Not Every Wealth Management Firm Is a True Boutique

Standards Every ‘Boutique’ Firm Should Meet for Accessibility, Investment Specialization, Flexibility and Retention

Virtually every independent firm likes to tout the high-touch service they provide advisors and, by extension, end investors. Many have even settled on a word to describe it – boutique.

Others, including exceptionally large firms with thousands of advisors spread across all corners of the country, settle on ‘boutique-like.’ But the message is the same in each instance: Our service separates us from our competitors.

And, truthfully, you wouldn’t expect anything else. After all, no business – wealth management or otherwise – will go on record saying, “Our service is a one-size-fits-all model, but we have a strong focus in other areas.”

To be clear, back-office operations do not make a firm boutique. Technology has been the great equalizer over the past 10 years, with successful wealth management firms of all sizes and business models now offering a similar digital experience. The same goes for comprehensive regulatory and compliance systems and competitive clearing services.

It all begs the question of what boutique really means. More flexibility? Increased focus on building relationships? More customization? Sure.

Yet, at the same time, these concepts are subjective. So, how can you know if a firm is truly a boutique enterprise or just using a market-tested buzzword? To understand the nature of a firm, consider the following questions.

What is the ratio of home office staff to advisors? And how accessible is the senior leadership team? 

Creating an exceptional service culture is paramount for a boutique firm. A firm dedicated to its advisors should have a low advisor-to-staff ratio, making it easier to build deep relationships and customize services for each advisor’s unique practice.

An advisor-first mindset should be instilled from the top and permeate throughout the organization. And speaking of the top, oftentimes, a boutique firm’s senior leadership team will participate in the actual hiring process of an advisor.

Service is more than call times

This same group should serve as a resource for those advisors who want to pick up the phone and talk about strategy or share best practices. The service culture of a boutique firm is less about phone trees, call times and rep codes and more about knowing an advisor and their business and taking personal responsibility for solving issues and ensuring successful outcomes.

Does the firm have specialized areas of investment and planning expertise? 

Undoubtedly, as the industry has become more consolidated, more and more firms, by joining forces, have developed enhanced capabilities. But it’s an open question whether those capabilities are differentiated. In many cases, it’s a matter of playing catch up.

Don’t be blind to fixed income!

One area where many firms have fallen behind is fixed income. Because stocks had performed well for so long and interest rates were near zero, many clients – and advisors, for that matter – turned a blind eye to this asset class.

But now, with rates on the rise and equity performance lagging, it’s impossible to ignore the role bonds play in a well-crafted financial plan. A strong fixed-income desk can be a terrific resource for advisors and help set a firm apart.

How flexible are a firm’s offerings? 

Are your hands tied?

Boutique broker-dealers (typically privately owned) answer to two core groups: the advisor and their clients. As such, these broker-dealers can tailor product offerings and service levels to better meet the needs of these groups without having their hands tied by other stakeholders.

Advisors at boutique firms are free to make decisions that are in the best interest of their businesses and free to serve their clients as they see fit. 

How are the firm’s retention and revenue per advisor numbers? 

Advisors vote with their feet

Nothing is more illustrative of how a firm operates than the satisfaction of its advisors. How long do the advisors stick around? Since advisors tend to vote with their feet, if retention numbers are poor or even average, what’s the likelihood that the service is anything but mediocre? It’s a similar story for performance. If advisor average production numbers are high, the level of service likely is as well. 

Tim Edwards, Co-CEO &
Managing Partner,
Prospera Financial Services

In an industry teeming with buzzwords, there is perhaps no bigger one than ‘boutique.’ Yet that doesn’t mean we should shelve the term. We just need to define it and hold firms that use it to a higher standard because caring for and providing customized services to advisors is something every firm should strive to do. 

Tim Edwards is the Co-CEO and Managing Partner of Dallas-based broker-dealer Prospera Financial Services

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