Advising China’s nascent wealth management industry
When Tim Kochis resigned from the board of the company he helped build, he wasn’t quite ready to retire. Within months of his departure from Aspiriant in 2012, he formed consulting firm Kochis Global.
Kochis had no intention of competing with his former passion, the $9 billion AUM investment advisory firm. Indeed, he still relies on Aspiriant for his own planning needs and is a principal with a significant ownership interest.
So instead of taking on individuals as clients, he now counsels the owners and managers of planning firms on how to navigate and grow in an ever-evolving industry.
Firms in the U.S. and China have sought out Kochis’ guidance on a variety of projects that range from addressing rising personal wealth in Asia — where the largely underdeveloped planning profession resembles the U.S. market of 40 years ago — to handling the increasingly complex issue of succession and survival in a rapidly consolidating industry. But his guidance doesn’t come cheaply. His daily rate: $7,000 plus expenses, for multiple days of work that often include travel. For smaller projects, he charges $700 per hour.
“Is there life after leaving a firm you’ve founded — other than playing golf or hanging out with your grandchildren? There sure can be,” Kochis says. “This is a one-person, very diverse undertaking that continues to put me to work doing what I’m passionate about.”
San Francisco-based Kochis Global is part of a career arc that started a decade ago, when Kochis announced his intention to step away from the CEO role he’d filled since launching his first practice, Kochis & Fitz, with fellow Deloitte & Touche alumnus Linda Fitz back in 1991. He was happy to run the firm for years to come, but recognized that succession planning was rapidly becoming the industry’s top challenge.
“Is there life after leaving a firm you’ve founded – other than playing golf or hanging out with your grandchildren? There sure can be.”
At a firm like his where the co-founder served as CEO, even diverse ownership made it practically impossible for firm partners to push the CEO aside if he or she was unwilling. No one should be CEO for life, he believed. But since no one was likely to force him out, Kochis figured if he wanted a clear succession plan he’d have to announce his willingness to voluntarily give up his seat.
The partners at Kochis & Fitz subsequently formed a search committee to find good CEO candidates both inside and outside of the firm. During the process, they identified a merger candidate: A large RIA based in Los Angeles called Quintile. The firm’s CEO Rob Francais, also a Deloitte alumnus, struck Kochis as the perfect successor.
In what was then a highly unusual transaction, the two firms merged in 2007 to form Aspiriant, a $5 billion powerhouse with 32 equity partners. Kochis agreed to run the combined entity for two years and then hand the reigns to Francais, who still runs the company today.
Since then, the merger of RIA firms has become commonplace in an industry that continues to grapple with vexing succession issues. Indeed, Aspiriant has grown in the past few years by folding in other planning firms that are well operated but looking for a way to provide continuity for clients after the founders retire.
While it’s far from his bread-and-butter business, Kochis says he sometimes consults for one-adviser shops, which account for a large segment of the industry. Pressed by regulators to identify successors who could seamlessly take over clients in an emergency, these advisers are increasingly looking for ways to guarantee organizational survivability, Kochis says. That’s been a source of consulting business for Kochis Global.
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Always averse to one-size-fits-all financial plans, Kochis says strategic plans for small financial planning firms are as individual as they are.
“There are lots of choices – sale, local partnering, internal development, tapping third-party resources, taking out loans or folding into a larger organization,” he says. “The better run the firm, the more choices they have.”
Kochis says there’s been one bit of advice that has been consistently needed: most firms need to “tune-up” by investing in infrastructure – people, technology and/or marketing. Those investments can help founders grow their firms internally by building a stronger staff, and externally by making the firm more attractive to new clients, he says. And, for those who want to eventually sell the practice, it can make a small firm an attractive candidate for the industry’s bigger fish.
“We should all do for ourselves what we do for our clients: Be articulate about what your objectives are and match those objectives with your resources.”
“We should all do for ourselves what we do for our clients,” Kochis says. “Be articulate about what your objectives are and match those objectives with your resources.”
FEAR OF ROBOS
Unlike many industry pundits, Kochis doesn’t worry about robo advisers stealing a significant portion of the traditional industry’s client base.
“Robo advice is going to get better and better and is going to serve the needs of a lot of people,” Kochis says. “But there are a large number of people for whom that is not enough, only part of the answer or not an attractive answer at all.”
In fact, Kochis maintains there is a vast unmet need for planning services — far more need than supply — particularly when taking a global view. Kochis, who once chaired the International CFP Council, says the financial planning profession is in its infancy in most of Asia. There, Kochis says, large institutions often have conflicts of interest that hamper their advice in either practice or perception. However, the rapidly gentrifying population of more than 1.4 billion people highlights the need for good advice.
Many Asian institutions are now trying to form independent RIAs like those in the U.S. and seek guidance, says Kochis. Meanwhile, wealthy Asian families are increasingly looking to the U.S. as a place to invest a portion of their wealth.
CHANCE TO SERVE ASIAN FAMILIES
The opportunity to serve Asian families who still live abroad is still in early stages but could provide a unique opportunity for American planners.
“Over the next 10 years, I think the opportunities could really pay off,” he says. “The rate of wealth accumulation is much faster in the developing world than it is here. There will be money that leaves China, Indonesia and Malaysia. The question is where it will end up. Firms that have established relationships will reap the rewards.”
While portions of the Kochis Global website are translated into two different Chinese dialects, Kochis says developing connections in Asia doesn’t require foreign language skills. Asia’s wealthiest families are highly educated and largely English-speaking, he says. A planner’s first contact can be as simple as finding appropriate targets and sending an introductory message through Linkedin.
However, if you want to be taken seriously, you’ll eventually need to travel abroad, he adds. Building trust in Asia, like building trust with clients in the U.S., involves sitting down and talking face-to-face, he says.