When Frank Fantozzi left the accounting practice he worked for to start his own financial advisory firm 12 years ago, he faced a steep learning curve. He had to figure out how to do financial planning, develop relationships with present clients and learn how to prospect for new business, all at once. Right then and there, Fantozzi vowed that he would build his practice, Cleveland-based Planned Financial, an affiliate of LPL, into one that provided a more methodical professional development approach for new advisors in the firm.
And that's what he did. Five years ago, when he hired his first junior advisor, Fantozzi put in place a system: Devote the first year to honing technical financial-planning skills, then move into working directly with clients, and, finally, start bringing in new accounts. “I wanted the advisors in my practice to develop their skills in a logical way with my help,” says Fantozzi, whose six-employee firm has $100 million in assets under management. “That was something I never had.”
Imagine that — the chance to develop your professional skills according to a clear-cut plan and a systematic progression. It's not something that many advisors get the chance to do. But, they should. In fact, industry experts say there are perhaps three important stages to an advisor's development: forging technical skills, working with clients and bringing in new business. Ideally, you should tackle them one at a time, mastering the first before you go onto the next. If that's not feasible, there should be as little overlap as possible. “You cannot sustain client relationships until you're technically competent, and you cannot build your business until you can sustain client relationships,” says Philip Palaveev, senior manager with Moss Adams, a Seattle accounting and consulting firm that specializes in working with financial advisors. Here's a look at the three stages and how to make the most out of each one.
Stage #1: Technical Expertise
Young advisors have to master the nitty gritty — how to balance a portfolio, create a financial plan, work with compliance and so on. While you may have learned a lot of this stuff in college or studying for your CFP, doing the job in the real world is usually a very different matter. (Consider how useless the Series 7 exam is to most advisors today.) Obviously, a degree in finance can give young advisors a leg up when it comes to managing real-world scenarios. In fact, with a finance degree, your junior rep may get through this first stage in as little as one year, while he can expect to spend three years or more at it without that background, experts say.
Young advisors will also progress more quickly if they work closely with a mentor. Take Jeremy Bok, who joined Planned Financial five years ago with a B.A. in finance and accounting. Bok spent his first year largely concentrating on creating financial plans. In the beginning, Fantozzi looked over each one closely, usually asking for a substantial number of corrections. That went on for about six months, after which time, Bok got to the point where his work went largely uncorrected. Now, says Fantozzi, “He's a much better financial planner than I ever was.”
HoyleCohen Wealth Management takes that approach one step further. The 15-employee, San Diego-based firm has a head of financial planning who, as part of her duties, reviews the work of all junior planners. In addition, junior planners are closely supervised by senior planners. It's an arrangement that seems to have worked. The 20-year-old practice has $400 million in assets under management.
Some junior reps find themselves drawn to this first stage of the process, where they are essentially back-office propeller heads, researching investments and crafting financial plans and doing little else. But such a role doesn't pay as much; it's considered a support professional job, paid with a salary and, probably, a bonus. There are exceptions. HoyleCohen, for example, has a special track for professionals who don't want to work with clients directly. Take Troy Waters, a financial systems analyst at the firm, who has been doing investment analysis and, more recently, financial planning, since joining the firm straight out of college 11 years ago. Waters has no plans to move to the next stage. “I'm not much of a face-to-face person,” he says. “I'm content with collecting a salary.”
Crazy as it sounds, when it comes to developing technical skills, you can overdo it. “Past a certain level of expertise, you're not going to improve your career much,” says Palaveev. How do you know when it's time to move on? For one thing, you need to be completely comfortable with your ability to answer technical questions and produce high-quality analysis.
Stage #2: Working with Clients
To work with clients successfully, an advisor has to master the art of zeroing in on what clients' want and closely gauging their appetite for risk (clients often say they can handle risk, when in reality, they can't stomach losing money). It's important to gather the right information, make effective presentations, instill a feeling of trust and create a relationship that lasts. Expect to spend three years perfecting these skills. “It's not something that comes naturally. It needs to be taught,” says Stuart Silverman, president of Fusion Financial Group in Elmsford, N.Y., which provides marketing, consulting and broker/dealer services to 125 advisory firms. (See p. 49 for a profile of Fusion Financial Group.)
The best approach is for more-experienced advisors to allow junior professionals to sit in on meetings with existing clients, probably starting with less-important clients. Then, gradually, the junior advisors can take over more of each meeting until it's entirely their show and they've assumed primary responsibility for that client. At the same time, in between meetings and reviews, the newer advisor will increasingly become the point person for a particular client, answering phone calls and emails and maintaining the relationship.
Bok is a case in point. After about a year on the job, he started attending client meetings. First, he only observed. Then, he began watching the first part of the meeting, during which Fantozzi presented an overview. In the second part of the meeting, Bok would take over the proceedings, offering more detailed information about specific investments, recommended changes and so on. Finally, a few meetings later, he would run the whole thing and assume responsibility for that client. “As the person became more comfortable with me, I could become the head advisor,” he says.
For junior reps who have had some previous experience working with clients, you may need to retrain them, especially if your firm has a different approach from the one they're used to. Two-and-half years ago, for example, Amy Raisman joined Andrew Stuart Asset Management in Coral Springs, Fla., after 10 years at Morgan Stanley. She brought some clients with her to her new employer. But she also went through a process in which she and a senior partner held joint meetings with new clients of the firm so she could get a feel for the more consultative approach her new firm used. After about 10 meetings, she got the hang of it and was able to become the main point of contact for those relationships.
Many advisors never end up leaving this stage of development. “People reach a fork in the road,” says Dave Welling, vice president of Schwab Institutional. “They either decide this stage is temporary — or it's forever.” For those who choose to move on, however, there are a few tell-tale signs they're ready. One is that they're consistently able to run client meetings from start to finish. More important, however, is that clients start to give them referrals. And then that advisor needs to establish a reputation for high-quality work among a critical mass of accounts. “Unless you have a good reputation, it's difficult to develop business,” says Palaveev.
Stage #3: Rainmaking
This is the big show, of course — the way to make the most money. Consider this: A recent survey by Schwab Institutional found that 91 percent of the principals at top-managed RIA firms were involved in developing new business. It requires the ability to develop new leads continually and to close them — and it may be the toughest stage of all to master. “People who have technical skills or are great at handling existing relationships often don't have the natural ability needed to develop new business,” says Silverman.
How to learn? Probably the best way is just to practice: Observe more-experienced people in action and then try it on your own. But, that's not all. You also need to pick up techniques for asking existing clients to give you referrals, something that's difficult for many advisors. Fantozzi and Bok have started role-playing exercises in which Fantozzi will act out exactly how he approaches a client for a referral, providing what amounts to a script that Bok can follow.
Plante Moran in Southfield, Mich, uses an even more methodical approach. Advisors go through a specified career progression: Entry-level planners produce financial plans; senior planners review that data and work with some clients; and relationship managers have the ultimate authority over client relationships and, also, bring in new business. Each person has a career-development plan with specific goals, which is reviewed every year. As part of that plan, when appropriate, advisors go through sales training programs developed specifically for the firm. They also may receive help from a business coach. Plus, the practice offers programs to larger groups on such topics as how to ask clients for referrals. The approach has paid off handsomely. The firm, which was started in 1977 as part of an accounting firm and then became independent in 1991, has a trust bank and an insurance agency, as well as assets of around $5 billion.
What comes next? In rare cases, advisors step out of the client-development role to become full-time CEOs, running the business and forging strategy. But that's more the exception than the rule. Still, if that's your goal, keep this in mind: It's never going to happen unless you've mastered the first three stages — and you're really patient.
