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Mutual Fund Store' Franchises Across U.S.


Within a Chicago suburban strip mall in Northbrook, Ill., nestled among the typical fast food, drug store and dry cleaning storefronts, is an unusual newcomer, The Mutual Fund Store.

This office is one of a dozen of mutual-fund-only, predominantly franchise-operated, fee-based financial planning outlets -- the brainchild of 40-year-old Adam Bold. Bold, a former registered rep with a major brokerage firm, founded the venture in the basement of his home in Overland Park, Kan., and now serves as the chief investment officer and spiritual leader for all of the offices. He calls the shots when it comes to recommending asset allocations and individual mutual funds for investors.

In 1996, Bold established his financial planning office. He followed that with one company-owned store in St. Louis. In 2000, after an epiphany in the middle of the night, he partnered with a venture capital firm and decided to take the mutual fund storefront idea nationwide. His plan was so successful that this past May, Bold was able to repay his VC partners and now has full control of the mutual fund financial planning empire he created.

He and his franchise operators now manage more than $815 million for 6,000 clients in 13 offices, including those in Indianapolis and Fort Wayne, Ind., Cincinnati, New Orleans, Las Vegas and San Diego. In December, new Mutual Fund Stores will open in Albuquerque, N.M., and Charlotte, N.C., followed by a San Francisco office in January, and Washington after that. More stores are set to open in key markets including Cleveland, Memphis, Phoenix, Portland, Ore., and Raleigh-Durham, NC. "There's no market we won't open in," Bold said.

All of the necessary back-office services and reporting are handled at the company's 10,000-square-foot Kansas headquarters, leaving franchise owners/managing partners to work directly with clients. Clients pay from 90 basis points to 1.5%, depending on account size. Account minimums are $50,000, but clients average between $175,000 and $200,000 and include retired small business owners and those changing jobs with rollover assets to invest. "Our sweet spot is the everyday person," Bold said.

While those clients often include walk-ins who drop in out of curiosity, key sources for new clients are referrals and Bold radio fans. Every Saturday, Bold spends three hours hosting a radio call-in show aptly named "The Mutual Fund Show," syndicated in markets where he has stores. "The power of the radio brings credibility," said Brian Jensen, the franchisee/managing partner in Northbrook, and a former TD Waterhouse vice president.

On a recent show in early November, Bold recommended one of his favorite funds, the Excelsior Value and Restructuring Fund, to a man with a son in the Navy with $5,000 and $100 a month, respectively, to invest. And to another caller, he touted the Cambiar Opportunity Fund. Although his radio shows aren't infomercials, they are the predominant marketing tool Bold uses to drive traffic to the storefronts, as he makes sure before signing off to invite listeners wanting more information to call or visit their local Mutual Fund Store. "We don't prospect, people come to us," Bold said. And he won't accept any fees from fund companies. In fact, many fund managers first hear about Bold and The Mutual Fund Store through these on-air recommendations.

The Unique, Bold Model

Certainly, franchising is an oddity in the financial services industry. But that could change, fueled by the growing need for planning services, said Dr. Robert Robicheaux, professor of marketing at the University of Alabama at Birmingham.

According to data from Bond's Franchise Guide, published by Source Book Publications, there are fewer than 50 franchisors within the financial services sector. Those that do exist include tax-preparation, payroll and check-cashing outlets. Jackson Hewitt Tax Service of Parsippany, N.J., is the largest of the sector's franchised businesses, with over 4,300 units, although almost 12% are company-owned stores.

The Mutual Fund Store charges a franchise fee of between $50,000 and $250,000, depending on the market. Franchisees must have another $300,000 to $1.5 million in available capital to subsidize business expenses including rent. It takes roughly 13 months for a store to develop a full clientele and 18 months to become profitable, Bold noted. Since there is no inventory, the goal is to have revenues exceed monthly expenses. "Our stores generate very large sums of cash," Bold said. Like all franchise operations, Bold's company takes a percentage of all revenues generated.

Bold's operation is a flexible franchise that includes owner-operators and entrepreneurs and soon will include a group of investors who will purchase five franchises and then hire advisers to run their shops, Bold said.

But there are inherent risks, Robicheaux said. "For franchisors, it is legally risky because they have to bear responsibility for everything that happens." That may include investors being harmed or a franchisee absconding with client assets.

Funds and Only Funds

Despite its growing nationwide footprint, The Mutual Fund Store will only handle mutual funds. "We help our clients manage their money through mutual funds only," Bold said. Offering other products would "dilute our ability to do the very best at what we do." Those seeking tax advice, estate planning, and insurance are referred to independent providers.

What Bold prides himself on doing is researching to find the very best mutual fund managers and then weaving the funds they manage into asset-allocation portfolios for all clients. Performance consistency tops Bold's must-have list. It's not the fund that necessarily attracts Bold, but it's the manager, each of whom Bold talks with directly. "For all of the funds we recommend, I have spoken to the manager," he said. "If the fund does badly, I can ask, What are you going to do to turn this around?'" He admits that he only recommends no-load funds for clients, although he will allow load funds into allocations if they can be purchased load-waived.

"I'm not about the best fund on Money magazine's cover," Bold said.