Getting Rich - Growth

Here’s a good discussion of some of the components of reaching the affluent:

The modern luxury brand consumer
To contextualise our research-based model for developing luxury brand strategy in the digital world, we should understand existing brand engagement behaviours, purchase drivers and media consumption habits of today’s luxury consumer.

They are not a homogeneous group. Luxury brand lovers display considerable differences in spending power, spending frequency, brand loyalty and purchase motivations. Consumer typologies range from fashion connoisseurs motivated by the idea of staying abreast of the latest luxury fashions to product connoisseurs driven to collecting luxury items within a specific product
category. Whatever the typology characteristics for luxury consumers, purchase motivations fall into three distinct categories: Indulgence, Exclusivity and Status; these three elements are the building blocks for strategy.

Luxury brand consumers are considered purchasers. They enjoy the full sensory exploration of luxury products, the experience of the in-store environment and they actively engage with brands on many levels. High-involvement purchasing demands immersive brand marketing. This represents a huge opportunity aligned to the uniquely interactive qualities of digital media.

Luxury consumers expect digital brand communications
Luxe brand consumers already extend their brand experience digitally wherever they can. They actively use digital media and technology to engage with brands well before purchase and to share and talk about luxury goods.

Our media diary research reveals frequent ‘pre-shopping’ through luxury brand and high-end retailer web sites, visits to fashion blogs and celebrity sites, luxury retailer and brand newsletters, sharing product links and images via email, Instant Messenger, and sending SMS/MMS messages during the in-store shopping experience. A recent study by the Interactive Advertising Bureau and Wallpaper magazine in the UK adds further weight to the relevance of digital media to luxury consumers. The study identified a premium group of online luxury consumers that is price insensitive, loves shopping, consumes all kinds of media and is very receptive and responsive to advertising.

Internet usage by luxury consumers typically ranges from 30 minutes to 5 hours per day. This presents a huge customer engagement opportunity for luxury brands both online and through emerging digital platforms including mobile and social networking.

Most significantly, our research discovered an expectation for digital communications by luxury brand consumers. Qualifications and parameters for appropriateness and acceptability of these communications are of course required, but failing to fulfill customer expectations through new media channels potentially threatens brand beliefs, positioning and loyalty.

The Luxury Brand Engagement Model
Our global research findings highlight an overwhelming consumer appetite for more digital media activity that exists alongside an expectation that the luxury sector will ultimately set the benchmark for digital advertising, just as it is perceived as doing in print advertising. However, the transfer of marketing expertise from offline media to the web requires careful management and a workable framework within which to identify and understand behaviours within specific customer segments and apply insight empathetically online.

Analysis of luxury brand engagement can be crystallised into six key phases, all of which present opportunities for digital brand strategy, as follows:

1. Awareness
In awareness advertising, context matters online just as it matters offline. Consumers expect online creative to take what they’ve seen offline to the next level; high quality production and execution are critical to delivering consistency and a deeper, more interactive brand experience. Digital advertising should captivate not irritate.

2. Admiration
Part of the DNA of luxury brands is their ability to inspire admiration. Luxury brands have consumer ‘permission’ to take digital media communications beyond rational brand communications. Luxury brand owners want to be thrilled and impressed; with the right execution digital media can do this to stunning effect. Deliver involvement, entertainment and interaction in a personalised context.

3. Exploration
With a highly involved, experiential purchase cycle, expanding the opportunity for individual exploration of luxury brands presents a huge strategic opportunity. Conveying the heritage, authenticity and quality of the brand, brings it to life and complements the in-store experience that the majority of consumers ultimately enjoy.

4. Consideration
Personalised care and attention are the experiences consumers value within a luxury retail environment. Translating and extending these to digital media replicates the superior service and personal attention received in-store. SAKS Fifth Avenue’s live chat facility enables real-time peer-to-peer consultation for online browsers – an excellent example of direct, contextual engagement with the online experience. Recognising online visitors, offering membership and remembering personal information enhance individual engagement.

5. Purchase
Integrating the web with retail drives positive brand reinforcement. Consumers enjoy the ambience of the retail environment – enabling them to enhance this experience, perhaps through pre-reserved items or directing consumers to their most convenient outlet further improves brand experience, loyalty and talkability.

6. Ownership
Part of the attraction for luxury brands is their exclusivity. Digital media, through its inherent opt-in and individual communication channels has the ability to enable one-on-one, personalized brand communications with every customer. Brand advocates desire ownership that goes further than an arms-length relationship and creating an online ‘club’ deepens engagement still further.

The tide is turning
Despite a degree of conservatism by luxe brands in adopting digital communications we can expect digital brand strategy to become more prevalent as luxury marques seek to realise the opportunity for improved loyalty, engagement and relevance that digital media offers their brand.

Exclusive communities and individual experiences enabled through mass media can be created and managed by luxury brands. With increasing use of digital media across a range of platforms by high-net worth luxury consumers, demand for digital brand communications will continue to grow. Luxury consumers want mobile, email and web interaction with their luxury brand and this is set to supplement their retail experience. Custom solutions such as microsites linked to key events can be particularly good at deepening these consumers’ love for luxury brands.

Positioning for luxury brands has a future tied to digital. New media permeates every aspect of life for younger audiences; without brand presence, affluent young consumers will not connect with luxury marques or exhibit the kind of loyal and exclusive behaviours of older generation consumers. Relevance, innovation and exclusivity are at the heart of luxury brand positioning strategy; the exact same values that are delivered through good digital communications. It’s time to bridge the divide.”

I’ve always thought this was true. Now there’s some research as reported from Booz Allen:

Summary -
Conventional wisdom dictates that team conflict leads to poor performance. This study suggests the opposite is true: Team conflict can actually enhance performance and creativity. The authors surveyed 21 teams of students from design, engineering, and MBA programs who worked together to develop a product.

- Teams that disagreed early on were forced to confront their differences and agree to mutually acceptable terms.
- Teams with fewer obvious differences came to terms more quickly, but because team members were not forced to challenge their thinking, their work was not as creative or inspired. Some level of variance is important in the creative process.
- The authors also found that it was necessary for groups to resolve conflicts by taking everyone’s interests into account rather than going with the view of the most outspoken person on the team.

Bottom Line: Creative differences among team members can lead to more inspired thinking during the idea generation process.

IMHO, this is especially true in marketing work. The best ideas often come from left field, inauspicious beginnings and are illogical and fought adamently — usually by the very people they will help. Examples abound.

Now, the problem is that we are hard-wired to avoid conflicts in groups and women and men handle it differently. But there’s research being done on that too. Think of this when you’re with clients and distribution partners. More to come…

PS - I’m dating myself but I always remember a story about the (once) super rock group The Police. At the height of theri popularity, and they were very big children, they literally could not be in the same room atthe same time. They would get in fist fights! So each would go into the recording studio alone and lay-down their own tracks then turn it over to the others to do their own. They hated each other and ultimately broke up but never again had the success of that period as separate artists.

Did you see this in Investment News? Are you seeing effects from this at all?

Should be bullish for those of us dedicated to helping advisors grow! (as my 18 year old daughter would text me)

Do you think fiduciary concerns play a role in these moves at all? Looks like Schwab is the big winner.

Big Wealth Teams Dump WireHouses To Go Independent
By Bruce Kelly June 16, 2008

David Hou, Mark Sear and Bill Gurtin have now ventured out on their own. Two of the brokerage industry’s most prominent wealth managers have dumped their wirehouse broker-dealers, instead opting to become independent registered investment advisers, with more well-known advisers perhaps soon to take the same path.

One group, with $7 billion in assets, left Merrill Lynch & Co. Inc. of New York last month. Merrill regularlytouted the heads of that group, David Hou and Mark Sear of Los Angeles, as among the firm’s most elite producers.

The other team, led by fixed-income specialist Bill Gurtin, in May completed the transition of $5.2 billion fromMorgan Stanley of New York to the newly formed Gurtin Fixed Income Management of San Diego.

He has parked about 80% of his clients’ assets with Schwab Institutional, which is seeing unprecedented interestfrom the largest brokers in the country, according to one executive.
“In an average year, we get one group with $1 billion or more in assets,” said Barnaby Grist, managing director ofbusiness consulting with Schwab Institutional of San Francisco. “There are three or four more we hope move thisyear.”

Mr. Grist said that Schwab Institutional expects to add $18 billion in assets this year from breakaway brokers.
The impetus for such prominent advisers to leave wirehouses has “been building up over time,” said Tim Welsh, president of Nexus Strategy LLC, an independent consulting firm in Larkspur, Calif. “The tipping point was the credit crunch and subprime crisis, particularly if teams were holding large amounts of company stock.”

Wirehouse brokers and advisers are typically tied to their firms through deferred compensation packages in the form of company stock that a broker loses if he or she leaves the firm.

Over the past year, the stock prices of Merrill and Morgan have plummeted. The availability of technology and products to independent firms has also leveled the playing field, Mr. Welsh said.

No longer do wealth managers have to rely on wirehouses for cutting-edge technology.

“There’s nothing really there to keep these guys tethered to the wirehouses, not anymore,” Mr. Welsh said. And the value of an independent adviser’s business is increasing at the same time the big wirehouses’ stock prices are depreciating, he added.

“We needed autonomy to build a fixed-income money management business,” said Mr. Gurtin, who praised Morgan Stanley, saying he probably would have left the firm years ago if it were not so accommodating. Two significant considerations were the control he now has to hire his own staff and the ability to have technology specific to the firm’s fixed-income management strategy, he said.

And the assets that advisers such as Mr. Gurtin, Mr. Sear and Mr. Hou have in their hands are nothing to sneeze at. Mr. Gurtin and his team therefore managed about 0.72 percent of the Morgan Stanley total, while Mr. Sear’s and Mr. Hou’s $7 billion was about 0.43 percent of the Merrill Lynch client asset total.

Meanwhile, it was unclear which asset custodian Mr. Sear and Mr. Hou have chosen. High-level industry sources gave conflicting reports, with one saying Merrill Lynch opened up its clearing firm, Broadcort of Jersey City, N.J., to the team, while another source said the two chose to use multiple custodians. Mr. Hou declined to comment on his and Mr. Sear’s decision about a custodian.

But Merrill Lynch may once again be trying to find a position in the crowded field to serve investment advisers,
industry observers said.

Last Monday, in a move to strengthen its clearing platform, Merrill said it hired one of the heads of the defunct New York-based Bear Stearns Cos. Inc.’s former clearing and custody business, John Tyers.

Mr. Tyers will join Broadcort as president. He was senior managing director and co-head of Bear Stearns’ broker-dealer and investment adviser services.

Joe Triarsi, who shared Mr. Tyers’ title and responsibilities at Bear Stearns, is now sole head of the clearing business there.

Interesting study by Brad Barber and Terrance Odean

Tell me what you think of this topic.

Below is the summary of the full paper which is at: http://faculty.haas.berkeley.edu/odean/papers/gender/BoysWillBeBoys.pdf

Summary

Theoretical models of financial markets built on the assumption that some investors are overconfident yield one central prediction: overconfident investors will trade too much.

We test this prediction by partitioning investors on the basis of a variable that provides a natural proxy for overconfidence – gender. Psychological research has established that men are more prone to overconfidence than women. Thus, models of investor overconfidence predict that men will trade more and perform worse than women. Using account data for over 35,000 households from a large discount brokerage firm, we analyze the common stock investments of men and women from February 1991 through January 1997.

Consistent with the predictions of the overconfidence models, we document that men trade 45 percent more than women and earn annual risk-adjusted net returns that are 1.4 percent less than those earned by women. These differences are more pronounced between single men and single women; single men trade 67 percent more than single women and earn annual risk-adjusted net returns that are 2.3 percent less than those earned by single women.

Here is a good commentary on generic marketing materials. In addition, they are not that effective and you run the risk of clients, prospects and referral partners seeing the same information from a competitor!

Now they can seem cheaper but — if you work with us or Trungale Egan they probably won’t be.

See article below:

“Your Name Here’ Marketing Draws Concern - May 30, 2008

Regulators are warning firms and registered representatives that “Your Name Here” kinds of marketing are potentially misleading. These marketing materials include brochures, newsletters and pamphlets brokers can buy from vendors which imply the broker wrote the material himself.

In a recent posting, the Financial Industry Regulatory Authority tells firms that marketing materials some reps are using “appear to raise serious questions” about whether they comply with principles of fair dealing and good faith. Regulators prohibit false, misleading or exaggerated communications with the public, and they are worried that ghost-written material misrepresents brokers’ expertise.

The notice says that if reps use material that they didn’t write or create, they must disclose that someone else prepared it. It further reminds firms of their obligation to supervise such material. “The concern is about representatives using material that appears to be something it’s not,” said Tom Pappas, Finra’s vice president of advertising regulation.

Pappas said his department, which reviews firms’ and reps’ marketing material, has been seeing a growing number of ghost-written advertisements. “There seems to be more technical capability of individuals to prepare documents that not too long ago could only be done by professional-level publishers and printers,” Pappas said. As a result, he said, vendors who sell professional-looking material are “a growing business.”

Regulators’ concerns stem from a form of marketing in which reps pay an outside vendor to provide a newsletter, pamphlet, book, article, broadcast or other material. The material is already prepared, and the rep just adds his name or photo to it.

Sometimes they come in the form of magazine articles that appear to be written by or about the broker. Sometimes they are interviews for broadcast or Web cast, in which it appears that a neutral third party is interviewing the rep, but the questions and answers are scripted.

One vendor of such material, Javelin Marketing of Concord, Calif., offers financial advisors a series of “SeniorFinances” newsletters. At the tops of the newsletters—which have titles such as “Annuity Opportunities” and “Senior Finances”—there is a spot for advisors to put “Your Picture Here,” followed by their name. “You position yourself as a desirable specialist” by sending out the newsletters, Javelin says on its Web site. “Plus, your clients feel as
though you continuously keep-in-touch.”

Javelin’s material was called out by a state regulator in Congressional testimony last year. Javelin didn’t respond to a request for comment. Javelin’s marketing materials are aimed at older investors, and indeed, this is a segment of the market that regulators are very worried about. But Finra said the ghost-written marketing material isn’t just geared toward seniors.

Still, in its most recent notice, Finra mentioned its ongoing concern over the use of deceptive practices meant to target seniors. In addition to the ghost-written marketing material, the regulators are worried about the use of designations that misleadingly convey that a broker has expertise in a subject. Protecting older investors has been a major push for regulators in recent years.

Pappas pointed out that there may be nothing inappropriate in the content of the ghost-written material brokers are buying; it’s the form that gives them cause for concern. “We’re asking for a change in the way the material is presented,” he said. “It should say ‘prepared for Joe Broker,’ so there’s a clear indication that Joe Broker didn’t write this.”

You need new relationships If you want to grow…

The head of one of the world’s biggest ad agencies said this. He is from Chicago originally, actually a very small farm town in rural Illinois, and I worked with him while he was here. He invented the McDonald’s “You Deserve a Break Today” campaign.

There are many different, and some new, ways to listen to your clients, referral sources, centers of influence and even vendors and partners — and don’t forget staff and employees.

Let Rich & Co. help you do that and take action on what you hear.

Get a hold of us, so we can listen – to you.

Everything = relationships.

Both my clients business and my own are growing mainly from referrals from relationships with business partners. Or the web. These are not really personal friendships but business friendships (more about that later). The relationships are based on trust. Trust is a whole lot easier to get started and keep if my dealings are transparent, free of undisclosed conflicts and where I keep the clients, and partners, interests as central as my own.

Heck, my clients are practicing fiduciary standards anyway. So…why not do the same in our marketing and dealings with referral sources and partners. Added bonus – let’s highlight our fiduciary business practices in our marketing, strategy and brand positioning.

Only makes sense, everyone is tired of the caveat emptor business practices – besides I don’t think Boomers will give us their assets to manage unless we are completely above board and transparent.

My practice is focusing increasingly on digital marketing and the integration of online and software tools to manage prospecting and the new business pipeline.

To achieve and manage the volume of growth and referrals that my clients seek, who are all exceptional wealth management professionals like you, and still leave them time for client work, firm management, their families and themselves — we have to maximize the leverage these tools give us.

Also, for many of the same reasons, our clients and their other advisors, who are our referral sources, are turning to technology more as well. Also, I just heard today first hand stories about how corporations are putting increased emphasis on digital communications and management tools as the challenges, and expense, of business travel increase.

Unfortunately, but it also presents a competitive opportunity, investment advisors and wealth management advisors have been slow to invest in and adopt technology. But that will change. Quickly.

We have some exceptional proprietary tools we have developed just for the HNW , UHNW and smaller institutional client acquisition. These include:
- A client referral solicitation program
- Relationship building with current clients children and spouses
- Referral tracking
- An online marketing and sales strategy/project management tool — this is a special time saver and consensus builder for our clients and senior leadership at the firm.

I should emphasize that all this work stands outside and separate from any client systems and process. It is also fully compliance reviewed. We have no interaction with client information.

At Rich & Co. I partner with an ad agency Trungale Egan and Associates and their partner a digital marketing firm effinity to plan and execute this work. While full service firms serving many kinds of clients, they are also experts in investment services and we, jointly, invest quite a bit in R&D in wealth management solutions. They are at

However, our systems do help the firm track and allocate business development compensation if they desire.

When our clients get referrals there are typically 4 other firms/advisors recommended as well!! Very tough competition. Answer? Your marketing and sale has to be very good. Plus, you have to budget more money than you will be comfortable spending for business development.

You need systems and software in place to track referrals and prospects, very personally – and respond (literally) in minutes to inquiries and follow-up. Sorry. We don’t make the rules.
Two good pieces of news:
- The big competitors are a bit crippled and not very effective, right now. They have other things on their minds. However, this is just a window, they may come back into the game at some point. Maybe not.
- All you really have to do to compete effectively is – just be yourself. You and your firm are unique. The more clearly you communicate that the better.

And there are now so many cool and interesting ways to tell folks who you are and let them get into a dialog with you. ‘Course you have to be open to new ideas and approaches…

That’s where we help.

See article below.

This is becoming a big problem in financial services as Boomers seek help with their retirement money which cannot be subjected to the same kind of risk taking behavior that caused the sub-prime crisis. Financial services firms need to somehow reign in these neuro-tendencies when dealing with clients assets.

Nor can retiree investors, mainly guys, allow their own inappropriate risk taking to drive their management of their long-term assets..

In fact, the more appropriate fiduciary approach emphasizes long-term relationships oriented decision making which happen to be more female brain oriented.

Sex and Financial Risk Linked in Brain - April 7, 2008 By SETH BORENSTEIN, AP Science Writer

WASHINGTON (AP) - A new brain-scan study may help explain what’s going on in the minds of financial titans when they take risky monetary gambles - sex.

When young men were shown erotic pictures, they were more likely to make a larger financial gamble than if they were shown a picture of something scary, such a snake, or something neutral, such as a stapler, university researchers reported.

The arousing pictures lit up the same part of the brain that lights up when financial risks are taken.

“You have a need in an evolutionary sense for both money and women. They trigger the same brain area,” said Camelia Kuhnen, a Northwestern University finance professor who conducted the study with a Stanford University psychologist.

Their research appears in the current edition of the peer-reviewed journal NeuroReport.

The study only involved 15 heterosexual young men at Stanford University. It focused on the sex and money hub, the V-shaped nucleus accumbens, which sits near the base of the brain and plays a central role in what you experience as pleasure.

When that hub was activated by the erotic images, the men were far more likely to bet high on a random chance game that would earn them either a dollar or a dime. Each man made more than 50 gambles under brain scans.

Stanford psychologist Brian Knutson, a lead author of the study, says it’s all about the power of emotion and arousal and our financial decisions. The trigger doesn’t have to be sex - it could be chocolate or a winning lottery ticket.

“It didn’t matter if the sexy woman didn’t tell you anything about the odds of winning a roulette game,” Knutson said. “What really matters is that the sexy woman is having an emotional impact. That bleeds over into your financial decisions.”

Kuhnen said the same link could hold true for women, but they didn’t test it because it is more difficult to find an erotic image that would appeal to many different heterosexual women compared to heterosexual men.

The link between sex and greed goes back hundreds of thousands of years, to men’s evolutionary role as provider or resource gatherer to attract women, said Kevin McCabe, professor of economics, law and neuroscience at George Mason University, who wasn’t part of the study.

“Risk-taking is a natural way of increasing your relative success, but, of course, there’s a downside to it, what we’re seeing right now in the economy,” McCabe said.

The results of the study jibe with the real life on the trading floor, said Phil Flynn, a former Chicago commodities floor trader and current analyst at Alaron Trading Corp.

“I’m not shocked that it may be part of the deal,” Flynn said Friday. “When you talk about all the euphemisms for trading (on the floor), they can be used for sex as well.”

(”Massaging the market” and “hardcore” were about the cleanest that he and his colleagues could come up with.)

The study conforms with recent research that indicates men shown a pornographic movie were more likely to make riskier sexual decisions. Another suggests straight men think less about their financial future after being shown pictures of pretty women.

One still-to-be-published study at Harvard University found a link between higher testosterone levels and financial risk-taking.

But the study conducted at Stanford, funded by the National Institutes of Health, went deeper, using functional magnetic resonance imaging machines. It’s part of a new but growing field called neuroeconomics that attempts to take the hard-wired science of brain biology and mix it with the softer sciences of psychology and economics to figure out why we make the financial decisions we do.

An earlier study by the same team found that the brain’s reward area lit up at about the same time as risky decision-making.

The erotic pictures experiment was designed to find which was the cause and which was the effect. The answer: Lighting up the reward area, in this case with soft-core pictures, caused the risk-taking, Kuhnen said.

“The more activation there you have, the more prone you are to taking more risk,” Kuhnen said. “It could be a feedback loop.”

The flip side was that the photos of snakes and spiders activated the portion of the brain often associated with pain, fear and anger. And those people were more likely to bet low.

This all makes sense to Harvard economist Terry Burnham, author of the book “Mean Genes.” Burnham said it could be all summed up in a famous line from the movie “Scarface.”

“In this country, you gotta make the money first. Then when you get the money, you get the power. Then when you get the power, then you get the women.”