DISRUPTION: AssetMark Executive on Outsourcing and Practice Growth

Matt Matrisian, SVP of strategic initiatives at AssetMark, is passionate about the topic of advisory practice management, enough so that he wrote a 300 page book on the subject; chatting off-the-cuff with PLANADVISER, he argues outsourcing is the way of the future.

Matt Matrisian is an advisory practice management expert and senior vice president of strategic initiatives for AssetMark, a financial services technology firm dedicated to supporting the adviser industry through outsourced investment management and practice support capabilities.

In the role, Matrisian provides leadership and oversight to AssetMark’s Practice Management, Digital Channels, and Strategic Initiatives teams. Through these, he leads the development of thought leadership and digital resources to support advisers and their businesses in areas such as sustainable growth, mergers and acquisitions, human capital, and technology.

Recently, Matrisian sat down with PLANADVISER to continue our “DISRUPTION” series, aimed at examining pressing practice management and client service challenges facing defined contribution (DC) plan and wealth advisers in the marketplace today. In particular, Matrisian is quite a strong advocate of advisers outsourcing the processes surrounding portfolio management, but he says there are quite a few other opportunities to benefit from outsourcing as well.

PLANADVISER: Given your interest in practice management topics and the subject of outsourcing, it makes sense that you would have joined up with a firm like AssetMark. Can you explain your role at the firm and how your team interacts with advisers on a daily basis?

Matt Matrisian: I have been with AssetMark for a little more than eight years now, and currently my responsibility extends over our business consulting team, which includes our advisory practice management team of consultants working out in the field. They all report up to me, and we drive a lot of thought leadership for the company. Today, much of our time is spent doing consulting with independent registered investment advisers (RIAs). We try to help them with best practices, whether that is around human capital, business management, operational efficiency, or branding and marketing.

Overall, there are many different discussions we find ourselves having in the marketplace when it comes to outsourcing and practice efficiency; it depends a lot on the nature of the adviser and the firm with which we are speaking. In an important sense, however, a lot of the conversations we have are similar, because they are about advisers contemplating major behavioral changes they may have to make in the near- or mid-term future.

Frankly, there have not been all that many new concepts or new ideas to emerge in practice management over recent years—but what is clear is that advisers need help understanding what these concepts mean for their daily work and their practice offerings and team structure. To the extent that advisers buy into these behavioral changes, moving away from investment processes in favor of client relationship management, they will see significant changes in their business. A lot of people use the analogy of fitness and working out—we all know what will make us healthier, but that is not enough. You need to embrace the lifestyle and make behavioral changes. The same is true when it comes to advisory firms and how they think about the future; the evidence is pretty clear for what works to promote growth and what does not.

PA: And when you are talking with advisers out in the field, are they struggling to grow? Do they see outsourcing as a means to achieve new efficiency and better growth potential?

MM: The picture is actually pretty complicated. What we are seeing from an increasing number of advisers is that they are not necessarily growth challenged. Rather, I should say, those advisers that really want to grow and who put in the necessary effort are in fact seeing strong success in gathering new assets. Much of this growth is coming from the rollover market and from referrals, I would say.

Now, when I say not all advisers want to grow, what I mean is that there are clearly advisers out there who are still more comfortable in what you can call a ‘lifestyle practice.’ They are not actively going out to beat the bushes expeditiously, so to speak, and they are not seemingly concerned with building out great scale in their business. Other advisers are actually focused on growth and are trying to accelerate growth in their business, and they are having success in a couple different ways.

One, as you would expect, they are leveraging their referral networks. Two, they are creating a voice in the marketplace, perhaps through social media channels and by leveraging digital thought leadership components—or even through traditional presentations. Our conclusion is that, any time good advisers get in front of prospective clients, we see they have a real chance of winning new business. The third growth engine is that more advisers are focused on the rollover market. We are seeing advisers being able to leverage their 401(k) and plan sponsor relationships with great effect, even as the regulatory framework is shifting.

Stepping back, though, the bigger issue for a lot of advisers who are focused on growth is how to build efficiency as you grow in scale. We are hearing more and more from advisers that the issue of fee compression continues to come up, putting the emphasis on the efficiency of serving new and old clients alike.

PA: What concerns and points of optimism do you hear from advisers when having this discussion about fee compression, scale and efficiency?

MM: One thing that is clear is that if the adviser doesn’t have a strong value proposition, then the question of falling fees becomes even more challenging for them to address. So we are doing two things in an effort to help these advisers. First we are helping advisers build out and demonstrate their value proposition, structured around a goals-based financial planning approach. And then, of course, we are focused on helping them add value to the client relationship through quality service support. We see clear evidence that when advisers can do both of these things effectively, add value and demonstrate the value, they can achieve strong and sustainable growth.

That being said, the advisers that are more investment-planning centric, their fee structure is starting to be compromised the most, alongside the commoditization of access to quality investments and model portfolios. From this perspective, we are seeing real fee compression going on. It is creating major challenges for advisers when they are still focusing their value proposition on investment management.

PA: It sounds like you would strongly agree with industry research reports showing that advisers focusing on ‘client service’ or ‘relationship management’ are proving themselves to be able to grow faster and more efficiently than their peers still focused on the traditional tenants of investment management?

MM: Absolutely. As we are talking with advisers in the field we are constantly touting the positive aspects of outsourcing. Outsourcing is a way for advisers to boost their value proposition from the investment perspective while also securing the operational efficiencies they must build into their business in order to survive profitably for the long term. Especially in the realms of compliance and general operations around investment due diligence and recommendation suitability—all of these are ripe for outsourcing.

Supporting this outsourcing is what AssetMark does at its core, so I am coming at this from a certain perspective, but I believe a lot of advisers will continue to draw the conclusion that outsourcing is becoming a smarter way to go in these areas. We want to help advisers understand what gaps they have in their business, and how do they go about filling those gaps with the right people, the right roles and the right processes. It’s all about getting the proper tools in place, the right CRM solutions and procedures.

If advisers can build proper workflows around the outsourced services, they will be amazed by just how much time and effort they can save on the investing and client service process, freeing up much more time to focus on drumming up new business. Again, the deeper theme across this whole conversation is that advisers have to focus more on relationship management and on defining and proving their value proposition. They must move away from spending time and effort on the repeatable and outsourceable tasks that might previously have been the focus of a traditional advisory business.

PA: And do you find that this messaging around outsourcing is resonating with advisers? What are some of the hang-ups you run into?

MM: There are certainly some. Even advisers that are willing to use a firm like AssetMark, we have found many of them do not want to outsource all the elements that they could or that we would recommend. So, for example, we see a lot of advisers that continue to want to build their own portfolios using our vetted funds and strategies, believing they can add value from the portfolio management perspective. I understand why advisers want to hold on to this process, but honestly the advisers that we see who are truly winning out there in the marketplace go all the way and they are willing to outsource the end-to-end portfolio management process. Instead they are focusing on helping the clients to set and pursue longer-term goals.

In other cases we have seen advisers embrace full outsourcing only for a part of their book of business; say they have outsourced the investment management for only a quarter of their clients. But they still have legacy mutual fund business or they are still doing annuities—these folks don’t get to experience the full benefit of leveraging an outsourced provider. We are trying to educate advisers on the fact that, if they really want to embrace outsourcing and experience the potential benefits, they have to commit strongly. That’s going to maximize your efficiency—not a piecemeal approach.