I was asked to write an opinion piece for Fundfire (A Financial Times Service) on the question of whether it makes sense for advisors to seek smaller accounts as a business-building strategy. This comes in the wake of LPL Financial’s decision to lower the minimums in its model wealth portfolios to $25,000.

While one of the great things about being an advisor is that you can build your business any way that you want, and I have usually shied away from a small account strategy, I have come around to believe that you can be successful with such a strategy – if you build your business the right way.

There are two general principles that advisors should keep in mind when developing an asset-gathering strategy:

• Always act in clients’ best interests; and

• Focus on building a profitable and sustainable business.

If advisors consider both factors, they should be able to determine which clientele is best for them.

Now, having said this, and firmly believing that each advisor ultimately needs to set his or her own direction, and understanding and accepting that advisors can make a good living servicing a large number of small accounts, my bias still rests with a larger minimum built around a top-notch service organization that emphasizes a differentiating value proposition.

This leads to long-term, stable and profitable client relationships and a healthy, thriving business.

Contact me if you want me to send you the entire opinion piece.

I was asked to comment last week on a poll in Ignites (A Financial Times Service) on how common in-house bias is in the industry. The question came in the wake of allegations by former JP Morgan advisors that they were pressured to use proprietary funds in the face of better performing and less expensive alternatives.

(I blogged about this a few weeks ago – The Danger of Selling Proprietary Products – posted on July 5th)

While the poll results indicated that most respondents said that bias is very common, which I agree with, what was surprising to me was that the poll also seemed to indicate that advisors/brokers tend to favor these funds. I strongly disagree with this assessment.

To quote from the article, and in keeping with my previous post:

“Andy Klausner, founder or strategic consultancy AK Advisory Partners, says the Ignites poll results are surprising given the wealth management industry’s emphasis on selecting best-of-breed money managers, as opposed to the firm’s proprietary products . “I don’t think it is true” that brokers favor in-house products, he says, “I think the reality is that most advisors don’t want any perception of conflict of interest.

However, it would be naive to think that there is no pressure put on advisors. Recently it was JP Morgan, and last year there were questions about Merrill Lynch selling Bank of America banking products.” Klausner says. “But if advisors feel pressure, they should stand up for themselves. Advisors should always be proactively showing clients how they come up with the recommendations that they make.””

What do you think?