No Matter What: Serving your clients

In the third episode of our podcast, learn how going independent gives advisors the flexibility to serve their clients the way they see fit, especially during times of crisis.

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An investment advisor listens intently to their client.

Hear Jim and Jessica's story

When the 2017 California wildfires threw their clients' lives into disarray, Jim Aljian and Jessica Markarian were there for them—in ways the pair could not have been before going independent.

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Jim Aljian: Driving through the area, it looked like war zone. I mean every single home, one after the other was just leveled to the foundation. Just black trees everywhere and just debris, and it was just horrendous. So, we were just able to run our business through our laptop computers at the hotel room. We were operating pretty efficiently throughout the entire ordeal.

Jerry Cobb: On October 8th, 2017, wildfires swept across northern California, destroying over 8,000 buildings and killing 44 people. 

Four years earlier, Jim Aljian and his long-time assistant, Jessica Markarian, had opened the doors to their independent investment firm, Aljian Capital Management, in Santa Rosa. 

Although their business was one of the few buildings in town spared by the fire, it sustained smoke damage and was closed for over a month for repairs. 

During this time, Jim and Jessica kept the firm up and running remotely, and their client focus broadened to help those who were struggling in the aftermath of the devastating disaster. 

Jim Aljian: The clients, they were very overwhelmed with the process… You know, we all compared notes as to where have you got with this part of your insurance. And has the insurance company, are they returning your calls? And are they answering your emails? And what is your adjuster saying?"

Jerry Cobb: Out of the ashes of the wildfires, Jim and Jessica found a way to strengthen their relationships with their clients, helping them rebuild their lives. 

Jim Aljian: I don't even consider these people to be clients any longer, they're really friends. 

Welcome back to your insider's guide to becoming an independent Registered Investment Advisor, or RIA. 

I'm Jerry Cobb, Senior Business Consultant at Charles Schwab, and this is How I Became an Independent RIA, an original podcast from Schwab Advisor Services.™

Speaker 1: You get to the point where you're like, "You know what, the risk I can take to leave and be independent is absolutely worth it."

Speaker 2: I felt apprehensiveness, nervousness, but yet excitement. 

Speaker 3: You know that you can see the light at the end of the tunnel. 

Speaker 1: Really everything we wanted was possible. 

Speaker 2: Even when it's hard or more than you thought, you still got to do it. 

Speaker 2: Everything that stopped me from taking that next step was just fear and that fear was in the way of me actually being fulfilled. 

Speaker 1: Complete freedom and happiness has been the result.

Jerry Cobb:  Advisors of all kinds have taken the path to independence and found success. 

In today's episode we explore the story of Aljian Capital Management, which was founded in 2013. It's a story about how operating as an independent RIA firm allows you more flexibility to serve your clients, especially during a time of crisis. 

First, we'll hear Aljian Capital Management's origin story, how the firm survived the wildfires of 2017 and helped clients who lost everything and had to start over. Then, we'll check in with an expert on the importance of client relationships, how clients' expectations are changing, and why investors may prefer independent firms. And as always, we'll get a little practical advice, and bust a few myths about the RIA journey. So you can learn from others as you consider your own path forward.

Jerry Cobb: Jim Aljian sold stocks for a large investment bank for 26 years. And even though things were not perfect, Jim was content.

Jim Aljian: You know, I just liked the culture, I liked the firm. I had a lot of friends. 

Jerry Cobb: For 10 years at the firm, Jim worked with Jessica Markarian, who had previously been an operations manager at another investment bank, and now worked as an assistant to Jim and another broker. 

But Jessica was having second thoughts about her position at the firm. She found the bureaucracy exhausting. 

Jessica Markarian: Sometimes a piece of mail would take two to three days before it would filter down to the assistant's desk, or a phone message that was taken. Instead of the client going through to your voicemail, sometimes would take days to land on our desk. 

I had one client say, "I actually walked into the office, dropped off a form, you don't have it?" And I had to go up to the front desk and say, "Was Mr. Smith here yesterday?" "Well, yeah." "Well, where's the form?" "Oh, I don't know." And it took a while for them to locate it, and then they said, "Well, yeah, we got it, but you can't have it yet because we have to review it." It just was silly.

Jerry Cobb: Meanwhile, Jim was starting to reconsider how much the firm was actually benefiting his clients.  

Jim Aljian: Every single year their firm wanted a larger slice of the advisors' revenue, and every year their firm kept coming up with more nuisance fees for the clients. And every year those fees kept getting more severe.

Jerry Cobb: Jim also felt restricted in the ways he could manage his clients' accounts.  

Jim Aljian: I wanted the flexibility to manage my accounts without somebody telling me all of the rules and guidelines. They had so many rules and restrictions on what I could and could not do managing my accounts for my clients.

Jerry Cobb: After the firm underwent a merger, Jim knew it was time for him to look at his options.  

Jim Aljian: The culture was a lot different; it wasn't as friendly. The camaraderie was gone. And I just felt like, you know what, it's time for me to evaluate my other alternatives. 

Jerry Cobb: Jessica felt the same. 

Jessica Markarian: It kind of got to the point where it was just very frustrating to come in every day, and it seemed like the simplest tasks became very difficult to complete. 

Jim Aljian: We wanted out of that culture. 

Jerry Cobb: The two of them spent a year evaluating their options. Jim interviewed at other large firms, but they didn't offer the flexibility and independence he was looking for. 

Then he found out about the RIA model. Intrigued by the possibilities of becoming an RIA, Jim and Jessica researched the mechanics of what a move to independence would look like. 

Jim Aljian: And then Jessica and I circled September the 6th on our calendar.

Jerry Cobb: It was January 2013. They had eight months till resignation day and a lot of work to do. Swirling through their minds were all the typical concerns common to advisors looking to go independent. 

Jim Aljian: Well yeah, that was the biggest concern, what are our clients going to think? Are they going to support us? Are they really loyal to me? I mean, I just didn't know.

Jessica Markarian: He had no idea that even his family would transfer. It was basically his own assets and my assets, and that was it. 

Jerry Cobb: After deciding on a custodian, vendors, renting an office space, and completing all the necessary paperwork, they were finally ready. 

Their last day arrived.  
 
Jim Aljian: That was a really, really nervous day, and...

Jessica Markarian: I probably was nervous all week long. I can still remember that feeling of being nauseous… But at the same time, it was exciting. 

Jerry Cobb: Aljian Capital Management opened its doors on September 6, 2013, in Santa Rosa, California. 

Jim retained the majority of his clients. He and Jessica worked nonstop for the first few months to get the business off the ground, and things were going well. For the next four years, Jim watched his business thrive and grow. Neither Jessica nor Jim felt any regrets about their decision, especially because it strengthened their relationships with clients. 

Jessica Markarian: In the years that I've done this, there are people that I work with that come to work, do their job, and they just leave, and it's just a job. And then there's people that make a career out of it, and I've always felt like this is my career. I have a lot of personal interest in our clients and their lives. They have interest in my life, and I feel very fortunate to be in the situation that I'm in. 

Jerry Cobb: But something was about to happen which would threaten their business, their homes, their clients—and even their families. It would be completely outside of their control, a disaster on a scale they never could have imagined.    

It was early on the morning of October 8th, 2017. 

Jessica Markarian: I woke up at ... 2:00 o'clock in the morning, maybe, hearing lots of hooting and yelling and cars, and honking, and went to my bedroom window and looked outside and I saw the transformers flickering and smelled smoke. I woke my husband up and said, "I think something's wrong." And realized what was happening. At that point, the fire could be seen over the hill beyond our house. We hadn't received any type of alerts or anything yet. But shortly after we got up and got our kids up, we started receiving Nixle alerts and a phone call alerting us to evacuate, so we collected our things and left our home.

Jerry Cobb: Wildfires were spreading across northern California at an alarming pace. Jim lived near Jessica, but at the time he was vacationing with his wife in Ireland. They were in the middle of a tour when Jim got a frantic call from his adult daughter. 

Jim Aljian: She was, she was hysterical. She had heard on the news report that the Sky Farm subdivision had been hit. So that's where we lived, so she told us that when she called us on the phone. 

Jerry Cobb: As Jim raced to the Dublin airport to catch the next flight back to California, Jessica and her family were heading to her sister-in-law's house in a nearby community.

Her phone buzzed. It was a text from Jim.  

Jessica Markarian: And he kept asking me if I knew anything, if I had heard anything, how his house was, how the office was… 

Jerry Cobb: Jim and his wife spent the night in a London hotel on a layover. They went online, frantically reading everything they could about the fire, desperate to find out if their house was still standing. 

Then it hit them. 

Jim Aljian: We spent a full evening just reading all of the news of what was happening. And we actually saw in a local newspaper, there was, you know, 15-20 fire photos, and one of the photos was our house on fire.

Jessica Markarian: And then and short time later I got a text from him and it was a picture of his home in flames. 

Jerry Cobb: Jim returned home to find his house had burned to the ground. The devastation was overwhelming. 

Jim Aljian: Driving through the area, it looked like war zone. Every single home, one after the other was just leveled to the foundation. 

Jerry Cobb: But Jim and Jessica soon learned that not everything had burned. 

Jim Aljian: Everything around us burned. But for whatever reason, this office building survived. 

Jerry Cobb: Luckily Jessica's home was also spared. 

During this chaotic time, Jessica and Jim felt a strong sense of duty to their clients and were determined to keep the business open. The office was still standing, but damage from the fire and smoke meant they couldn't go back right away. There was no bureaucracy standing in their way. 
They could work from anywhere. So that's exactly what they did. 

Jessica Markarian: I was able to log in and work remote every day. 

Jerry Cobb: Meanwhile, Jim and his wife stayed at a local hotel. 

Jim Aljian: So, we were just able to run our business through our laptop computers at the hotel room, with the phone's being forwarded. And from a business standpoint, we did not miss a single client call, we didn't miss any market trades or anything. We were still in business and operating pretty efficiently throughout the entire ordeal.

Jessica Markarian: All of our mail got rerouted to a local post office, and I was just available from home every day. 

Jim Aljian: We sent out an email, I think, to the entire client base to let them know what had happened and that they might not be able to communicate with us regularly like always, and that we didn't have an office to meet them at. My clients were very supportive of our need.

Jerry Cobb: And Jim and Jessica were very supportive of their clients, too.   

Jim Aljian: Most of my clients that lost homes, I think, I think Jessica and I counted like six clients that lost homes. And I would say four of those were retired elderly widows. But these 85-year-old women losing their home, and I tried to help them as much as I could.

Jessica Markarian: We had one client that lost her home, and she had decided very early on she was not going to rebuild. And she needed some funds and was having difficulty establishing a loan through her local bank, and we were able to get her the funds that she needed from her accounts.

Jim Aljian: We just figured out a way for her to pay cash and not have to deal with the mortgage. 

Jessica Markarian: I honestly think that she feels she wouldn't have been able to get into the home she's in now if we hadn't helped her.

Jerry Cobb: Jim also spent time with his clients sharing experiences around talking to adjustors, dealing with the complex paperwork related to losing a home. 

Jim Aljian: And we all shared stories about what our insurance company were telling us and versus what their insurance company was telling them. 

Jerry Cobb: Jim and Jessica were able to return to their office building during the first week of November. And when they did, their computers, fax machine, and office printer did one client a world of good. 

Jessica Markarian: We had a client that was receiving multiple emails every day from her insurance company with claim forms and information and she needed to correspond with them, and so she was coming up to the office, and we were printing out all those documents for her and helping her.

Jerry Cobb: If you ask Jim, he'll tell you that he did what any advisor in his position would do. 

His job was to support his clients. And if this meant counselling them on how to handle the loss of a family home, sharing insurance findings, or helping them liquidate assets to get a new mortgage, well, that was what he was going to do. 

And after the fire, he realized that when you're truly free to put your clients' interest first, that relationship changes in a fundamental way.

Jim Aljian: You know, I don't even consider these people to be clients any longer; they're really friends. I mean I just feel like I have 250 friends, and they're clients at the same time.

Jerry Cobb: In the midst of catastrophe, Aljian Capital Management was able to play a pivotal role in helping their clients recover and rebuild. The trust and accountability that Jim and Jessica established strengthened their client relationships and allowed their independent advisory firm to thrive even more. 

Jim Aljian: This has exceeded my expectations. I had no idea that our firm would be this successful, that we would be this happy, that we would be this content. And this has been by far the best thing that Jessica and I could have done. 

Nikolee Turner: I think Jim's story is an example of how advisors are able, when they're independent, they're able to understand the needs of their clients and be able to change their expertise to focus in on the things that are important to their clients.  

Jerry Cobb: Nikolee Turner is a managing director of business consulting at Charles Schwab. She helps independent advisors optimize their businesses for growth and take advantage of opportunities or overcome challenges.

Nikolee Turner: The wildfires is a great example of him saying, I'm invested in you as a client, so I'm going to roll up my sleeves and figure out  what this means and how that's going to affect your financial plan, and there's so much power in just having someone say, "I'm going to be here. I don't know what I can do to help you, but I'm going to try to help you." 

Jerry Cobb: Jim went above and beyond when it came to helping his clients. It wasn't just about managing their financial portfolios.  

Nikolee Turner: It was really touching for me to hear that about Jim's story and to just imagine how supported that client felt. I definitely think he felt empowered, but I also don't think he feels like it's a business. I feel like he probably imagines that he would do this for a friend, and these clients are truly his friends. And so yes, it's important for him to continue on, to keep his business up and running, but I think he did this because of the connection that he has with his clients, not because of a business reason.

Jerry Cobb: Jim sees his firm as more than just a business - and he's not alone. Many advisors who've gone independent feel the same way and choose to go independent for the same reason. 

Nikolee Turner: There are so many advisors that tell me that the reason that they chose to go independent was because they thought that they could service their clients better. And that was the impetus for them to take the risk, to take the leap. That's why they started their businesses. 

Jerry Cobb: In fact, not only are more advisors choosing to go independent, but more clients are seeking out the services of independent firms. 

Nikolee Turner: I definitely see that shift of more and more clients that want to work with independent advisors. And I think it is that idea that money permeates almost every aspect of their lives. So, they want someone who they can trust, who's going to be there, and who's going to take all of those things into consideration, and not just, you know, what is the return on their investment. 

The client expects that the advisor is going to look out for them and to help them make decisions that will set them up for success, that will help them accomplish their goals and their dreams and their financial plan.

Nikolee Turner is a managing director of business consulting at Charles Schwab.

Jerry Cobb: It's been years since Aljian Capital Management opened its doors and the California wildfires caused them to temporarily close. I wanted to check in with Jim to ask about how the business was doing before and after the devastating wildfires. 

Jerry Cobb: So, let's start with kind of your vision for going independent. How would you describe your vision for going independent, and do you think you've accomplished that vision?

Jim Aljian: Well, definitely I have accomplished the vision that I had... I felt like for years, I was paying and giving away such a large slice of my revenue for such a small amount of support and service, and then they were always coming up with new fees for the client. They kept instituting account minimums. They made it very difficult for me to service or have small accounts… And I didn't like that, so my vision was to eliminate all of those forced requirements on me that I really didn't appreciate or like.

Jerry Cobb: So, in terms of advantages of being independent, are there advantages that you would point to, maybe advantages that you didn't expect or anticipate?

Jim Aljian: Yeah, there's so many advantages. I mean, I could probably talk for a half an hour to an hour just on the advantages, but the trading platform is so much more comprehensive. You know, at the wirehouse they have restrictions on what percentage you can have of a single particular stock. So, for instance, I have a large position in Google and Amazon, and the price of those shares would appreciate, and if the price of the stock appreciated and became more than 20% of the portfolio, I was literally forced to sell shares. The client didn't want the shares sold. The client would get the confirm, and they would say, "Why are you selling my Google? I don't want to sell any Google." And then you'd have to explain to them that, well, now it's 22% of the portfolio, and that's outside of the box, and I can't do that... They just had so many different layers of supervision that restricted what you could and could not do. And now... no one is putting those kinds of rules on me. So, that's a huge advantage. 

Jerry Cobb: You know, going independent and making the transition that you did is a huge event. In your case, though, you had this added event of the wildfires. You know, a lot of people would certainly understand if a business were impacted by a big natural disaster like the wildfires. If that business owner were to say, "You know what, I'm just stepping back or temporarily shutting down my business," but you decided not to do that.

Jim Aljian: Well, these clients that trust me with their money, and I just take that so seriously, and I just will do anything for any of these clients that place their trust with me. And we have just a very mutual respect, friendship, and they trust me, I trust them. We just get along beautifully.

Jerry Cobb: You've shared some really great examples of how the transition has affected you from a business perspective and how you run your business. What about from your clients' perspective? Do you find that you have more time, more capacity to interact and deal with clients?

Jim Aljian: Absolutely. At the wirehouse, you were pretty much limited to… their email platform and their telephone. You weren't permitted to email a client with your personal email, but there's probably 20, 25 clients now that have my personal cell phone, and we'll exchange a text on the weekend. They'll text me with a question about something, and I'll text them back with an answer. But I enjoy that extra layer of communications, outside of the normal business hours.

Jerry Cobb: Well, based on what you know now, what advice would you have for someone looking to go independent?

Jim Aljian: I would start preparing your book for a move, and you've got to make sure that your assets are portable. You've got to make sure that your clients have the trust and confidence in you, and so I wouldn't rush into it. I would have a very detailed business plan. We took like, "What's our worst-case scenario on the number of assets that we would transfer, and what do we think the average fee is going to be?" And we estimated some of my business costs, my rent, my lease, Jessica's salary. And so we did a pro forma, kind of on a low-end projection of what I would expect to make. And I said, "Okay, that will work." But you know, I really wish I would have done it 10 years sooner, and I could have done it 10 years sooner. 

Jerry Cobb: Jim Aljian is the owner of Aljian Capital Management in Santa Rosa, California. 

Today's story focused on client relationships and how operating as an independent advisor allows you the flexibility to meet the needs of your clients, in whatever way is most valuable to them. That strengthens the client-advisor relationship and your business. 

If you're thinking of becoming an RIA in order to serve clients better, here's a few things to keep in mind. 

Most advisors who go independent are glad they did. More than 90% of respondents to a survey by Schwab Advisor Services report they have no regrets about their decision to go independent. Another Schwab study shows 94% of advisors make the move to gain the flexibility to do what's best for their clients.
More and more clients are looking to employ the services of RIAs. According to a Cerulli study, the market share of managed assets has declined 10% for wirehouses over a 10-year period, while independent models have increased nearly 6% over the same period.
Advisors who go independent are more likely to see their relationships with clients deepen, because of how they're able to serve their unique needs.
And when I hear Jim's story, here's what inspires me most:

Even after losing his own home to the wildfires and being unable to work from his smoke-damaged office, Jim's singular focus on serving his clients never wavered. As a result, he strengthened his relationships with clients at a time when they needed him most.
Jim didn't hesitate to spend his time providing emotional and administrative support to help his clients who lost their homes in the wildfires. His view of client services expanded beyond managing their financial portfolios.
And ultimately, Jim's clients have now become his friends, which is more and more common to see among independent advisors.  
Thousands of financial advisors across the country take the leap and become independent RIAs. Each story, and each transition, is unique. But the steps they take, and the support they need, is often the same. 

Learn more—lots more—about the RIA model, and how Schwab Advisor Services can help you forge your own path to independence. 

Find us online, at Schwab.com/RIA, or look for the link in the show description to this episode. 

I'm Jerry Cobb, and this is How I Became an Independent RIA, an original podcast from Schwab Advisor Services. 

DISCLOSURES:
Speaker 4: Schwab Advisor Services serves independent investment advisors and includes the custody, trading and support services of Schwab. 

The comments, views, and opinions expressed in the podcast are those of the speakers and do not necessarily represent the views of Schwab. They are provided for informational purposes only. 

Experiences expressed by advisors may not be representative of the experience of other advisors and are not a guarantee of future success. 

The above-mentioned firms and their employees are not affiliated with or employees of Schwab unless otherwise noted. They should not be construed as a recommendation, endorsement of, or sponsorship by Schwab. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. Copyright 2019 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. 

Independent investment advisors are not owned by, affiliated with, or supervised by Schwab. 

Compliance Code: (1219-96S1)
 

Key takeaways

Creating your own culture

Jim and Jessica were content at their previous brokerage. Until things started to change. They encountered more hoops to jump through and more fees for clients, and they lost connection to their coworkers. Learning about independence, they grew excited about the opportunity to create a friendly, efficient, and client-focused firm.

Discover support to make your dream firm a reality >


Working from home or hotel

New-found flexibility allowed Jim and Jessica to take advantage of the benefits of working remotely after their office closed from smoke damage and Jim's house burnt down. Digital tools kept them going. From a hotel, Jim stayed connected to clients and didn't miss a beat

Power your firm with digital tools >

 

Building on the strength of the RIA model

The flexibility and freedom of the independent Registered Investment Advisor (RIA) model can be crucial in times of crisis. From the ashes of a terrible wildfire, Jim worked with his clients to inspire hope and new plans for the future. 

Learn why the next great investment firm will be an RIA >

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The above-mentioned firms and their employees are not affiliated with or employees of Schwab unless otherwise noted. They should not be construed as a recommendation, endorsement of, or sponsorship by Schwab. The views expressed are those of the third party and are provided for informational purposes only. Third-party firms and their employees are not affiliated with or an employee of Schwab. Experiences expressed by advisors may not be representative of the experience of other advisors and are not a guarantee of future success. The data contained herein from third-party providers is obtained from what are considered reliable sources; however, its accuracy, completeness, or reliability cannot be guaranteed.

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