Client Portals

Win with Small Firms — 6 Big Ways  3 min read

Oct 16, 2018 - John Osbon ( 5 mins to read)

The story of small versus big is as enduring as the David and Goliath legend. Investors who are thinking about changing advisors or picking an advisor for the first time can choose from dozens of big firms and thousands of small firms. So, which is best for you…small or big? Several years ago, Malcolm Gladwell floated the idea that small firms have a real business advantage over larger competitors. We agreed then and feel even more strongly that way now.  Here are six reasons why.

Reasons to go small

I last wrote about small firms in 2013 when Gladwell’s guide for entrepreneurs, David and Goliathwas a new release. The trends he pointed to then that favored smaller, leaner, more tech-ready organizations have only grown stronger since then.

Remember it was only a couple of decades ago in the investment management business when big brand name firms got all of the attention while small firms were given little to no regard. To most observers, bigger meant better, period. But 2009 changed that. Large financial institutions lost the public trust in the financial crisis, while fresh technological advancements leveled the playing field for smaller firms.

Today, small equals innovative, personal and responsive, exactly what most are looking for in financial services. Each year there are many more small firms to choose from in investment management, investment banking and boutique advice.

What makes it possible for small firms to stand out?

  • Virtualization– It’s easier than ever to have an in-depth personal conversation via digital technologies. We use screen share with clients, passing control of the mouse back and forth, or fire up the camera for face-to-face interaction. Even old-fashioned email and text get more powerful every year as new capabilities are added. We recently received nine pdfs from a client by encrypted email and quickly started the next discussion via text.
  • Adoption of New Technology – Software producers are constantly competing for the attention of the financial industry. It’s a buyer’s market and small firms can easily upgrade their practices through new tech on a regular basis.
  • Multigenerational Continuity – Turnover in small firms is typically very low. That means working with the same team for decades, not a revolving door of advisors seeking to climb the big firm ladder. Small firm teams are incentivized to stick around.
  • Independent Custodians– We see continual advances in electronic account opening, transfer, viewing rights and granting of discretion. An independent custodian like Fidelity or Schwab can handle many such tasks easily. That’s not true of all broker dealer custodians.
  • Independent Thinkers – In small firms, there’s no tendency toward groupthink or blind allegiance to corporate dictates. Small firms earn clients through transparency, trust and attention, not million dollar ad campaigns and product distribution.
  • Direct Access – Working directly with the owner-operators of a small firm creates connection and continuity, versus short-term relationships with large firm service teams.

Only you can decide what’s best for you. Small firm service is especially beneficial for the “forgotten rich” – those with one, five, ten or twenty million of investable assets. They are forgotten because they often receive the entry-level bare bones service level from the wirehouses. They’re the perfect size for small, independent, tech-savvy firms like Osbon Capital Management.

Small for some time

Osbon Capital will be grouped in the small firm category – between $100 million and $1 billion of assets managed – for the foreseeable future. We like it here and we see the “small” label as an advantage. For a client to say “my money is managed by a small firm” implies some exclusivity, some choice and careful thinking. If you would like to have a small firm look at your portfolio, please contact us by email or phone.

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