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Financial Planning > Tax Planning

Havent Won A Client Lately? Join The Crowd

By Warren S. Hersch

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What is the greatest challenge advisors face in today’s marketplace? If you guessed “attracting new clients,” then you’re in good company.

Advisors contacted by National Underwriter uniformly cite client acquisition as a top challenge in their own practices. So, also do some 600 producers that Windsor, Conn.-based LIMRA International surveyed earlier this year. Nearly 53% of the advisors polled in the LIMRA Producer Panel said that winning new customers is a major challenge–the only issue on which a majority of those surveyed agreed.

Why are so many encountering difficulty? Insurance professionals finger a range of hurdles, including increasing competition from financial advisors in related (and once distinct) fields, heightened consumer skepticism about financial seminars and the difficulty of making time for prospecting.

Key to dealing with the time issue, advisors say, is the ability to systematize activities that yield new business opportunities: making phone calls, networking, following up on marketing-generated leads and, not least, acting on referrals.

Mark McCandless, vice president of RAV Financial Services, Beachwood, Ohio, says that his “close rate” on referrals from existing clients and friends is greater than 90%. Nearly as effective, he adds, are referrals from partnering advisors, such as certified public accountants and estate planning attorneys.

Developing these business relationships is no small matter. At least 40% percent of advisors polled by LIMRA flagged this as a “major challenge,” comparable to the percentages cited for insurance compliance, developing one’s own expertise and identifying a successor.

As more CPAs, attorneys and investment advisors add life insurance and financial planning services to their portfolios, the challenge becomes all the greater. The difficulty, McCandless observes, lies not only in finding a partner but also in ensuring the alliance is of mutual benefit. His concern is most acute with respect to CPAs.

“The model of 10 or 15 years ago–that you would cultivate CPAs and they would send their best clients to you–is rapidly becoming a myth,” says McCandless. “People should recognize that CPAs are already in the financial services business.

“While not doing comprehensive financial planning, they are doing planning and selling product,” he adds. “They’re not going to make many referrals in cases where they can service clients themselves.”

Even when fellow advisors don’t offer competitive services, the uninformed among prospective clients often think they do. That perception continues to be widespread, say insurance professionals, with respect to brokerage houses. Why, some clients ask, pay a fee to a financial planner when a stockbroker at Merrill Lynch or Bear Stearns will do?

Or when, as so many “do it yourselfers” believe, you can get all the financial information you need from the Internet. Peter Radloff, vice president of advanced markets of Jackson National Life, Denver, Colo., says the Web is creating a more financially savvy public, one more inclined to view advisor recommendations with skepticism.

Relationships with other professionals, whether of a cooperative or competitive nature, aren’t so troublesome when those advisors work in-house. Geoffrey Kaltenbach, an associate managing partner at Signature Resources, a Los Angeles, Calif.-based agency of John Hancock Financial Services, says his firm employs a range of specialists that Signature producers, and their clients, can consult with.

The ability to tap that expertise, says Kaltenbach, is all the more critical for new advisors with little experience in advanced markets. While Signature “grooms” these producers to become experts in a particular area, they function during their initial years as a kind of “financial concierge.”

“A new person coming into the business doesn’t have to have a deep knowledge of tax law, estate planning, long term care or succession planning,” says Kaltenbach. “They just have to understand the process. Our financial team-building model allows them to have credibility with the client without having the expertise.”

Radloff agrees, adding that the ability of insurance carriers and agencies to deliver high-quality and timely support services to advisors, particularly in the area of advanced markets, is increasingly important to surviving and thriving in today’s marketplace.

Also key is the ability to satisfy ever-expanding regulatory requirements. To that end, McCandless’ firm employs a financial planner who doubles as a chief compliance officer. If the compliance load weren’t so heavy, he says, the advisor would be able to devote a lot more time to meeting with clients.

Kaltenbach concurs, noting that increased compliance requirements is perhaps the chief factor underpinning the third statistic in LIMRA’s poll: the roughly one-third of producers who say that “increasing their productivity” and “having the time and capacity to service their clients” are major challenges.

Kaltenbach says the added documentation, report-tracking and time that advisors have to spend on compliance tasks have added from 10% to 15% of his firm’s workload.

“[Compliance] is an additional burden on the advisor’s practice,” he says. “Software-enabled automation has reduced the time requirements somewhat. But our industry is still way behind the curve from a technology standpoint.”

‘The model of 10 or 15 years ago–that you would cultivate CPAs and they would send their best clients to you–is rapidly becoming a myth’

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