Schwab Consulting Services — "We've Been Touched on so Many Different Levels"

In taking a closer look at Schwab Consulting Services we asked to talk to a few advisors who have been through one or more of the programs Schwab offers for Advisors. One of the firms we spoke to was Westmount Asset Management in Los Angeles. Mike Amash is a senior member of Westmount's investment committee and has been through a number of the consulting service offerings.

Douglas Heikkinen: Mike, thanks for allowing us to talk to you. To give us some context, we're wondering if you could briefly describe your firm; when you started and what you've seen in terms of growth, both in number of employees and the size of your firm.

Mike Amash: Sure. I'd be happy to. The firm was founded 25 years ago, in 1990. We started with Schwab from the very beginning, using Schwab as a custodian. We started with zero assets and we are now managing about 2.2 billion in assets on behalf of our clients. I joined the firm 13 years ago. I think I was the 80th employee. The first 12 years, there was significant growth, going from 0 to 250 million and of course the last 13 years has just been better growth. It went from 250 million to 2.2 billion over the last 13 years.

Really, much of that growth has come in the last 7 or 8 years. That is really the period during which we had to change a lot of things that we were doing to build out our infrastructure, to find a way to scale at the larger level, the same way we were when we were small. When we were smaller, it was pretty easy, you didn't have to hire too many people, you didn't have to change your infrastructure, your systems, very often. So, that growth was easy but over the last 10 years, we had much more significant growth, many more employees in the firm. It's caused us to rely heavily on Schwab for certain management services.

Doug: Mike, which programs are you working in and how has that been beneficial to Westmount?

Mike: The bank marketing studies have always been useful for us and all of the partners will see into that rather deeply. In terms of different areas, it actually stems from last year's IMPACT. We've spent a lot of time with them on the profitability status for our clients. As a researcher to either change our minimum or do income segmentation in terms of our clients service offering. Recently, I spent a lot of time on this internally, just to really dig deeply into finding out what the profitability of the cost of service per client is.

Honestly, we didn't really know that. We had always guessed on what it was. We didn't have a good methodology for determining it. Typically we take on most clients who get referred to us whether or not they'd met their minimums and whether or not we knew if they were profitable. We realized that was wrong. We've spent a lot of time with their team which was really insightful. It was exactly what we were looking for.

Doug: Could you describe a little bit more on managing client profitability. How was it helpful for you?

Mike: We knew what our cost was. We would always divide it up by the amount of clients that we had that were together. We just knew the way we were looking at it was flawed. The way we looked at it, we wouldn't be able to justify more clients, it would bring down our cost of client service. So, we knew we were looking at it in the wrong way and we knew we had to, really, find a formula for the way we think about how we calculated it. That was the genesis of really taking a hard look at it.

They gave us all the tools to ask the right questions in terms of finding out how many hours were spent from a personnel standpoint. What the offering is for our smaller clients versus our larger clients — even though we didn't have a defined hybrid or segmented business model?

Going through this exercise, we were able to quantify what that meant instead of applying the same cost to all of our clients. We were able to spend all of our time really defining, 'What are we offering these different client segments?' We came up with specific numbers for each of them that we've been offering.

For us, probably like a lot of firms, we found out that we have a lot of clients that aren't profitable. We are going to have to make some decisions around that new information, but just to be able to know that was a great first step. Now we can make an informed decision regardless of which direction this is going.

Doug: What surprised you and your firm about the business consulting offerings? Has it been the depth that they've gone to?

Mike: Specifically, the issue of profitability. It seems like such a small or a very narrow issue that somebody would have a program around. It was something that we've been discussing and grappling with effectively for the past few years. I went to this with the thought that there would be a segment or an offering specifically around diving into the profitability of your client section. It wasn't until having attended IMPACT a year ago and seeing a session on this.

Schwab had an offering exactly around the issue that we picked up that went, now for a few years, that was the genesis of coming back and starting this program eventually and learning more about it. It was really surprising that it's not just on a high level benchmarking, informational level that really gets into the weeds, that your offering really gets into the weeds on multiple different levels. I think that a lot of firms, us included until a certain point, might not even realize how deep and intricate the offering is across different parts of the business. That is just the profitability part.

Doug: What else jumps out at you?

Mike: One of the things that came out of IMPACT that we found extremely useful as well, was, two years ago at IMPACT, hearing Dave Richmond speak. It was so enlightening to sales, even though he is not at Schwab, his emphasis is how to sell and how to be a more effective advisor from a business development standpoint, getting primary referrals, etc. I like to hear their people speak on that subject and typically, they don't offer anything new or they really haven't been in our shoes before where we find it useful. Dave was very different in that sense because everything that he said was exactly what we know and what we do. I found his presentation so useful that Schwab was kind enough to bring it to our office and our whole team here got to meet with him and spend a day with him. It was the same presentation and then we had some follow up work that we had to do with him in terms of re-branding our firm from a sales standpoint and from a business development standpoint.

Doug: What's in the overall value to the firm in going through these programs?

Mike: It's hard to quantify because we've been touched by so many different levels. I think the biggest value is just knowing that we have a partner and a resource for most of the challenges that we encounter. I think there's significant value that you know that you have a team behind you that you can draw on during times that you need to. As you grow, you realize, now there's a lot more of that need than there was 10 years ago because they weren't having to change as much or scale as much. Now, we are going through a lot of it, through a lot of, we call it growing pains — challenges with growth. The need during this phase of our firm, I think, is greater than it's ever been. Going through all of this change with the resources and the partner behind us has been mentally comforting and helpful in making decisions.

Doug: What was the genesis in getting involved in these programs? Had you heard about it from others that had participated? What was your motivation?

Mike: Initially, Jim had heard about it from a national study group that we are a part of. Jim, our President, is the one that goes to the study groups. He hears tremendous things from other people who have spoken and who have attended before. Having heard from other people in the study group who had people who had attended it, how well received and the value that they got from it, that he came back excited about it. One of the things, in addition to everything else that we mentioned, some of the challenges, one of the things that we'd been going through is just generational things. We've brought in equity ownership within the firm and we are continuing to do that. We recognize that we are lacking in terms of building the next level of leadership within the firm. So, the two really should go hand in hand as we've brought in equity ownership. When Jim learned of that program from his study group, he came back excited about it and wanted us and wanted me to be able to participate in it. Then, continue building a deeper team that had the ability to be more, with more broad leadership of the firm in addition to the prior equity ownership. So, we just have a longer sustainable firm that we can grow for gratuity. I'm really looking forward to their leadership program — which will kick off in January!