We feel so strongly about what we do that we wrote a manifesto about it.
Most businesses begin when an entrepreneur identifies someone with a problem and creates a solution to that problem. The next step is for the entrepreneur to go find more “someones” (i.e., customers) who have the same problem and therefore will be good candidates to buy the solution. Which is OK if those customers are relatively homogeneous. It’s a “wash-rinse-repeat” approach that can be highly profitable.
An alternative is to build a set of capabilities and then customize those capabilities for each customer, mixing and matching to address unique problems. No customer gets the same solution, though there are common themes and elements. This is the definition of an artisan business. Such a business does not scale very well. Whereas “wash-rinse-repeat” drives declining cost per customer and increasing margins to scale, the artisan business model is not as profitable because it lacks operating leverage.
In our industry (which is supposed to be about financial advice but generally goes by “asset management” or “wealth management”), the universal approach is to create a solution (i.e., a set of asset allocation models using exchange-traded funds) and then find as many customers as possible to plug into that solution:
It works well for the broad market of individuals (the “mass affluent”) whose needs are similar (i.e. how do I address a particular financial goal, usually retirement)
It is highly profitable – the marginal cost of each new customer tends to decline over time
It results in advisors becoming salespeople who feed the solution machine
Liquid assets become the lifeblood of the advisory business because assets = revenue
We are taking the road less traveled, but we think it's a better path for our business owner audience:
Relatively heterogeneous customers - yes there are common themes but the needs of one entrepreneur can differ markedly from the next (e.g., business life cycle, personal life cycle)
It is not as profitable because the marginal cost of each new customer is the same
We solve an ever-changing, dynamic puzzle for each customer in a different way
Many entrepreneurs either have little in the way of liquid assets, or their liquid assets are primarily “dry powder” for new ventures and projects
Below you’ll find a simple chart to further highlight these differences. Does Bluestone address the problems in the first column? Yes, that’s all part of our process. But entrepreneurs have other problems that flow directly from their focus on business and real estate assets. These problems require more unique solutions (see examples shaded in blue). And that’s where we excel.
| Problems with Standard Solutions | Problems with Unique Solutions |
Simple | How do I plan for retirement? | How do I manage capital allocation for my business? How does that then integrate with capital allocation for my family? |
Complex | How do I transfer assets to heirs? | How do I think about third party or employee ownership for my business? How do I utilize third party capital in my business and real estate assets? |
Ours may not be the best business model but it's the best business model for our entrepreneur audience.
The views expressed represent the opinions of Bluestone Financial Advisors as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.
Diversification and asset allocation do not ensure a profit or guarantee against loss.
Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website.www.adviserinfo.sec.gov Past performance is not a guarantee of future results.