Your Broker-Dealer Can Help With The Transition To A Fee-Based Practice

Advisors can certainly make the transition themselves. There are a number of books and software programs that are now available that offer how-to assistance. But its a big job. A sensible alternative is to look to a top-quality broker-dealer for assistance. The broker-dealer can provide guidance to ensure a smooth transition process.

A broker-dealer can provide a mentor who may be available to give step-by-step assistance in evaluating the advisors client base and selecting the best candidates to move to fee-based relationships. The mentor can also identify all of the required registrations and disclosures and provide guidance in establishing a sound fee structure, positioning the advisor as a problem-solver rather than an order-taker.

A broker-dealer can also provide tremendous ongoing support, such as education and training, monitoring and managing assets, online access to client account information, online trading, and the required client account reporting.

In most cases, an advisor must supply all clients in a fee-based relationship with a quarterly recap of their account activity and balances. These quarterly reports are a valuable benefit for the client, but producing them can be a complicated and time-consuming task. Most broker-dealers are able to produce and mail reports that are far more comprehensive–and probably more accurate–than the advisor could produce alone.

The broker-dealer may also provide the latest technology and software, such as asset allocation, trade blasting and client contact management, to help manage the advisors clients and his business.

Advising clients will require a much broader and more advanced understanding of the business, the clients, the marketplace and the multitude of increasingly complex products that the advisor can draw on to help clients achieve their financial goals. The broker-dealer can make available a number of continuing education and training opportunities that cover technology, product knowledge, and identifying and understanding clients needs. It may also have a wide range of financial products and services that would help clients meet those needs as their life situation changes.

Most broker-dealers usually charge an administrative fee for this package of services and support based on the clients account size. The fee can range from 0.05% to 0.40% of the client fee, much more cost-effective than an individual rep can do on his or her own.

Research shows that the number one reason clients change financial advisors is the lack of ongoing communication–communication and customer service are even more important than investment performance and cost. This is especially true in todays turbulent economic and market environment where investors have found themselves confused and overwhelmed. As a result, a strategy like fee-based relationships that encourages objective, professional counseling has become more popular.

Advisors who dont offer their clients the opportunity to switch to a fee-based relationship could quickly discover that someone else already has.

Carolyn A. Jergens, CFP, CIMC, CLU, ChFC, is senior vice president, advisory services for ING Advisors Network, Torrance, Calif. She can be reached at [email protected].

Reproduced from National Underwriter Edition, April 14, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.