|[March 19, 2014]
Small Accounts Present Opportunities for Advisors, Says Trust Company of America
DENVER --(Business Wire)--
Financial advisors have long struggled with how to serve clients with
small account balances. Through ever-increasing account minimums, the
large wirehouses - and many RIA custodians - have indicated that small
accounts should be avoided.
But Trust Company of America (TCA), the only independent RIA custodian
offering fully integrated real-time technology, consultative services
and back office support built exclusively for RIAs, sees an opportunity
in small accounts and has solutions that can make them more viable and
profitable for advisors.
TCA outlines some strategies for effectively managing small accounts in a
new Trend Advisor paper, "Small Accounts, Big Opportunities."
While small-balance accounts can be a good source of referrals and an
investment in a firm's future growth, the Trend Advisor paper notes that
portfolio management and client meetings take up the majority of an
RIA's time - a time commitment that can be the same for a $5 million
account as it is for a $5,000 IRA, making serving small accounts a
difficult value proposition for advisors.
To address this challenge, TCA polled numerous successful advisors who
are known for managing accounts as small as $5,000 and asked them what
strategies allow them to manage these accounts more efficiently.
Advisors provided common pieces of advice:
- Tailor fees: Termination rates tend to be higher among small
accounts because, in general, investors with small accounts have less
experience and are less willing to wait for a strategy to develop.
Advisors should tailor fees for small accounts to reflect this
reality. A higher startup fee, offset by lower fees down the road, can
help advisors cover costs while incentivizing clients to be patient.
Set minimum balances for each strategy: Advisors who are
willing to work with small accounts should still set a minimum for
each strategy. Otherwise, assets cannot necessarily be allocated
according to the diversification the strategy requires.
Use asset allocation models to manage small accounts: Models
save advisors time by allowing them to create investment strategies
for broad investor profiles, accounting for age, risk tolerance and
needs. With models, advisors can provide small-balance clients with
managed portfolios while at the same time managing them effectively
Invest in the right technology: To effectively oversee small
accounts, advisors need the right tools. With the right technology,
advisors can rebalance accounts in just a few clicks, bill clients
quickly and efficiently, and save clients money through asset-based
pricing and model-level fees.
TCA's technology platform does exactly that. Plus, advisors who use
TCA's technology also have the benefit of being able to offer clients
exclusive TCA services, such as mobile portfolio monitoring, at no extra
"The TCA platform makes it possible for us to deliver discretionary
advisory services to accounts of all sizes in a way no one else can,
especially when it comes to operational and cost efficiency," said
Gordon Wegwart, President of Verity Asset Management.
While large wirehouses continue to raise account minimums to focus on
high-net-worth clients, there are compelling reasons for advisors to
serve small accounts to the best of their abilities, even if the payoff
isn't as immediate as for larger accounts. With the right technologies
and strategies, the payoff can be significant.
"In the first 3 years after we implemented TCA's technology, small
accounts were the most profitable segment of our business," said Jerry
Wagner, President and Chief Information Officer, Flexible Plan
"Quality service is the best way to ensure client satisfaction," said
David Berry, CEO, Trust Company of America, "Our goal is to enable
advisors to provide their best service to all clients, big and small,
and we hope our latest paper advances that goal."
About Trust Company of America
Since 1972, Trust Company of America (TCA) has been a champion of
Registered Investment Advisors, dedicated to helping them realize their
full potential. TCA is the only independent RIA custodian offering fully
integrated real-time technology, consultative services and back office
support built exclusively for RIAs. Headquartered in Colorado, TCA is a
partner to advisors, providing the technology and support they need to
manage their practices and clients' financial futures. See more at: http://www.trustamerica.com.
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