If relationships matter, focus on them.

We value our relationship with you.  It’s a common sentiment I hear all the time.  The problem is, there seems to be minimal commitment.  Distributors new found focus on RIAs often smells too much like the idea of the month.  In the past month I’ve had two disappointing phone calls from key contacts at fund companies with whom I do business. In one case, it was a wholesaler letting me know that his territory was being re-aligned and I was being given to the independent broker-dealer wholesaler.  Although he was not happy about it, he said there was nothing he could do.  I felt like a piece of meat getting traded at auction.  In the other case, it was a guy telling me he was being let go because the firm was refocusing it’s efforts elsewhere.  I’m sure that’s not the message they want to send but they essentially severed my only point of contact with the firm.  And no one has called me since.

 Successful distributors in the RIA space do a couple of things well.  First, they position themselves for the long-term.  We tell our clients that they should have a rolling 5-year commitment to their portfolio.  If they can’t, we need to reevaluate their investment plan and perhaps not invest at all.  I suggest distributors think the same way.  Announcing a new “initiative” focused at RIAs or severing relationships with constant territory realignments does not scream long-term.  Neither does “revamping the investment team” or “reorganizing senior management”.  For us, productive relationships follows a lengthy courtship.  It’s not hook up night at the club. You know, you might look good now, but I might regret it later.

 Successful distributors do something else well, they diversify, and I don’t mean portfolios.  They diversify the relationship.  The more points of contact I have with a firm, the more the relationship becomes company-centric and the less it becomes about one personality.  You know the last time I got a call from someone at the divisional or national level of a sales staff?  It was NEVER.  And talking to people on the investment staff at some firms can be like trying to get a hold of the almighty himself.  Don’t worry. I know you think I’ll call the portfolio manager ten minutes before the market closes to ask him for a prospectus.  But can I get a conference call, email, something?  If I’m given one point of contact and it changes, it can be like starting at ground zero.  If I have 5 points of contact and you change one, it’s still business as usual. 

As has been said many times before, this is a relationship business.  They can be built over the phone, through email, social networking sites, snail mail, and in person.  The problem is too many distributors only pay lip service to the concept, not wanting to put in the time, and messing up the ones they do build.  RIAs place a premium on their relationships with their clients and their vendors.  It’s one of the key things that set them apart from their competition.  The challenge distributors have is that these relationships are hard to earn.  The reward is significant loyalty and consistent cash flows in up and down markets, and over long periods of time.  But there are no shortcuts.