You’ve stopped to smell the roses. Good for you! Now wake up and smell the coffee. Yes, a new era has been brewing in the financial services industry for more than a decade — and it’s a rich blend indeed for those advisors perking with the change.
To be sure, if you’re not developing your business to jibe with the diverse, expanding needs of today’s investing public, you aren’t just on a slow track, you’re stalled at the gate.
No worries, though. It’s not too late to buckle down and start using tactics and strategies to build your practice for the here and now and simultaneously plant seeds to reap business in the future.
The three bywords of today’s successful FA are “holistic, as in broad client relationships; “consultative,” as in huddling with those clients; and “advice,” as in the heart of what clients need.
“It’s not salesmanship anymore. Now it’s leadership. Advice isn’t transactions. And managing your practice isn’t managing your book. Servicing clients is different from having clients. These shifts represent an enormous opportunity for advisors — and a great challenge,” says David Kowach, Wachovia Securities’ director of business development, based in Richmond, Va.
To meet that challenge, wirehouses are putting the accent on training to provide competencies in such sophisticated areas as estate planning, intergenerational wealth transfer and business succession. More than ever, the concept is: value-added.
Electronic technology has helped advisors leverage their time; it’s also given clients access to cheap — even free — do-it-yourself investing. Thus, “as an industry…we need to be delivering services and investment advice beyond what somebody can do on their own. Technology has raised the bar as to what value-added really is,” says Phil Sieg, managing director and head of strategic leadership and development for Merrill Lynch in New York City.
And for principals of independent practices, it’s obvious that they must truly inhabit the role of CEO. “You have to wear lots of hats as opposed to simply being a financial planner. You need to be a business owner and put together a business plan, do your financials, understand processes, and be good at human resources,” says Joni Youngwirth, vice president-practice management at Commonwealth Financial Network.
“You need to get clear on what it is you do — and don’t do — for clients. If you’re going to be everything to everyone, you’ll be mediocre,” adds Youngwirth, based in Waltham, Mass.
Today’s high-net-worth investors — baby boomers, in particular — may be fundamentally shrewd about money; but many have challenging, complex financial situations with which they need help. “A lot of affluent clients are not only expecting assistance with asset management but with many other areas,” says Paul Brunswick, managing director-national business development at Smith Barney in New York City.
At the firm, beefed-up training programs pivot on the motto: “Competence equals confidence.” Beyond asset management, the wirehouse breaks out three other key competency components: lifestyle management, including estate planning; liability management, especially applicable to business owners; and risk management, which “helps clients identify their financial blind spots. The big emphasis,” says Brunswick, “is on these other areas in which advisors traditionally didn’t need to be competent.”
Building Your Business Today
So, in light of the shift from transactional to consultative, how can you build your practice right now?
First, choose or refine your target market. Acquire technical skills in the more intricate financial-planning areas. Create a mission statement, marketing strategy and client-retention strategy, plus a service standard for each client. Develop a written annual business plan — and, ideally, refer to it consistently throughout the year.
“Getting to know you” is today’s chief theme for obtaining and retaining clients. Gravitate to a specific niche. “The emphasis is on being much more narrow in the type of people you deal with — [but] much deeper in the way you try to help them achieve their goals,” says Merrill’s Sieg.
The comprehensive client profile — which helps FAs uncover financial needs in tandem with life hopes and dreams — has become one of the most important tools in building your practice.
Wachovia stresses client-profiling skills “even with [clients] our advisors have known for years,” notes Kowach. Using the firm’s Envision program, they probe to learn about life goals and “get to the heart of real issues clients face day to day.” From that, the FAs create appropriate financial plans. “We don’t want it to be the same-ol’ salesman-type of business. Now we want to play more of a role of life advisor to our top clients.”
In building an advisory business, it makes sense to have a business plan — an annual one that, as Smith Barney’s Brunswick says, “doesn’t disappear into a file in January until the next January. It should become part of the advisor’s life on a quarterly, monthly, [even] weekly basis.”
Youngwirth, at Commonwealth, believes that every independent should have a written business plan to “live by through the year. It’s essential to do one even if advisors put it in the bottom drawer and don’t look at because [at least] they will have articulated how fast they want to grow, services they want to provide and to whom they want to provide them.”
Establishing an investment policy statement and an agreed-upon client-service standard are other aids to help boost business in the short term. “A lot of research shows that a written investment plan and consistent client contact absolutely have an impact on client loyalty,” notes Kowach, of Wachovia, whose new Forefront business model for advanced FAs has an IPS, a service standard and the Envision tool at its core.
Prospecting for new clients shouldn’t be neglected — even if all you do is ask accounts for referrals. “In the past cold calling was effective, but not anymore,” says Sieg. “Identifying a niche market, networking and working with other professionals [for referrals] are probably the most effective thing to do today.” Brunswick says that FAs who have learned new, advanced competencies become “more referable” by CPAs, attorneys and the like. Seminars are excellent for bringing in new business too.
According to Youngwirth, independent FAs must market to three groups:
“First and foremost, existing clients because they get invitations every week to go to seminars with free dinners; prospects — people you’ve had some interaction with — because they’re hot; and your niche market or the larger community” via advertising and public relations branding.
Forming a partnership or team can often be the perfect move because such a union can bring together complementary skill sets. But heads up: “Partnership,” points out Youngwirth, “is an art.”
Whether an independent advisor or FA in a large firm, an entrepreneurial spirit is, without a doubt, what you need. This is a highly entrepreneurial business, says Merrill’s Sieg, “and those who do very well think of themselves as having a business within a business. They’re constantly looking at how to change for the better.”