| |
The Del Monte Group
Based outside of San Francisco, the Del Monte Group manages $120 million of individual assets.
Currently engaged in a transition from a broker-dealer network to becoming a fee-only independent advisor,
it is capitalizing on many opportunities to improve the efficiency of their operations and the level of
service provided to clients.
We spoke with Richard Del Monte, the firm's founder and CEO, about his unique way of identifying clients'
financial needs and constructing portfolios to meet them.
Transitioning to an Independent Fee-only Advisor
The major initiative for the Del Monte Group is moving from its relationship with Securities America to become an independent fee-only advisor. In the process, the firm will reduce its client base from nearly 650 to about 120. But, because 80% of its profitability comes from 20% of its clients, spinning off its smaller clients and changing its fee structure will actually increase net revenues. Once the transition is complete, the average account size will be $1 million, with a minimum fee of $10,000.
Del Monte's core technology is from Advent, utilizing Axys and ACD. Schwab is the primary custodian, with many others supported through ByAllAccounts' Custodial Integrator. Del Monte also recently outsourced the bulk of its reconciliation, performance and fee management/billing operations to a former employee. Del Monte is planning to use Trumpet's Assemblage product to collate reports and streamline statement preparation. A consultant handles document management.
Regulation
The regulatory environment is one of the primary reasons Del Monte is changing its broker/dealer relationship. "I cannot get away from the NASD requirements fast enough," Del Monte said. "Having to clear all my communications through a regulatory department is a huge impediment to growth." During the transition, the firm must satisfy both NASD and SEC regulations, but he expected that the dual-reporting period will last for only three more months.
Psychoanalysis and Portfolio Construction
When working with clients, Richard Del Monte tries to figure out what the client needs for the standard of living he or she wants. Hypothetical questions, such as "What would you do if you knew you had five years to live?" or "What would you regret most if you found out you had only had 24 hours to live?" allow Del Monte to get to the essence of what is most important in his clients' lives.
"I get the most amazing results when I've determine my client's most cherished goals," he said. "I found one client who really wanted to work overseas, and we were able to create a plan to make that happen."
Once the client's goals are identified, Del Monte builds a financial plan and portfolio. Del Monte walks the clients through market cycles -- using historical data and even newspaper articles -- to show how a portfolio will fluctuate in both good and bad markets. Goals -- college education, vacations, and retirement -- are identified and prioritized. Financial plans and portfolios are calibrated against the goals, to determine which can and cannot be met. Del Monte carefully reviews his clients' current and future tax liabilities, testing the plan under different tax bracket scenarios. Risk tolerance is also closely examined, because Del Monte needs to be certain clients can handle the risks in a portfolio that can meet their financial goals; if not, either the goals or the portfolio are fine-tuned.
"This aspect of the process is an art, not a science, and I rely a lot on my years of experience and sometimes gut feelings to get the right result," Del Monte said. "Some clients just want to swing for the fences, in which case I tell them I am not the right guy for them."
NaviPlan is Del Monte's primary financial planning tool, although the firm is also considering MoneyGuidePro, which works well with Del Monte's goal-oriented planning style. Del Monte selects mutual funds and ETFs based on research from Morningstar WorkStation and Schwab. Del Monte does not foresee expanding its portfolios to include SMAs, hedge funds, and other alternative investments, as these are too expensive for its clientele. To achieve diversification, Del Monte combines as many as 20 asset classes and sub-classes - ideally, ones that perform in an uncorrelated manner -- to achieve the desired risk and return. Model portfolios are created; Tamarac is used for rebalancing, to generate trade reports, and to submit the trades for execution. Because diversification results in underperformance in certain markets, Del Monte knows to manage expectations when times are good as well as bad. "A big challenge is dealing with both greed and fear," he said.
Automating the Office
Del Monte spends about $30,000 each year on technology; he believes this is significantly above average for a firm of only five employees. "There are always candidates for automation. Our biggest push is to get clients to covert to electronic statements. Paper statements are just dumb," he said. "I already have a virtual office and can work from anywhere, but I am looking forward to getting an iPhone, because it offers full-screen browser capabilities."
As clients convert their custodial relationship to Schwab, Del Monte encourages them to receive electronic statements to reduce fees and protect against identity theft.
Del Monte gives Schwab credit for improving its services through MoneyLink. To save time, new accounts can be funded through electronic funds transfers, and cash disbursements (for fees and distributions) can be done electronically, without forms. Especially helpful are alerts that notify Del Monte if the client has insufficient funds for a distribution; these alerts are timely enough to allow the problem to be corrected before the scheduled distribution.
Getting and Keeping Clients
Like most advisors, Del Monte relies almost exclusively on word-of-mouth for new clients. Cooking classes, sporting events and fishing trips are all used, and clients are encouraged to invite their friends. Del Monte is also developing a speaker series, inviting his clients' grown children to workshops to develop financial responsibility and money management skills among younger investors, and to "give their parents greater peace of mind that their hard-earned money will not be squandered by their spendthrift children." By expanding its use of Assemblage, Del Monte will be able to deliver customized reports, based on client preferences. An effort is underway to create client web pages, where they will see personalized content based on their interests and hobbies. Del Monte already offers clients daily on-line access to their investments (through a service offered by ByAllAccounts) - an essential part of cementing clientrelationships.
The Del Monte Advantage
Richard Del Monte has staked his firm's growth on strong client relationships, and it has paid off: He has retained nearly all of the clients he targeted during this transition period.
"I was really surprised about the transition process to becoming an independent advisor," he said. "I thought I could lose as many as half of my clients. Although new prospects immediately see the advantage of fee-only relationship, existing clients need to be sold on its benefits."
"I see the overarching trend in this industry to deliver service and communication which is increasingly personalized to the needs of my clients. That will require a technology investment, plus a lot of reconnaissance and networking to see what is successful among my peers."
Remember, if you have a question or comment, send it to .
|
|
|
