A successful brokerage operation has to provide individual solutions

by Stephen M. Grice

Its no secret that over the past decade, the financial services industry has changed dramatically. In the past, stockbrokers sold stocks and bonds, CPAs provided tax services, and attorneys drafted wills and trusts. Today, those lines have blurred to create a marketplace in which advisors offer varied financial advice and products to consumers looking to consolidate their financial choices.

Navigating through the ever-evolving financial services industry is like charting a course through a reef-filled ocean. One can take numerous channels to the destination. Each is filled with different currents, sandbars and unknown hazards, but with knowledge, skill and determination, a captain can plot a course that will bring the ship successfully to port.

Establishing strong relationships with advisors in various channels is critical to a successful brokerage operation. To do this, one must understand the complexities of each channel and provide individual solutions.

Preparing to Set Sail

One of the first steps to growing your business in new channels is to educate yourself. Invest in the certification, licenses and training to establish your professional credentials.

Eliminate the “sales” stories from your conversations and meetings. Talk about how you solved problems and helped a client realize a dream, not about the variable annuity or managed fund that you set up.

Affiliate yourself with companies that offer a broad range of solutions and will partner with you. Identify which companies develop products for specific markets and niches. The broker-dealer also should have effective compliance processes and technology platforms.

Learn the language. Depending on your experience, you may understand the insurance channel but might stumble over terms commonly used by stockbrokers or CPAs. By overcoming the language barrier, you can build a relationship in a new channel more quickly.

Once youve begun to plot your course in a new channel, share information freely, follow up consistently and be patient. Position yourself as a problem solver and ask probing questions to ascertain the clients need before making recommendations. Stop “selling” products and be prepared to spend the time to educate the broker, advisor, CPA or attorney about why your recommendation is right for the client.

Dont assume that the advisor or the client understands how investments and life insurance work. Educating advisors and clients can be difficult if they position themselves as experts. Often this requires a delicate touch.

Address this issue up front by asking probing questions about goals and needs. By gently educating them on the strategy, the plan and the solution, you can sidestep the pitfalls of pride more easily and strengthen the relationship.

While creating the trust necessary to build a strong relationship, expect disagreements to occur. Be flexible and offer broad-based plans and solutions that can be modified without wandering from the clients goal.

Your value lies in being trustworthy, making recommendations that meet the clients goals, and creating a relationship with the advisor and the client that can flourish over time.

Independent Financial Planners

Recently, I was asked to review a plan for a retired couple. Upon consultation, I discovered the husband and wife had been sold policies that were not appropriate for their needs.

The clients had received two variable universal life (VUL) margin calls on their survivorship policies. Due to poor performance in the subaccounts, the clients annual premium was set to increase from $40,000 to $90,000. Submitting new medical and financial information to the insurance carriers resulted in guaranteed coverage for a $47,000 premium, an annual savings of $43,000 from the proposed new premium.

The clients then requested that we review their $5 million survivorship whole life contract with annual premiums of $104,000. Based on previous underwriting and current cash values in the contract, we determined that we could reduce the premium by more than half.

The clients replaced the coverage, thereby saving more than $62,000 in annual premiums. These consultations resulted in a combined yearly savings of over $100,000 to the clients.

Certified Public Accountants and Attorneys

Like advisors in other channels, CPAs and attorneys provide a broader range of services. Having earned their clients trust, many are being asked to review investment strategies and provide financial solutions to clients, such as small business owners.

Attorneys and CPAs often run their businesses on an hourly retainer or fee structure. So, consider offering fee-based services rather than commissioned products. This consideration must, however, be balanced by demonstrated expertise and an ability to provide the right solution for the client.

I once was asked to consult with clients of an accountant. The doctor and his wife had excessive traditional insurance premiums funded by proceeds from a real estate sale.

Their current insurance agent recommended moving the real estate proceeds into the traditional policy. The investment advisor fought to retain the assets. Tired of the infighting among their financial team, they asked their accountant for help.

After reviewing the clients needs and objectives, which included a $1.5 million death benefit on the doctor, we recommended the clients negotiate a settlement with the current insurance provider. The clients retained some traditional insurance, supplemented with affordable term insurance, and they moved the investments to the accountant (who had an investment license). This is a classic example of all parties working together to meet the clients needs and objectives.

National Accounts

Working with major wirehouses to offer clients broad financial services can build your brokerage business. Many wirehouses have teams of experts. One member manages the money, another handles the marketing and a third, the operations. They look for third parties to provide life and long term care insurance.

One representative had clients worth $25 million who needed insurance to provide liquidity for their estate in the event of their deaths. They were reviewing a $10 million survivorship policy and had requested advice from their investment advisor about the proposals.

After talking with the representative and the clients about their needs and wants, including philanthropy and the possibility of quick-pay premiums, we presented different solutions. A 15-year VUL policy had a little more risk and lower premiums than did other proposals, but because the clients were young and had a high risk tolerance, it was a good fit.

We also identified a carrier that offered an additional benefit for their charity of choice. In the end, the clients had a better understanding of all the insurance options vs. one choice presented via a carrier spreadsheet.

Staying the Course

Providing solutions rather than selling product, understanding the intricacies of the channels and staying focused on clients goals can result in a sure course for navigating successfully through the seas of change.

Stephen M. Grice, CFP, is a principal at Grice Financial Group, a Charlotte, N.C.-based firm that represents Transamerica companies. He may be reached at sgrice@gricefinancial.com.


Reproduced from National Underwriter Edition, April 8, 2005. Copyright 2005 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.