This content is from: Innovation

What to Do After a Referral Contacts Your Firm

From the Nov 2020 SEI Special Report

Running a successful independent financial advice business has always been an enormous amount of work; it’s a challenge to manage your clients’ complex needs and investments and run your own business at the same time. This year has pushed advisors to find new solutions to unexpected things – like how to have a simple meeting with a client safely in the middle of a pandemic – and underscored the importance of reinforcing to clients the value you bring to the table. Having the right service and technology foundation is fundamental to the success of an advisory business, and for this report on managing growth in wildly volatile markets, we’ve turned for insights to SEI and its innovative people and solutions. Independent Advisor Solutions by SEI – which is a strategic partner to over 7,600 advisors and has $69.4 billion in AUM  – provides independent financial advisory firms with robust wealth management services through integrated custody, administration and technology services, curated investment strategies, and practice management programs. Through its services, SEI helps advisors save time, grow revenues, and differentiate themselves in the market, backed by nearly 30 years working with Registered Investment Adviser (RIA) firms. 

1 Tax-Smart Investment Strategies and Technology Tools for Navigating Extreme Volatility

Even before the COVID-19 pandemic turned 2020 on its head, many analysts and economists were predicting prolonged volatility for the foreseeable future, noting that extreme peaks and troughs were occurring much more frequently than had been the case historically.

For nearly 30 years, independent financial advisors have turned to SEI for its flexible lineup of investment strategies and enhanced technology solutions. A specific competency that sits at the intersection of investments and technology is SEI’s lineup of Tax-Managed Strategies, designed to optimize investors’ after-tax returns. Notably within this lineup, SEI’s Tax-Managed ETF Strategies and tax overlay management capabilities both seek to opportunistically harvest tax losses during periods of market volatility. (Tax-loss harvesting is the selling of securities at a loss to offset a capital gains tax liability.) This strategy is typically employed to limit the recognition of short-term capital gains, which are generally taxed at a higher federal income tax rate than long-term capital gains.

In addition, tax overlay management can coordinate buys and sells across multiple investment managers, implement asset allocation changes, and apply rebalancing policies to the overall portfolio of individual securities – all in a tax-efficient manner.

In October, Independent Advisor Solutions by SEI took answering advisors’ tax-related challenges to a new level when it announced the availability of a new Estimated Taxes Saved report. The report provides a snapshot of estimated taxes saved through automated tax loss harvesting, showing data as of the most recent business day, and delivers advisors a personal tool to use with each of their clients utilizing these strategies. Each report is specific to an individual client’s account employing either a SEI Tax-Managed ETF Strategy or individual security-based strategy with tax overly within SEI’s Managed Account Solutions program. The report helps independent financial advisors have more relevant and personal conversations with clients about their estimated tax savings.

SEI

Self-service and daily availability

“We’ve had similar reporting available in a more limited capacity prior to this new system, and for years these reports had grown to be some of our most-requested client deliverables. Now the reports are 100% self-service and available daily,” says Erich Holland, Director of Distribution and Engagement for Independent Advisor Solutions by SEI.

Tax management – through the use of a variety of tax-efficient investment tools – has been a dedicated core competency of SEI for nearly as long as the firm has been strategically partnering with advisors. Its mutual-fund-based strategies, ETF-based strategies, and individual security-based strategies have a tax-managed “cousin” for taxable accounts. 

“Most asset management firms would substitute municipal bonds for fixed income and call it a day. For us, that focus on portfolio design is just the starting point,” says Holland. “So, it starts with municipal bonds, but then it’s also tax lot management and accounting.1 It’s holding period management and tax-aware trading. It’s tax-smart rebalancing, so we’re not forcing trades that would be suboptimal from a tax perspective. And most importantly, it’s automated tax-loss harvesting to proactively take advantage of the persistent, dips in account values that come with market volatility. All of this is an integral part of what we’re doing every day to help make our solutions both efficient for advisors and personal to their investor clients.”

The new Estimated Taxes Saved report builds on that foundation and offers advisors the ability to run an automated report across a variety of time periods, including the prior month, prior quarter, prior year, or year-to-date. A few things that advisors will find particularly helpful, include:

  • A summary of account gains and losses broken down by strategy and dollar amount.
  • Transactions for any losses that are contributing to the estimated taxes saved value.
  • Calculated dollar values based upon the loss of a transaction multiplied by the long- or short-term tax rate assigned to the account.

“Harnessing technology to not only enable tax-efficient investments, but then to highlight your business’ value through automated reporting is vital for advisors – especially given the market volatility we’ve witnessed this year,” says Kevin Crowe, Head of Product Development for Independent Advisor Solutions by SEI. “Our Estimated Taxes Saved report clearly illustrates proactive tax management results that can better position advisors to deepen existing client relationships and attract higher-net-worth investors.”

SEI

It’s sometimes said that investments are a matter of opinion, but taxes are a matter of fact. The Estimated Taxes Saved report can not only have an immediate impact with the existing clients at an advisory firm, it can also potentially contribute to the growth of the business. “Advisors can frame the explicit value of taxes saved in dollar terms and totally change the dynamic of a conversation with a client,” says Holland. “When advisors show those dollar figures on the Estimated Taxes Saved Report, they can and should take full credit for that value-added as their own. This is just one way we focus on putting advisors in control, specifically with a quantification of their value-add.

“But the story continues with the added benefit of taking that report to an accountant, an attorney, or other center of influence and saying, ‘Look, what I can do for your clients and how much money they can potentially save on their taxes. Wouldn’t this be valuable?’ It has the potential to open new doors for the advisors we work with so they can broaden their pool of potential clients.”

2 Creating Time and Capacity for RIAs

Every RIA firm has its own identity and value proposition – clients with differing needs, a service model that has evolved over time, a philosophy the business hews to, specific goals for the future. RIA firms share some things in common, too. For example, time is precious, and the fact that it is best spent on clients rather than administration is a golden rule of sorts for all advisors. The need to maximize time and cost efficiencies isn’t lost on Erich Holland, Director of Distribution and Engagement for Independent Advisor Solutions by SEI, and Steve Gardner, Managing Director of RIA Distribution, SEI,who spend their days thinking about what advisory firms need, and how they can help deliver it.Many advisors are familiar with SEI as a pioneer of turnkey asset management programs (TAMPs) and as a trusted strategic partner to advisors for nearly 30 years. But you don’t remain a leader by standing still. In a recent conversation with Holland and Gardner, we discussed the latest innovations that are helping RIAs reach peak efficiency – and provide a greater level of service to their own clients.

Holistically speaking, how would you describe SEI’s ecosystem of solutions for advisors?

Erich Holland: Broadly speaking, there are three aspects of our suite of solutions for advisors – integrated custody; technology and administration services, curated asset management strategies; and, advisor firm services, also known as practice management. While each of the three are built with the value to stand on their own, the totality of this ecosystem creates vastly more value than just the sum of those three parts, and we look at everything through the lens of delivering it to advisors in an efficient, but personal way.

SEI

What are the core differences that really stand out within each of the three aspects of the solution, starting with asset management?

Holland: The best words used to describe our asset management solution are “curated flexibility.” It’s difficult to come up with an investor scenario for which we don’t have a good answer – whether it’s mutual-fund-based strategies, ETF-based strategies, individual security-based strategies, a mix of all of those in a unified structure, sustainable investing strategies with ESG and SRI options, strategies built to optimize after-tax returns, or even allowing for advisors to build their own portfolios on our platform – the options are all there, no matter how big or small the account, or how conservative or aggressive the client.

The other real strength from an asset management perspective is a dedicated focus on goals-based wealth management. For us, that’s a lot more than just the buzzword that it’s become in the industry – it’s in our DNA. We provide the ability to divide a single account into multiple portfolios, and for an advisor to state a tangible goal or goals for a client – think retirement or home purchase or a child’s education, or any other goal. Then, based on the inputs from advisors, investors can track to those real, meaningful goals – using time horizons and starting values and target values – both on investor statements and on SEI’s investor website. In the simplest terms, we enable advisors to connect their planning and advice to whatever investments they choose via this goals-based wealth management framework.

What are the benefits of the custody and technology combination?

Holland: The first advantage is the one-stop experience we provide for advisors and their support staff. We are our own custodian – we provide custody through SEI Private Trust Company. As custodian for investor accounts, SEI Private Trust Company adheres to extensive federally mandated controls designed to prevent fraudulent activity – and to safeguard investor assets it does not commingle investor assets with its own or any other investor or organization, nor lend, pledge, or margin lend any investor assets. It also gives advisors the benefit of single-source, single-system access to custody and portfolio management under one roof. That can be a big, big advantage for advisors and their staff, particularly in running the day-to-day operations of an advice business.

But the real key is easy access to what we believe is truly must-have technology for advisors to run a successful advice-based business. It’s embedded in the custody system is. Not a bolt-on, not an add-on, not ancillary technology systems, but literally part of the embedded code, and for no added cost. That includes the full portfolio management system, a models-based trading system, rebalancing system, tax harvesting system, performance reporting and statement production, auto calculation and deduction of advisor fees, integrated cash management for contributions and withdrawals, and more – all embedded in the SEI Wealth PlatformSM.

SEI

Practice management is an everyday priority for advisors. What do you see as the critical need for them to focus on within their business while also focusing on their clients?

Gardner: You’re right, and that’s why our advisor firm services are the nimblest of the solutions we offer. It’s meeting advisors where they are, on their terms, putting advisors in control of their business and their value-add. We provide a direct service liaison and a direct relationship liaison for advisors, whether they are in growth mode or preparing to sell their business, or any of the many stages in-between. We realize that everyone has their own unique business, so we choose to meet advisors on their turf, whether they choose to do so digitally or in person. The idea is for them to be able to leverage our total ecosystem of solutions and personalize how they use it and what they do with it. And with no business minimums and the broad suite-of-solutions available, we really have an answer for nearly any advisory firm situation – and with a focus on keeping advisors in control.

With the holistic approach you’re describing, and with so much critical technology embedded in the solutions, it seems logical that there are some cost efficiencies for advisors embedded as well.

Gardner: There’s no doubt about it. Other major firms provide custody, and they do it well, but they don’t have an embedded portfolio management system with automated rebalancing, models-based trading, or integrated performance reporting, not to mention investor-centric goals-based reporting. From an advisor standpoint, to enable those capabilities with another custodian you’d have to go and buy some other technology to bolt onto that system. There is some great add-on technology out there, but it’s expensive and it takes valuable time away from serving clients. With our integrated approach, advisors don’t experience the added cost or the headache of integration – and, by the way, the bolt-on technologies typically require manpower to run, so that’s even more cost.

Compatibility must be an issue when you start cobbling together various technology, too. 

Holland: It is, and so is the reconciliation aspect of tying systems together. I’ve been in more offices than I can count where I’ve seen that it’s a full-time job just to do the reconciliation between the custodian and a technology system. Or it’s a full-time job to calculate fees, process the trades to generate the cash, collect those fees, and then reconcile the process. These tasks take time, and time is money and it’s time away from clients. You’re easily talking about five figures in cost savings with what we provide fully embedded in the platform.

SEI

SEI is well known in the traditional TAMPs [turnkey asset management program] space, but what we’re talking about is vastly different, right? How have you upgraded from what comes to mind when most advisors think about TAMPs?

Gardner: The most important part about what’s new is that we’ve completely unboxed what people know as the traditional TAMP. We’ve added flexibility, personalization, and choice, without sacrificing scale and efficiency. What SEI has done incredibly well as a TAMP provider for close to 30 years is add efficiency, scale, and process to advisory businesses, but advisors had to use our investment strategies in order to enable that efficiency. They don’t need that anymore. We can provide all of the same efficiency and scale, but now with added asset management flexibility, which includes an advisor’s own set of models and strategies and investment beliefs. The integration between custody and technology is key to efficiency and scale in helping advisors effectively serve their clients, and it’s now combined with the pure flexibility of asset management solutions so that advisors don’t need to sacrifice whatever their investment philosophy has been for clients for as many years as they’ve delivered it.

SEI

That sounds ideal for clients. How else are you improving the experience for the clients of your clients?

Holland: Over the last half-decade, we’ve radically evolved our platform and service delivery so that nearly 100% of the interactions with us can be digital, from account open all the way through account servicing. The signature from a client to open a new account can be done electronically via DocuSign3 as can other service elements that require a client signature. Once an account is open, nearly everything – moving money, rebalancing, sending distributions, pulling contributions, changing a strategy, and much more – can be done online. It puts advisers squarely in the driver’s seat of adding value versus inundating their clients with meaningless administration.

Is that cradle to grave digital experience a differentiator for SEI?

Holland: Other custodial platforms have digital capabilities, but to use your words, the cradle to grave digital aspect of our solution is indeed rare. It points back to the fact that SEI provides custody, technology and administration all under one roof. Single source access is key, and nearly all of that can be done without need for unnecessarily burdening investors.

We’ve talked a lot about solutions and the technology behind them. What’s the philosophy and ethos behind it all? What should advisors know about SEI beyond what you’ve already mentioned?

Holland: It’s not an advisor’s job to learn how they can change to fit into our platform. It’s our job to understand an advisor’s business and their value proposition so we can effectively and efficiently fit into what they’re doing. If I were to boil everything we do down to a few words, we put advisors in control. And what I mean by that is we remove friction, and we create more time and capacity for advisors to serve their clients without having to sacrifice their story or the level of personalization their clients have come to expect from them.



1 For those portfolios of individually managed securities, SEI Investments Management Corporation (SIMC) makes recommendations as to which manager will manage each asset class. Upon SIMC’s termination of a manager from the program, SIMC may recommend a replacement money manager and the investor has the option to move the account assets to another custodian or to change the manager. SIMC is the manager of the SEI ETF Strategies. Consider the investment objectives, risks, charges and expenses carefully before investing.

Tax and Tax Management Techniques Disclosures: SIMC does not represent in any manner that the tax consequences described as part of its tax-management techniques and strategies will be achieved or that any of SIMC's tax-management techniques, or any of its products and/or services, will result in any particular tax consequence. The tax consequences of the tax-management techniques, including those intended to harvest tax losses, and other strategies that SIMC may pursue are complex and uncertain and may be challenged by the IRS. Neither SIMC nor its affiliates provide tax advice.

Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by you for the purpose of avoiding tax, penalties and/or interest which may be imposed by the IRS or any other taxing authority; (ii) this communication was written to support the promotion or marketing of the matters addressed herein; and (iii) you should seek advice based on your particular circumstances from an independent tax advisor. Accordingly, Clients should confer with their personal tax advisors regarding the tax consequences of investing with SIMC and engaging in the tax-management techniques described herein (including the described tax loss harvesting strategies) based on their particular circumstances. Clients and their personal tax advisors are responsible for how the transactions conducted in an account are reported to the IRS or any other taxing authority on the Client’s personal tax returns. SIMC assumes no responsibility for the tax consequences to any Client of any transaction.

Availability of certain services may be subject to Firm or Firm’s Home Office approval.

Information provided by Independent Advisor Solutions by SEI, a strategic business unit of SEI Investments Company (SEI).

There are risks involved with investing, including loss of principal.

Custody services provided by SEI Private Trust Company (SPTC), a federally chartered limited purpose savings association and wholly owned subsidiary of SEI Investments Company.

Services provided by SEI Global Services, Inc. (SGS). SGS is a wholly owned subsidiary of SEI Investments Company (SEI).

3 What to Do After a Referral Contacts Your Firm

SEI

By John Anderson, Managing Director, Practice Management Solutions, Independent Advisor Solutions by SEI

We have noted in conversations with our clients that over the past six months referrals from their own satisfied and engaged clients continue to be the main source of new business for advisors during the pandemic. While money is in motion, prospects will be researching your website, social media and any other content to understand what it is like to be your client – well before they pick up the phone or email you.   

A prospect contacting you is just the first step. What you do and how you communicate next is crucial.  

An emotional decision

Let’s assume that a prospect likes what they see and hear about you. They discover you specialize in an area that appeals to their needs, and your firm seems like a good fit.  While all seems good, they are contacting you with trepidation, feeling things like:

  • Not wanting to be “sold” something
  • Trouble admitting to a stranger that they need help
  • Difficulty unwinding a relationship with another advisor that they may like personally but is not meeting their needs
  • Fear of the “new”  

This is a fundamental flaw in most advisors’ referral processes: They don’t put themselves in their prospect’s shoes. Many advisors normally react by sending out a brochure, an intake form and risk questionnaire. The prospect’s first conversation may be with a staff member or receptionist who may not be properly trained. This approach is designed to “sell” the advisor firm –not to alleviate the prospect’s anxiety.

First steps

Before you begin, it first makes sense to understand how most referrals come to your firm. Understand who is making the referral and for which services. Understanding why you’re being referred provides insight into what is appealing and differentiated about you. By taking on a prospect’s mindset, the next steps are clear.  

Understanding a prospect’s mental roadblocks is always the first step to correcting a problematic process. The easiest way to diagnose and fix the issue is to create a workflow or journey map that creates a more unique and personalized process.

Next steps

There are a number of steps in the referral process that you should look at from a prospect’s point of view:

  1. In most cases, a prospect will call the advisor. It’s critical to train the staff, who will most likely be the prospect’s first impression of your firm, how to ask appropriate questions and discuss your value proposition. Understanding a prospect’s feelings and creating a script for prospect calls will go a long way.  
  2. If a prospect contacts you by email, make sure your first reply provides the prospect the ability to book a convenient time into your calendar to talk. A simple thing like scheduling a meeting should not be an obstacle—the technology is there, use it.
  3. Create your customizable referral packet. What a prospect says during the first conversation will inform what you’ll send as a follow-up. Personalize it based on your conversation – not a blanket brochure or generic list of services.
  4. Don’t send an intake or profile form. From the prospect’s perspective, it may seem too invasive or uncomfortable to share with someone they don’t know yet. You can get most of the information you need in your first scheduled conversation.
  5. Make reference to your initial conversation in the follow-up communications. Try to draw out their concerns while acknowledging what others have felt in the same situation.
  6. Understand the current environment. They may prefer to meet in person or by video –give them the option and assure them that either is fine.
  7. Understand the first conversation’s goal is to have a second conversation – not to have them commit to a financial or investment plan.  

Put a referral journey map or workflow discussion on your next staff meeting’s agenda, and think about what happens when you get a referral. Do you have a process in place? The script is as important as putting the workflow process into your CRM. But putting yourself in a prospect’s shoes is most important: Are you tuned into their emotions?

Learn more about how Independent Advisor Solutions by SEI provides the technology that works for you, with the flexibility that works with you.


1 As of September 30, 2020.

2 Tax-lot accountingis a method of accounting for a securities portfolio in which the manager tracks the purchase, sale price and cost basis of each security. This allows a manager to “swap” a tax lot with a more tax advantageous lot that may have been purchased by a different manager at a different time.

3 For those portfolios of individually managed securities, SEI Investments Management Corporation (SIMC) makes recommendations as to which manager will manage each asset class. Upon SIMC’s termination of a manager from the program, SIMC may recommend a replacement money manager and the investor has the option to move the account assets to another custodian or to change the manager. SIMC is the manager of the SEI ETF Strategies. Consider the investment objectives, risks, charges and expenses carefully before investing.

Tax and Tax Management Techniques Disclosures:SIMC does not represent in any manner that the tax consequences described as part of its tax-management techniques and strategies will be achieved or that any of SIMC's tax-management techniques, or any of its products and/or services, will result in any particular tax consequence. The tax consequences of the tax-management techniques, including those intended to harvest tax losses, and other strategies that SIMC may pursue are complex and uncertain and may be challenged by the IRS. Neither SIMC nor its affiliates provide tax advice.

Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by you for the purpose of avoiding tax, penalties and/or interest which may be imposed by the IRS or any other taxing authority; (ii) this communication was written to support the promotion or marketing of the matters addressed herein; and (iii) you should seek advice based on your particular circumstances from an independent tax advisor. Accordingly, Clients should confer with their personal tax advisors regarding the tax consequences of investing with SIMC and engaging in the tax-management techniques described herein (including the described tax loss harvesting strategies) based on their particular circumstances. Clients and their personal tax advisors are responsible for how the transactions conducted in an account are reported to the IRS or any other taxing authority on the Client’s personal tax returns. SIMC assumes no responsibility for the tax consequences to any Client of any transaction.

Availability of certain services may be subject to Firm or Firm’s Home Office approval.

Information provided by Independent Advisor Solutions by SEI, a strategic business unit of SEI Investments Company (SEI).

There are risks involved with investing, including loss of principal.

Custody services provided by SEI Private Trust Company (SPTC), a federally chartered limited purpose savings association and wholly owned subsidiary of SEI Investments Company.

Services provided by SEI Global Services, Inc. (SGS). SGS is a wholly owned subsidiary of SEI Investments Company (SEI).