Wednesday, 26 March 2014 14:40 admin
Wela Strategies in Atlanta will take your castoff clients (but you should want to keep them).
Employing a strategy that is counter to the critical mass approach prevalent in the space, Wela has created a platform to service the Mass Affluent clients, those 33 million households with as little as $50,000 in investable assets. These are the clients left behind by the minimums many firms have in place.
Wela has created a program to service these clients profitably and is taking its story across the country, looking to partner with RIAs to find and manage the smaller accounts the industry has traditionally left behind as unprofitable.
“The industry is ignoring the easy doubles and singles in favor of the grand slam,” said Paul Scudellari, Wela’s business development specialist. “We believe growing via the Mass Affluent investor community will become critical as the ongoing generational wealth transfer picks up pace”.
Wela’s practice management partnership (PMP) offering enables other RIAs to efficiently serve these smaller relationships with low-cost ETF portfolios. The RIA would retain the client, but Wela would manage their assets while also producing white-labeled client communication materials. In-person meetings would be limited to only once a year, while the account’s portfolio will be rebalanced typically only twice a year.
Most mature advisory firms have stayed away from this size investor due to capacity constraints. Meanwhile, their growth may have become limited by increasing competition for high net worth clients. “We realize that serving the mass affluent investor isn’t for every firm,” Scudellari said. “But for many firms it could become an explosive new growth segment.”
Wela has built a business model that exclusively serves the Mass Affluent. In just the past two years the firm has added over $40 million across roughly 250 relationships. Counter to what the industry has preached, these assets have healthy profit margins. “We have created an offering to the underserved investor that can deliver the right level of service while also maintaining a viable long-term business,” Scudellari said.
Wela is an ambitious firm with its eyes set on bigger things that include new ways to reaching younger clients. For 15 years, it has used a local radio show strategy to attract clients and get its name out. But, with listener’s average age at 50+, “radio’s marketing punch will definitely fade,” Scudellari said, and the firm is working on a next generation web site aimed at a younger demographic that will use Mint.com-like planning tools.
The key to success with smaller investors is setting the right expectations with each client, and using a “High Tech – Low Touch” approach to deliver needed services while keeping firm expenses low. Wela wants to be the practice management partner that enables firms to serve this smaller investor market with minimal investment and risk.
“This market is huge, and desperate for attention,” Scudellari said. “We want to help RIAs serve the under-served, developing a new niche of high-margined business where they would least expect to find it.”’
This article originally appears on Beyond Alpha