Home » Client-centric Structure

A Client-centric Structure

The capacity of any organization to meet its clients’ needs starts with its structure.

Our structure was designed with one pervasive focus – Individuals and Families.

When we created Third Day Capital Management, we asked ourselves the following questions:

  • Why do industry-sponsored studies consistently show that 2 out of 3 investors are dissatisfied with their financial advisor?
  • Why do clients of financial advisory firms switch firms, on average, every three years?
  • Is the high degree of client dissatisfaction and turnover a function of a firm’s structure?
  • Why, and how, does the typical organizational structure within our industry fail to meet the needs of individuals and families?
  • What is the most beneficial structure for individuals and families?
  • What type of relationship and experience do individuals and families desire?
  • What services do individuals and families require?

Based on our decades of experience, we conclude:

The skillsets required to manage an investment portfolio and advise, nurture, support, and communicate with clients are increasingly mutually exclusive. This is a function of the fact that the majority of “investment professionals” pursue a path that takes them into the world of mutual funds, hedge funds, and pensions, where they can earn tremendous compensation. But it also comes with little or no direct contact with the individual and family investor, and therefore, little experience working as an “advisor” to individuals and families. On the other hand, individuals with strong inter-personal communication and sales skills tend to be attracted to the financial services industry, where they can utilize their sales skills to attract individual and family investors, and thereby earn a relatively high income, even though they typically lack investment management experience.

As such, our industry has developed what we call the “tag-team” approach. One professional works directly with the client, serving as the “rain-maker” / client-facing advisor, while another works behind the scenes making the investment decisions. Clients rarely get to interact with the investment professional, and vice-versa, which means many of the critical aspects of the relationship (that dictate how the portfolio should be managed) are filtered through at least one degree of separation.

This one degree of separation is the genesis for three fault-lines, all of which fracture the client experience:

Accuracy, Accountability, and Continuity.

Accuracy suffers when information is passed on and received second-hand. Second-hand information is seldom 100% accurate, complete, or specific. It’s human nature to include our own perceptions and opinions when we communicate, especially when we’re passing information along. As a result, through no conscious fault of the client-facing advisor, conversations with clients and the important information therein gets conveyed to the investment professional after passing through a filter.

More importantly, however, by not being able to interact directly with the client, the investment professional misses the opportunity to gather all relevant information. While our conscious minds process spoken content during a conversation, the vast majority of communication is happening non-verbally, sub-consciously. In other words, body language and tonality are far more important than the content of what is actually said. Can an investment professional accurately assess a client’s risk tolerance, or desire to invest conservatively or aggressively, if they can’t read the body language that accompanies (and speaks more loudly than) the client’s verbal response? How can an investment professional make the best possible decisions when they are operating with a fraction of the information their clients are conveying, some of which is incorrect anyway (due to the client-facing advisor’s filter)?

Accountability is difficult to impose when an intermediary (client-facing advisor) stands in the middle of the relationship. This is part and parcel to Accuracy. How much accountability can a client demand when they know that the investment professional is making decisions based on incomplete, filtered information? Is it a function of the investment professional, or a function of the firm’s structure?

Investors tend to forego imposing the necessary accountability for a period of time, but at some point, failure on any number of fronts ultimately motivates the investor to impose the ultimate form of accountability: replace the advisor and the firm. This explains why clients switch financial advisory firms, on average, every three years.

Continuity then becomes an issue for both the investor and the firm. The investor must now seek out a replacement advisor and firm, which takes time and energy (and very well may cause brain damage). Likewise, the firm must now seek new clients to replace the client it lost, which takes an inordinate amount of time and energy, inevitably at the expense of the firm’s remaining clients.

Thus, the structure of a firm can lead to a self-perpetuating feedback loop, whereby clients are routinely looking for a new advisory firm, and firms are routinely looking for new clients.

Neither find exactly what they are looking for, and so, the cycle continues.

All of our Portfolio Managers are also our Client-facing Advisors. This structure allows us to:

  • Gather Accurate information first-hand, without filters
  • Listen to the non-verbal, subconscious communication our clients are conveying by reading body language and tonality
  • Ask the questions that arise in the moment, which facilitates clarification, deeper inspection, and ultimately, better understanding of our clients
  • Submit to our clients’ Accountability requirements before they decide to move their assets to another firm
  • Maintain a low degree of client turnover, and thus, a high degree of Continuity within the firm’s client base
  • Spend our time and energy serving our clients, rather than looking for replacements

There are other aspects of our Client-centric structure, that, if you’re interested, you can read about in the following sections, as well as our Frequently Asked Questions:

  • Client Service Philosophy – We strive to provide the highest quality of wealth management services, built upon objective advice, for each and every one of our clients. To this end, we actively monitor our client / portfolio manager ratio, and focus more on the fit of a prospective client, rather than the portfolio size on day one.
  • Asset Custody – We custody our clients’ assets with Shareholders Service Group. Privately-owned, Shareholders Service Group is a highly respected custodian and broker dealer that is regulated by FINRA (the Financial Industry Regulatory Authority).

We reverse the self-perpetuating feedback loop with a structure that was designed to improve
Accuracy, Accountability, and Continuity.

We’ve also been told it eliminates brain damage.

If you want to learn more about the importance of a client-centric structure, find yourself asking any of the above questions, or have your own questions and would like answers, we encourage you to contact us only to answer your questions, not to sell you our services.