Optima Blog

Crypto Goes Mainstream – Sort Of

By Peter Ward, Senior Consultant

What some believe to be a historic move for the crypto industry, this week marks the launch of the first bitcoin-linked ETF. The much-anticipated ProShares bitcoin-linked ETF made its official debut on Tuesday, October 19. 

A measured approach
Not surprisingly, the SEC appears to be exercising caution when it comes to offering cryptocurrencies to the masses, as this initial approval is for a futures-linked bitcoin ETF only. This means the ETF will track bitcoin futures that trade on the Chicago Mercantile Exchange (CME), unlike a “spot” crypto instrument where an investor would be buying shares in a fund that tracks the current price of bitcoin directly. To some, this is a moderate step in the right direction, while others in the crypto community would rather see an ETF backed by physical bitcoin, which could offer lower overall fees to investors.

A flood of competition
The SEC approval is expected to result in a rash of subsequent crypto-related filings from other ETF providers. According to CNBC, these include Invesco Bitcoin Strategy ETF, the VanEck Bitcoin Strategy ETF, the Valkyrie Bitcoin Strategy ETF, and the Galaxy Bitcoin Strategy ETF. It remains to be seen when and if the SEC is prepared to approve a spot crypto ETF, as market manipulation is an ongoing concern.

For now, approving a bitcoin-linked future ETF provides the SEC with the assurance that comes with the regulated futures market. Should these ETFs prove successful, we may see additional approvals for other crypto-linked instruments on the horizon.

By the Numbers

By Tracy HM Hubbard

We love numbers—analytics, metrics, more analytics, useful information from websites, social media, and digital advertising. We want to share some astronomical numbers that are too fun to ignore. This is particularly pertinent in light of Monday’s six-hour outage of Facebook, Instagram, and WhatsApp and the ensuing uproar.

Domo came out with its ninth Data Never Sleeps report. The report tracks activity by the minute (worth bolding and repeating because we are talking about a minute. One. Minute).

A few highlights:

Some more interesting numbers from other sources:

So, what do all these numbers mean? They mean you have to have engaging quality content on multiple social media platforms. What the numbers don’t show: with all this social activity online people are yearning for actual contact… a call, a card, a coffee.

I’ll leave you with a case study of great marketing. I was looking for a ring, and because of those pesky little internet cookies, jewelry designers started showing up in my Instagram feed. From that feed, I found a ring I loved and ordered it. What was truly meaningful, however, was the handwritten note in the package thanking me for my purchase, personally signed and accompanied by a smiley face. This company leveraged the full capabilities of the internet to win a new customer and when they did, they used the human touch to elevate the client experience.


1 https://kinsta.com/blog/linkedin-statistics/

2 https://www.smperth.com/resources/instagram/instagram-statistics/

3 https://www.emarketer.com/content/facebook-ranks-last-in-digital-trust-among-users

Big Fish Keep Eating Little Fish

M&A firm DeVoe & Company recently released new data on transaction volumes in the RIA market. For September year to date, 160 RIA deals have closed. With three months remaining until year end, 2021 has already topped 2020’s record full year total of 159 deals. The chart below shows the accelerating growth in M&A transactions in the last decade.

Market dynamics continue to support rising deal volumes. On the demand side, aggregators are becoming more aggressive, and less price sensitive, as they race to build the necessary volume to compete with other rapidly expanding firms. Although a seller’s market, supply also seems relatively healthy. Mid-sized RIAs with aging managers face being forced to expand operations to remain competitive or sell out in a period when markets are favorable, and demand is high.

We expect the pace of consolidation in the RIA market to continue in the near to intermediate term supported by strong financial markets, abundant private equity involvement, the need for efficiencies of scale, and competitive necessity.

Winning the Corporate Branding Game

A challenge that many wealth managers grapple with is how rigorously the firm’s brand should be enforced and applied versus allowing teams’ independence and flexibility to “express” their individuality.

This issue arises for those with multiple locations and/or teams, especially when there has been an acquisition or lift out. Wealth management is largely a people business and deciding who to work with depends as much on personal fit as on solutions and services. And advisors can make compelling cases for maintaining their own independent brand.

However, a strong corporate brand has many advantages:

Creates and drives enterprise value
A firm that operates and presents itself as a unified advisory firm has far greater value than a firm that is a group of independent teams using a platform to conduct business.

Is more profitable
The cost of maintaining multiple brands is expensive and time-consuming, requiring more resources than a single brand model.

Builds a collaborative culture
A common brand helps to unify organizations and encourage cross-team efforts.

Creates a more consistent client experience
By developing an overarching brand and value proposition, with a common solution and service set, the client experience will be consistent, regardless of entry point or advisor.

There are ways, though, to build buy-in to a consistent brand and provide opportunities for personalization. Soliciting input from stakeholders during the brand development process helps individuals feel they had a say in the brand. Showing progress along the way also builds a sense of participation. Within your brand, allow certain pieces to be personalized by advisors, such as emails and quarterly letters. If an advisor has a certain area of specialization, create a piece specifically focused on that specialty and the solutions offered. This demonstrates support of an advisor’s unique knowledge set, while also institutionalizing that knowledge for use by others. With careful planning and communication, you can balance the need for a strong overall brand with an advisor’s preference for brand independence.

Customer Disengagement

Customer engagement is a critical revenue driver which companies constantly seek to optimize.

Traditional engagement practices
Auto insurance companies for instance, which are governed by state regulators, not a federal agency, have been in a war for customer engagement for years. Each major provider offers and heavily promotes its own app where users can see policy information, receive important updates, download insurance cards, request roadside assistance, and more. As the theory goes, the more engaged the customer is with the company, the more inclined the customer is to stay with the provider and even purchase other insurance products. The same theory applies to countless other companies in other industries.

Considerations for financial services firms
Not so with financial advisors and brokers. At least that appears to be the thinking of SEC Chairman Gary Gensler. The agency recently issued a request for information and public comment on so-called “digital engagement practices” (DEP) used by the financial services industry. These tools include behavioral prompts, differential marketing, gamification, and other design elements or features used to engage with retail investors on digital platforms, as well as the analytical and technological tools and methods. According to the SEC announcement, the Commission is “hoping to learn what conflicts of interest may arise from optimization practices and whether those optimization practices affect the determination of whether DEPs are making a recommendation or providing investment advice.”

The SEC request may give pause to a host of wealthtech providers who are constantly looking for ways to help financial advisors drive deeper engagement with their clients through robo offerings, digital onboarding, and other interactive applications. It appears there may be limits to how far these tools can go before advisors run afoul of regulations designed to avoid conflicts of interest and protect the end investor. While we don’t expect digital engagement practices to disappear from financial advisors’ toolkits anytime soon, the increased SEC scrutiny may make advisors more discerning in their choice of tools and how they are deployed.

Embracing the Next Generation in Wealth Management

Trillions of dollars are expected to pass down from ‘Boomer’ parents to their heirs over the next 25 years in the great wealth transfer, and advisors who establish relationships with their clients’ children will be better positioned to retain these assets. 

Delivering value-added, educative communication on topics the next generation can relate to is an effective, low-cost way to create trust and build connections for the future. Here are four ways to leverage your insights to reach the next generation.

1.Use email. When you meet with clients, ask if you can send their adult children information about wealth management. Create a targeted ‘next generation’ email list and periodically share your thoughts on a range of relevant topics such as ESG investing, philanthropic giving, tax-advantaged savings, debt management, launching a business, and negotiating a salary.

2.Update your website. Every email should have a strong call to action that includes a link to your website so that recipients can learn more about you. In addition, emails should be reformatted and posted to your website so that those who may have missed previous emails can find them there; and website visitors who are not on your email lists see that you have expertise on issues important to them.

3.Be social. Informative social posts and videos reach this audience where they get their news: on Instagram, Twitter, LinkedIn, Facebook, and YouTube. Invite clients and their families to follow you, and post information that can help them achieve their goals. 

4.Hold events. In-person and virtual events allow you to get to know your clients’ adult children and for them to get to know you as a reliable source of information about wealth planning. When the time comes for them to inherit your clients’ wealth, they will feel confident that you understand their situation and have what it takes to guide them. 

It’s Just a Formality

Have you ever called to make a doctor’s appointment and answered multiple questions about why you’re calling? At the appointment, they hand you eight pages of overly Xeroxed forms with the same questions you already answered. Then the nurse or doctor again asks you the exact questions that were on the form. This is what we would call a bad brand experience.

Scenarios like this happen in wealth management as well. Forms are the last thing firms think about as brand building material. But if they are cumbersome (a nice word to describe ugly and difficult) as well as ask questions you’ve already answered they leave a bad impression. Tedious is not the way you want to be described when onboarding a new client. 

Formulating tips:

• Collect only the information you really need

• Don’t use decorative fonts on a form (those are reserved for elementary school forms)

• Don’t send electronic forms that are in Microsoft Word. Once your client starts typing, Word shifts everything and sometimes makes forms illegible

• If you are going to use Word to build the form, create a PDF so the fields stay static when the form is filled out

• Give your forms some air; put space between questions, margins on the page that are at least 1 inch, and sufficient line spacing

• Don’t use a form that has been photocopied so many times that it looks like it was made in the 80’s — the content ends up a little crooked, some words are bulky or smudged (you know these forms, they usually come from your kid’s elementary school)

The best format
Your forms are an extension of your brand. Ideally, have them professionally designed and made into a fillable PDF. That way, your client can fill them out electronically or print them. Include only your logo, page numbers, and easy-to-understand questions that do not include a lot of financial lingo that a client may not understand. And remember, you also benefit from a well-designed, well-thought-out form — all the information you need will be easily accessible. If you can’t have them designed, research and review some of the online form-building applications.

Forms are the last thing companies consider when thinking about their brand. But every touchpoint with your client can strengthen or weaken the client experience and their perception of your firm.

Are Your Clients Ready to See You Again?

Why not ask them? One of the critical issues that organizations in every industry are grappling with is getting together in-person. Gatherings could be meetings, group presentations, social gatherings, or even conferences.

With the macro landscape constantly shifting, it’s difficult to know what activities people are comfortable resuming. Rather than guessing or deciding on behalf of your clients, a little research may be in order. Many schools, religious organizations, and other institutions are polling their “clients” to ask this same question, and it equally applies to wealth and asset management companies. Conducting research can have benefits beyond just getting information related to the targeted topic. We find that it:

Increases communication. Whether it’s a one-on-one interview or a focus group, research provides one more way to connect with your clients. This helps keep your firm top of mind in a positive manner.

Builds buy-in. By asking your clients what they think and want, they know their voice was heard. They feel like they contributed to the end product, making it more likely to be enthusiastically accepted.

Creates a sense of partnership. Research helps to build a sense of camaraderie and community. This helps to build client loyalty and foster retention.

Uncovers unknown perspectives. Regardless of what you are researching, in our experience, one always discovers thoughts, suggestions, or opinions that are unexpected, even though clients often assume you know.

A bit of research can go a long way to improving client satisfaction. Of course, regardless of what the results tell you, it’s always important to be sensitive to the individual client’s preferences. If his or her preference is to stick to Zoom, even though most people want to meet in-person, then Zoom it is!

Don’t Ignore the Mass Affluent

For many advisors, addressing the needs of the mass affluent is not high on their priority list. Many choose to focus their efforts on serving the more complex needs of the HNW and the UHNW segments.

Many believe the mass affluent segment tends to be DIYers when it comes to investing and, therefore, are better served by a robo offering than a traditional full-service advisor. In fact, a new report by Phoenix Synergistics titled, The Mass Affluent and Evolving Investment Strategies corroborates what many of these advisors believe – at least partly. 

The report finds that more than half of mass affluent investors, defined by Phoenix Synergistics as individuals with between $100,000 to $1MM in AUM, indicate an independent approach to investing, with those in the 18 to 49 age segment significantly more likely to report an independent approach. However, as the chart below shows, a solid majority (74%) of mass affluent consumers consult some type of financial advisor.

Furthermore, according to the report, 84% of mass affluent consumers indicate they need financial advice or guidance related to some type of financial goal or purpose. The most common type of advice relates to retirement accounts/planning and helps with selecting savings/investment options. Mass affluent consumers also expressed fears about the pandemic and how it will affect their investments. Some, particularly younger mass affluent consumers, expressed an interest in either reallocating investments to more-secure insured accounts, reallocating funds to less-volatile holdings, or selling holdings to avoid further losses.

Clearly, many financial advisors will continue to find HNW and UHNW individuals to be their most prized clients, well suited to take advantage of the breadth of services offered. A product, sales, and service targeting the mass affluent, of course, requires different resources and solutions. However, for those advisors that develop a mass affluent offering that can be delivered cost-effectively and profitably, they may be able to realize a significant opportunity.

The Cleveland Indians Guardians

Change is difficult, especially for sports fans who religiously worship their teams and don apparel with their logos. So it’s not surprising that when the Cleveland ‘Indians’ management recently announced the team will become the ‘Guardians’ after this season, the rebrand was met with mixed reaction.

Team owner, Paul Dolan, said the decision was spurred by the team’s desire to do the right thing. And many fans are quite supportive. However, others believe the new name takes political correctness too far. While only time will tell how successful Cleveland’s new name will be, here is what we believe management is doing correctly, and how its strategy can be applied to rebranding financial services.

1.    Management knows its audience. About 40% of Major League Baseball fans are minorities,* so the team wants to be inclusive and respectful. In addition, the team conducted market research before choosing the new name, speaking with fans and civic leaders about what it means to be from Cleveland. Loyalty, pride, and resilience were the characteristics most cited and guided the team’s selection of the ‘Guardians’ name, along with inspiration from the Guardians of Traffic statues on the Hope Memorial Bridge, just outside Progressive Field. Cleveland pride informed the decision to emphasize ‘Cleveland’ as the best part of the team’s name.

2.   Management retained what was working. To maintain a level of familiarity, management kept the same red and blue color scheme and similarly angled script font. The ‘Chief Wahoo’ logo was removed from the uniforms in 2018 and replaced with a new logo inspired by baseball and the wings on the guardian statues.

3.    Management communicated with empathy. In a video sympathetically voiced by the very likable Tom Hanks (a big Cleveland baseball fan and star of the 1992 baseball movie “A League of Their Own”) that was shared on social media, the team took a position of unity and inclusivity, giving a nod to their community as ‘forward looking’ and a ‘city on the rise.’

The decision to rebrand should not be taken lightly, whether you are running a sports team or a wealth management firm. Although you may have established equity within your brand, times change. If your brand no longer represents your mission or differentiates you from the competition, it may be time for a refresh. A successful rebrand will resonate with your audience, keep what’s not broken for familiarity, and let constituents know why and how the change will take place. It also helps to win, and if Cleveland wins the World Series, all will be forgiven.