Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Practice Management > Building Your Business

Creating An Action Plan For Long-Term Success

Your article was successfully shared with the contacts you provided.

Ask a novice insurance or financial service professional how one achieves long-term success in the business and he or she will likely call to mind relationship skills or technical savvy. But those in the know cite additional–and critical–factors, including the ability: to develop a business model that dovetails with one’s expertise and target audience; to delegate tasks calling for less skill to associates; to jettison clients who are inappropriate for the practice; and, not least, to manage a growing clientele without compromising time that must be spent prospecting.

“The hardest part of my job in the early going was not finding clients, but finding time to service them,” says Jennifer Alford, a vice president of Perrysburg, Ohio-based Creative Financial Partners. “You have to be organized from day 1. And you have to figure out what people, processes and systems you’ll need.”

For John Parise, a Cherry Hill, N.J.-based family wealth strategist for Sagemark Consulting, the focus is very much on the affluent. The practice services mostly clients with $20 million-plus in investable assets, offering comprehensive retirement, estate, charitable and business planning for the high net worth.

For an annual retainer fee, which generally ranges between $7,500 and $20,000, clients receive family office-like services. Chief among these are quarterly meetings, which for new clients follow a similar roadmap: a first get-together to establish financial goals and objectives; a second to coordinate with other advisors, including a CPA, attorney and investment advisor; a third to strategize on year-end tax planning; and a final chat to review the estate plan and a newly drafted “family mission statement” with adult children or other beneficiaries who stand to inherit assets.

Because of the wide range of advance planning expertise required to service his expanding clientele, Parise does a lot of joint work with other Sagemark-affiliated advisors who are versed in niche specialties, such as business succession or charitable planning. Parise also employs a team of junior-level advisors to service a less profitable segment of his clientele and whom Parise has personally instructed on the finer points of advanced planning.

“I train them specifically in what they need to do to bring them to the next level so they can handle the bigger cases,” says Parise. “The high net worth market is not being served as well as you might think. Most financial planning firms deal with $2 million in assets or less. Few firms focus on the $20 million-plus market.”

Not every firm can, and for reasons bearing not only on the advisor’s expertise, or lack thereof. Elizabeth Mower, a technical projects director for Business Enterprise Institute, Golden, Colo., says advisors need to determine whether the target markets within the communities they serve have a sufficiently large base of affluent individuals to support their practices. If not, then the better approach to expanding one business may be to prospect to more individuals within the existing demographic already being served.

Indeed, catering to those of moderate net worth could potentially be just as profitable as high net worth-focused practice, if one is prepared to service a larger clientele with less complex insurance and financial services needs. Parise says a “very successful” Sagemark-affiliated advisor with whom he shares offices boasts some 1,400 clients–about 10 times the number of Parise’s practice–most of whom have less than $5 million in assets.

In today’s challenging economy, some advisors are prospecting to individuals whom in better days they would have side-stepped in pursuit of more profitable business. Brian H. Merriam, president of Merriam Insurance Agency, Schenectady, N.Y., and a member of the Independent Insurance Agents and Brokers of New York, DeWitt, N.Y., says that only 2 months ago the company abandoned the industry’s time-honored 80-20 rule. Because 20% of clients generate 80% of one’s revenue, goes the maxim, client-acquisition and retention efforts should be devoted exclusively to the 20%–and the remaining 80% abandoned.

“I don’t believe this degree of arrogance works anymore,” says Merriam. “To grow our sales in light of the faltering economy, we’ve eliminated a minimum premium threshold that prospects had to meet before we would take them on as clients.

“A lot of people are seeing their incomes go down,” he adds. “What used to be a large account is now a middle-size account; and what was a middle-size account is now a small account. So we’ve returned to the posture that says we will be of service to all clients, regardless of size.”

Merriam isn’t, however, so flexible with respect to a prospect’s intent, temperament or integrity. He shuns individuals who are only looking for a good deal on a product, having no interest in establishing a long-term relationship. Also to be avoided are those, such as insecure investors, who require too much hand-holding for the level of remuneration, and people who are less than honest in their dealings.

Among the few clients Merriam has had to “fire” was an individual who entered a fraudulent professional liability claim. Parise, too, felt compelled in one instance to jettison a family-owned business in which an eldest daughter had sought through dishonest means to advance her position at the expense of the father.

“For the father to have confronted his daughter about the deception would have meant causing potentially irreparable harm to their relationship,” says Parise. “I said to the father, ‘I understand your position, but I can’t continue to work for your family in this environment.’ So we disengaged.”

It may also be prudent to end the relationship when the chemistry isn’t right. Creative Financial Partners’ Alford generally hands off to in-house colleagues analytical types who seem less interested in building a plan than in understanding the details of a policy illustration or mutual fund prospectus. Her sweet spot is dealing with creative types and, in particular, female small business owners. To tap this market, she has aligned herself, and shares commissions, with advisors holding related business planning expertise, including specialists in long term care, group benefits and property-casualty insurance.

A key challenge Alford has faced in recent years is how best to balance her time between new client acquisition activities and supporting those already on her books. To that end, Alford has also offloaded ongoing servicing to a prot?g? who assists with ongoing client reviews, planning and marketing efforts. Integral to the last are newsletters and various other mailings that Alford uses to “touch” clients throughout the year and supplement face-to-face meetings.

“I also use an online program to send personalized birthday and holiday cards that come printed with my signature,” says Alford. “The cards look like I personally signed them, but I just write a check to the program vendor.”

Prospecting to larger outfits is Patrick Ungashick, a principal of White Horse Advisors, an Atlanta, Ga.-based firm that deals mainly with companies housing from 20 to 200 employees and generating from $5 million to $80 million in revenue. Ungashick and 3 other principals engage in business development, interfacing with new clients and prospects. A second team of 4 advisors drafts financial plans, conducts periodic reviews and implements decisions; still other teams oversee compliance and administration.

In all, the firm has about 20 staffers who support some 178 clients, yielding about a 9:1 client-to-employee ratio that Ungashick considers “modest” by industry standards. Some firms with similar headcounts manage upward of 800 clients, he says, but Ungashick emphasizes his practice allocates staffers so as to minimize labor costs.

“Because of our organizational structure, we can provide service at the requisite skill level and at the lowest expense,” says Ungashick. “Another advantage is that clients get to interact with multiple people within the firm. They value the personal relationships and know that a broad team of people is meeting their needs.”

As White Horse expands its practice, the firm intends to maintain a strong focus on those personal connections. Given the myriad of servicing needs, including 4 quarterly reviews, advisors generally are limited to “62″ clients each; when that threshold is reached, the firm will recruit another financial professional.

And pay the individual appropriately. Ungashick notes that all new advisors are paid a salary plus bonus. Under a previous revenue-sharing arrangement, he notes, a new advisor who had, say, 20 clients to service (as opposed to 60) would get paid only one-third of what they could earn elsewhere. So the firm had to change its compensation model to remain competitive.

In return for good pay, White Horse demands much of raw recruits. Ungashick says that before new hires meet with a client, they have to become conversant–though not experts–in the panoply of advanced planning techniques. Among them: business exit strategies, qualified plan retirement design, estate and investment planning, risk management, and the various types of buy-sell agreements. To get recruits up to speed, the firm offers in-house training using an internally developed curriculum and White Horse’s own instructors. Within 7 years of joining the firm, recruits are also expected to secure, at company expense, at least 2 of 13 pre-screened designations.

The substantial investment in education, says Ungashick, is essential to success in the business arena, particularly in cases where clients already have other advisors.

“When we show up, the burden of proof is very much on us to demonstrate that we bring new value into the equation,” he says. “We’re hired because we’re able to spot issues and propose solutions that an existing advisor missed. That only comes about if your intellectual capital is as good as I’ve described.”

Kicker: Making The Cut

One advisor shuns individuals who:

–Are only looking for a good deal on a product.

–Have no interest in establishing a long-term relationship.

–Are insecure investors.

–Require too much hand-holding for the level of remuneration.

–Are less than honest in their dealings.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.