Three Lessons from 20 Years of Serving RIAs

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

I recently caught up with an old colleague, Jim Combs. We met 20 years ago when I was running Charles Schwab's mutual fund clearing platform. He was managing trust technology and outsourcing solutions for SEI. In a funny bit of synchronicity, we learned that we're once again serving the same audience.

Jim is CEO of National Advisors Trust Company (NATC) in Kansas City. Like my own company, RetireOne, NATC works with Registered Investment Advisors. These geographically dispersed wealth managers have unique business models that make them disaggregated entrepreneurs who don't consider our businesses core to theirs. Attempting to serve an audience for which your offering isn't core to their offering can make for long, confounding cycles.

Along a pretty mean learning curve, Jim says that his work in the RIA channel has taught him three important lessons that have helped NATC grow. And its growth – from an advisor network of 1,500 two years ago to over 55,000 today – has been remarkable, especially when you consider that they've achieved it among an audience for whom adoption of trusts is incredibly low: roughly 12%.

1. "Declare a major"

Jim arrived at NATC in 2013. Prior to that, he says, "National Advisors Trust was all about raising capital, and oh, by the way, we were a service provider, too!" The message was inconsistent, and often misunderstood.

Though they received their charter from the federal bank in 2001, NATC wasn't a trust company yet. They managed trust accounts but functioned primarily as a custodian.

"The brand image of us was pay-to-play. People would hear about us. Then we'd see them at conferences where they'd say, 'I'm not interested in that model.'"

In his first 100 days, Jim decided, "Okay. We have to declare a major. We're going to be a trust company." It was a pivotal decision. The key to the transformation and successful execution was a firm commitment to work within this niche serving independent financial advisors, coupled with the power of the "directed" trustee model.

As opposed to the traditional "delegated" trustee model, the "directed" trustee model allows advisors to be named on the account as investment advisor. This is a key distinction for RIAs, because, as Jim says, "It's their relationship and it's sticky, because they're written into the document." This isn't true of the "delegated" model, where another entity like a bank may control management of the asset.