If advisors were asked to rank their key responsibilities, most would put keeping clients satisfied at the top of the list. It’s a priority many in the profession feel doesn’t receive enough attention, as compliance requirements often divert their focus elsewhere. Provisus Wealth Management’s new investment platform, Transcend, seeks to ease that burden, allowing advisors to concentrate on adding value for clients through financial planning and tax assistance.
“We can help advisors transition from their existing business structure and focus on financial planning as opposed to compliance, administration or trading,” explains Chris Ambridge, president of Transcend. “It is outsourcing the portfolio management to focus on additional planning services and client retention.”
Transcend’s research shows that a financial advisor’s workload usually breaks down to a 60-40 split between servicing clients and portfolio management/compliance. Using this program means that 60% can increase to 100%.
“If an advisor wants to slow down but still wants to keep all their clients, we are offering an alternative to the current structure,” Ambridge says. “Essentially it is 40% less work, 40% more pay, and they can focus on what makes them better advisors.”
In these fee-conscious times, clients are asking a lot more of advisors, and those unable to meet increased demands will be left behind, Ambridge points out.
“Advisors need to adapt or become irrelevant,” he says. “Advisors who fail to react will face severe challenges to their future profitability and growth. Competition will force their hands. To compete successfully, advisors must differentiate themselves; otherwise, they will have to compete on price to win or retain clients.”
Catering to a wide range of retail investors, Provisus has $440 million in assets under management and has been selected as one of Profit 500’s Fastest Growing Companies in each of the last three years. Transcend is an offshoot of the Transcend Separately Managed Accounts Program, which has proven to be a real success for Provisus. The new entity is especially noteworthy, as it offers a pay-for-performance model within its equity pooled fund suite. It’s a novel approach, and one the company’s president believes really sets it apart from its competitors.
“With the advent of CRM2 and more of an onus on cost and performance, we need to put our money where our mouth is,” he says. “If we don’t beat the benchmark, then we won’t get paid. Ask any other money manager out there if they are willing to issue the same edict – I don’t think you’ll find many.”
Under this structure, clients pay a base fee of 0.25%, which covers administrative costs for the equity funds used in a client’s portfolio. If a fund performs better than the benchmark, it will trigger a performance fee equal to 20% of the fund’s performance above the benchmark. Of course, it will be tougher in some years to achieve that target – 2016 being a case in point.
“We were essentially around the benchmark for most of the year, and a little under at the end,” Ambridge says. “We can take hiccups like this, though, because over a long-term basis, we add value.”