Close Close

Financial Planning > Tax Planning

Moving From Financial Salesperson

Your article was successfully shared with the contacts you provided.

Prospects can sense the difference between the two

The tremendous benefit that accrues from status as a financial advisor is that you have no agenda, no product to sell and no objective other than to do what’s right for the prospect and the prospect can sense that. Because prospects do sense the difference between a financial salesperson and financial advisor (no matter what term you use to describe yourself), financial advisors gather more assets per client and have longer term, far more lucrative client relationships.

And, at the end of their career, financial advisors have a practice to sell because their client relationships have value.

Few people make the transition from salesperson to advisor. Consider these figures: There are approximately one million people in the U.S. with a securities or insurance license. But only about 78,000 people–8% of the one million–have either a CFP or ChFC credential.

That’s not to say that only people with one of these credentials are practicing financial advisors (or that some with these credentials are product salespeople and not advisors). But those who are serious about their status pursue a designation because they know that credentials quickly communicate financial expertise to the public.

So, the first step in the transition from salesperson to advisor is to get educated–whether by enrolling in one of the recognized designation programs or through self-study. You cannot advise if you don’t have adequate knowledge. Does this take a consistent effort to study each week over an 18-month period? Yes. Do most people make the effort? No.

Do the people who make the effort get rewarded? Yes–the CFP Board reports that financial planners with the CFP designation earn 50% more than non-CFP financial planners. So, if you struggle to earn more, knowing more is the first step to your goal.

Specialty Knowledge Attracts More Business

The CFP and ChFC credentials are indications of a fundamental and general knowledge base. Depending on your business, you should get specialty credentials. For example, if you do have a product specialty, such as long term care insurance, then get one of the long term care credentials like certification in long term care (CLTC) or long term care professional (LTCP).

If you specialize in working with seniors, then you want to get the certified retirement financial advisor (CRFA) credential or chartered advisor for senior living (CASL). If you focus on estate planning, then consider the Accredited Estate Planner designation.

Credentials not only provide knowledge that allows you to deliver value, they also have marketing value. The more you specialize, the more attractive you become to potential clients.

Continual Learning is Mandatory

Once you earn a credential or reach your goal, you’re not done. You need to invest about 200 hours annually in continuing education. I know that most credentials require 40 or so hours a year of continuing education, but this is insufficient. Not only do you forget what you know (and must spend time staying current), you need to add to your knowledge base continually.

Since your prospects and clients are getting more knowledgeable in financial matters, the value you add will diminish if they keep growing and you don’t.

Professionals Charge Fees

You must become a registered investment advisor so that you can charge fees for investment advice (check with your state about any licensing requirements if you want to charge fees for insurance or estate planning advice). Even if you work primarily on a commission basis, why are you doing analysis or preparing recommendations for free? That’s insane!

Some advisors are stopped by the prospect of becoming an RIA because they think it’s difficult. Yes, your state may require you to pass the NASD Series 7 and 66 exams. But passing exams is the minimal mark of a professional, as passing of an exam is not a mark of competence. Take initiative and take a review course if necessary.

But don’t wait for someone to push you because it won’t happen. No product company, insurance firm or broker-dealer will call you to say that you need to be an RIA and collect fees. It won’t happen because there may be nothing in it for them.

This is an age of self-learning. Dozens of articles have appeared in the industry press covering RIA status. There’s no shortage of information–you just need to go get it.

Many agents will be able to use the RIA of their broker-dealer or insurance company to charge fees. But either way, charging fees is essential to professional status and to survival in this business.

In fact, the only way you can provide complete service is to charge fees. For example, when doing a financial plan, would it not be a good idea to review your client’s property-casualty coverage?

Most planners don’t since they don’t sell p-c insurance. This lack of attention leaves the client exposed. If you charge fees, you get compensated for complete caretaking of your client.

Form a Network with Other Professionals

You need to affiliate with other professionals because you cannot know everything. Those that have the CFP or ChFC credential use other professionals more, not less. They realize how much there is to the tax, estate planning, employee benefits and financing issues that they don’t know.

But they know enough to be the quarterback for their clients and call in those professionals when needed. So, stop going it alone. That’s not how professionals bring value to their clients. If you need a heart operation, does your family doctor say, “No problem, I’ll do it”? Or does he bring in a specialist?

If you don’t make the most of every client relationship by fulfilling their needs either yourself or through your network of professionals, another advisor will and take your business away from you. If you don’t upgrade your knowledge and the value of your service, the prospective clients won’t need you because they are increasing their financial knowledge rapidly and will soon have no value for someone who simply has product knowledge.

Larry Klein, CPA/PFS, CFP, Certified Retirement Financial Advisor and Harvard MBA, is president of NF Communications, Inc., Walnut Creek, Calif. He can be contacted at [email protected].


© 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.