.

After deploying this firm’s unique investment research capability, I was so impressed that I aligned myself with this firm to share their story with advisors I’ve met over my career. That’s the reason I founded Advisors Solution.

We welcome the opportunity to share this” Disruptive” capability with you. Over a thousand of the nation’s top advisors would agree that it’s better to be on the Disrupting Side of a Trend.

Warren Buffet said, “Find a trend and throw yourself in front of it.” That sounds like great advice to me.

On the Victory Side,
Ray Harrison October 2021

Below are some more Jay Samit’s Quotes.

“Disruption causes vast sums of money to flow from existing businesses and business models to new entrants. “

” Disruption isn’t about what happens to you, it’s about how you respond to what happens to you.“

“There are riches to be found simply by capturing the value released through others’ disruptive breakthroughs.”

Souce: https://quotepark.com/authors/jay-samit/disruption/

DISRUPTION TO ADVISORS

By: Ray Harrison (Advisory Transformer | Entrepreneur | Speaker |
Media Contributor| Thought Leader)
October 2021