Finding a financial advisory firm that functions as a true enterprise and is innovating after 50 years in business is like finding a needle in a haystack. They are rare. Why? It may be harder to create, staff and bankroll the company than meets the eye. But when properly executed against a well-defined strategy, this business model clearly works – and has legs.
Case in point: EMM Wealth, a fee-only wealth management firm with 36 employees located in New York City. EMM is celebrating its 50th anniversary and, while the firm has recently gone through a retooling —almost like a company reboot under the professional guidance of the two relatively-new co-CEOs—this multi-family office with a full range of financial planning, investment management, tax strategy and legacy/trust advisory services, still adheres to its roots while growing new greenery on the branches of its well-established company tree.
A Needle in the Haystack
In a visit to EMM’s beautiful office space overlooking Midtown Manhattan, I made the rounds and spoke with some of EMM’s top executives to glean additional insights about what it means to run a true enterprise business model. David Aaron and Lloyd Abramowitz, the co-CEOs who have been with EMM for 9 years and 21 years respectively, shared how they are building for the next 50 years.
“While EMM is indeed 50 years old, we are actually in our second iteration of the business,” Aaron explained. “The key principles remain the same, to serve our clients – many of whom have fairly complicated financial lives—in a holistic manner without conflicts of interest. My father and his partners, who were the original founders, were generalists. They would go deep and were great problem solvers.”
Like a lot of financial advisory firm founders, they relied on their personal skills and knowledge to address both running the business and meeting client expectations. That approach served well for a long-time. However, over the past 15 years, the business has become a lot more sophisticated: Understanding the nuances of managing a trust, building and maintaining a portfolio, understanding the risk of the portfolio, understanding the risk of alternative assets, creating a sophisticated financial plan – all that is more complicated.
Aaron summarized the client-service model this way: “Our clients like having a place where they can get all their financial, tax, business and estate planning questions answered. We found that in order to keep up with changing client expectations, we wanted to have specialists in every area. Today, we have specialists like Susan Hartley Moss who just earlier today uncovered a flaw in the writing of a legal document, a giant loophole in what was meant to protect the family. We need that kind of expertise to cover all aspects of our clients’ financial lives.”
So the change this management team made from the prior generation was to build internal expertise across multiple specialists who work together to deliver world-class advice to clients with complex financial lives. Clearly, this approach represents a more costly, higher-risk approach – as the “build vs. outsource” decision almost always does. Aaron and Abramowitz, as the new co-CEOs, agreed upon a long-term vision and understood that, in addition to adding talent, there would be other changes required to keep the new team members motivated.
Unlike some other business models in the financial services industry, clients may have a primary relationship manager but are served by the whole team. During my visit, it was immediately obvious there is a sprit of camaraderie at EMM; they don’t operate in silos. While they have an investment team, a financial planning team, tax, insurance, trust and estate planning professionals on staff, it’s common to see members of multiple functions collaborating on an individual client solution.
There is also a clear career path for advisors who have demonstrated effectiveness in terms of client service relationships, technical knowledge and business development. “When I came here we had some really talented people – maybe even more talent than we should have had,” said Aaron. “And they were really, mostly, all in a client support role. We had turnover every two to three years. It was a natural thing. But you can’t be investing in the human capital side of things and then let good people drift away. In the past, the service people never really got to know the clients; they were not learning about how to handle a relationship or client’s needs, so we started switching that up.”
Today, EMM starts at a very early stage where the budding employee sits in client meetings and takes notes, does the follow up, and helps to implement the plan. The firm operates under an assumption that everyone in client-facing roles should have the opportunity to move up progressively in an even more responsible client-facing position at some point.
Those who are ready to move up, lead two or three meetings in any given year, with one of the more senior executives in the room. The senior person helps the emerging advisor prep for each meeting ahead of time. Some of the emerging advisors have started to bring in clients to the firm. “We think that’s a model that can work,” Aaron said. “You don’t necessarily need to be widely connected to do that, but if you do your job well and earn the trust of the clients, and you earn the trust of other professionals who service the clients, you will be successful in helping us expand the firm.”
So the firm has embedded career development within the client-service process, as part of the day-to-day routine. This approach works well for small businesses that want to support professional growth for their employees, but perhaps lack the scale to create stand-alone training programs. “The way to build a strong firm is to have a diversified group of client-facing advisors,” adds Abramowitz. “We think 6-7 advisors is about the right number for our business right now.”
EMM is investing in talent ahead of when they’ll be needed to support planned growth –
and this is a requisite for sustaining the True Enterprise model. It’s also a distinction between most Ensemble and Enterprise models. Whereas Ensemble models tend to add staff when they’ve reached capacity, or perhaps when they’ve added another rainmaker/partner to the mix, the True Enterprise model invest well in advance of the need. We clearly see this in how EMM operates, thinking about the next 50 years.
Clients Are Clients of the Firm
Clients that come in do not “belong” to an individual advisor building his or her own clientele. “Our advisors are not paid on a book of business. They are paid salary, plus bonus,” said Abramowitz. “Plus they receive an incentive if they bring in business.”
The goal is to make the client experience consistent, regardless of who’s assigned to the client’s account. There is one investment platform with an investment committee that drives the investment selection process. Some of the client-facing advisors sit on the investment committee but not all of them. “We are open to thoughts and have changed investment models based on dialogue, research and debate,” Aaron said. “For instance, we are doing significant work right now on how tax reform is impacting investments and then we share those thoughts with everybody in the firm; so that’s how we allocate in general. Clients will have different allocations; they are non-discretionary, so clients can reject certain managers if they take issue with any particular recommendation.”
EMM, like other Enterprise Model firms, has a definable client-service experience, which is consistent regardless of which team member leads the relationship. This is a key trait among successful Enterprise firms; it requires well-documented processes and management oversight to be sure things are working as planned. For many would-be Enterprise firms, developing and maintaining a common client service model is one of the most challenging hurdles to overcome. In part, because often no two (or more) advisors can agree on the elements of the service model and when they do agree, there is the need to invest in talent to support the vision. EMM has clearly defined the model and has been willing to invest to make it real.
New Plans for Business Growth
Consistent with the operating philosophy of having the right talent in the right roles, EMM is investing in business development talent to lead that activity. Randy Kauffman, a tenured financial professional, has for approximately three years been focused on strategic planning for the firm; however, “before Randy” EMM did zero marketing. “Some may wonder how we got to this many years without it,” Aaron laughed.
“The three original founders put together a great business,” explained Abramowitz. “They felt that if we did great work for our clients, our clients would refer us. In that day and time, before there was the Internet and robo advice, that worked perfectly. But today you can’t just sit back and count on one’s good work alone to generate automatic referrals. It’s a different era – and we need to grow the firm to better serve our clients. Now, we are very much embracing the idea of business development.”
“We are, however, being very strategic to ensure culture and fit are right,” Aaron added. “We are not going to be doing big glossy ads, for instance. We try to be sophisticated and not pushy. We have a nice website, and use a little social media to share information. We might host an event on biomedicine, or philanthropy, or happy families and legacies. We build awareness by giving talks and sharing our ideas through the written word. We work at creating the right presence. We are proud of who we are and don’t want to be a Wall Street firm. We are proud being a boutique and unbiased. Other professionals love us because they feel comfortable. And clients have started to refer more. Part of it is just letting them know we are open and able to take on more business.”
Smartly, EMM has also aligned compensation to support growth. “Everybody in the firm gets incentives for introducing new business,” Abramowitz explained. “But staff is hired, first and foremost, to service the firm’s clients. We provide training for all facets of an individual’s work here. Going forward, we will be putting more emphasis on training all staff members on strategic business development, but the focus will be to help them recognize how to build on the relationships they’re managing, rather than asking them to go out and find new clients on their own.”
Planning for the Next 50 Years
Now that EMM has put in strategic business development and intentional growth, they are thinking about changes based on the next generation coming in. “We didn’t get to 50 years without some forward thinking and planning – and we’ll need a strong vision for the next 50 years,” Abramowitz said. “It’s really important to us that we continue to deliver custom service, with a boutique experience, building a strong personal relationship with the client where we not only know them but they really know us. Our clients are used to us touching base with them, quite a bit more than the industry norms. That’s part of our DNA.”
“We are thinking more and more about the digital experience and the technology we use,” Aaron added. “We rolled out a client portal last year and are working to get clients engaged. That’s going to become the normal experience and we know we have to deliver that, so we are investing our resources.”
“I am prone to being paranoid about everything, so I do worry about this industry and the future,” Abramowitz said. “I have two boys: one is 20 years old, the other is 17 and both are interested in this industry. I want EMM to be the example, so that they can identify the kind of place where each can find proper mentorship and develop the necessary skills that make for a meaningful career. However, I’m concerned because there are a lot of challenges out there and a lot of competition. How do we keep delivering and adding value to the client experience? Even though last year was our best year in 21 years, I worry that younger people are gravitating towards a less personal, more digital framework. We need to be one step ahead.”
The good news for EMM is that they actually are one-step ahead because they’ve consistently invested in their business ahead of capacity constraints and created a unified client experience. Those, as you will recall, are two of the hallmarks of a True Enterprise.
As you ponder your choices and cast out mentally, thinking about how your vision might be achieved, ask yourself these important questions:
- Are you investing in your firm with an eye on the next 50 years, the next 10, or just the next quarter?
- How will you stay one step ahead?
These questions are worth some reflection. While each of the three Super Models has merits, smart advisors will consider their own strengths, vision and time horizon before attempting to shift to a new business model.
Read the Super OSJ case study: Super OSJs, Like Stratos Wealth Partners, Offer “Supported Independence” to Entrepreneurial Financial Advisors
Read the Super Ensemble case study: Super Ensembles, like Crosspoint Wealth Advisors, Provide a Great Example for Solo Advisors and Shared Support Silos Considering their Options