A must-have reference for financial advisors In step-by-step detail, Success as a Financial Advisor For Dummies covers how a current or would-be financial advisor can maximize their professional success through a series of behaviors, activities, and specific client-centric value propositions. In a time when federal regulators are changing the landscape on the standard of care that financial services clients should expect from their advisors, this book affords professionals insight on how they can be evolving their practices to align with the regulatory and technological trends currently underway.
Inside, you'll find out how a financial advisor can be a true fiduciary, how to compete against the growing field of robo-advisors, and how the passive investing trend is actually all about being an active investor. Additionally, you'll discover time-tested advice on building and focusing on client relationships, having a top advisor mindset, and much more.
Master the seven core competencies Attract and win new business Pick the right clients Benchmark your performance Start your own firm Brimming with practical expert advice, Success as a Financial Advisor For Dummies is a priceless success tool for any wannabe or experienced financial advisor.
Ivan M. Illan
, Ivan Illan
John Wiley & Sons Inc
Country of Publication:
16 November 2018
Professional and scholarly
Introduction 1 About This Book 1 Foolish Assumptions 3 Icons Used in This Book 3 Where to Go from Here 4 Part 1: Getting Started as a Financial Advisor 5 Chapter 1: Looking at the Big Picture 7 Understanding What a Financial Advisor Does (or Should Do) 8 Evaluating Yourself: Do You Have What It Takes? 9 Do you have the right personality? 10 What's driving you to consider this career? 10 What are your qualifications? 11 Deciding Whether to Fly Solo or Work in a Firm 12 Weighing the pros and cons of working in a firm 13 Considering the option of operating as a lone wolf 14 Thinking about starting your own firm 15 Taking Inventory: What You Need to Know 16 Complying with financial regulations 16 Brushing up on budgeting basics 17 Wrapping your brain around asset management 17 Knowing what liability management entails 18 Looking at what estate planning involves 18 Identifying key tax issues 19 Comprehending behavioral finance 19 Providing Superior Service to Your Clients 20 Performing your due diligence 20 Creating personalized financial plans 20 Teaming up for superior service 21 Creating a tiered service model 21 Assessing your performance as a financial advisor 22 Growing Your Client Base 23 Winning lifelong clients 23 Marketing your services 23 Teaming up with colleagues 23 Moving Up: Starting Your Own Firm 24 Getting started 24 Sharing revenue (or not) 25 Planning your exit strategy 26 Chapter 2: Deciding Whether You're Geared to Be a Financial Advisor 27 Evaluating Your Personality Traits 28 Do you like to teach? 28 Are you patient and supportive? 29 Are you willing to advocate for your clients? 29 Are you humble? 31 Are you well-connected? 31 Are you hungry for knowledge? 32 Questioning Your Motivations 32 Making a commitment to deliver value 33 Avoiding the siren call of commissioned sales 33 Balancing Leadership and Service 34 Embracing your leadership role 34 Maintaining a service-oriented mindset 35 Chapter 3: Performing a Self Background Check 37 Choosing a Career Path 38 Getting started fresh out of college 38 Changing careers from within the industry 39 Changing careers from outside the industry 40 Capitalizing on Your Personal Experience 41 Taking advantage of your childhood memories 42 Dealing with your own financial challenges 42 Helping others manage their finances 43 Evaluating Your Financial Position 43 Gauging your financial stability 44 Recognizing the risks of financial instability 45 Chapter 4: Deciding to Work for a Firm or Build Your Own Practice 47 Knowing Your Options 48 Hiring in as an employee of an existing firm 50 Setting out on your own as an independent financial advisor 52 Scoping out hybrid models 53 Investigating Different Revenue Models 53 Understanding the fee-only model 54 Collecting asset-based fees and commissions 56 Checking out the commission-only compensation model 56 Understanding how firm managers get paid 57 Getting On-the-Job Training as an Employee 58 Deciding where to go for your field training 58 Using internships to find the right fit 59 Finding Employment as an Independent Contractor 59 Affiliating with an independent broker/dealer 59 Finding work with an insurance-company-owned broker/dealer 60 Becoming a Registered Investment Advisor 61 Chapter 5: Surveying the Regulatory Landscape: The Fiduciary Standard 63 Familiarizing Yourself with Your Role as Financial Advisor 64 Recognizing the Confusion over Obligations and Care Standards 64 Sifting through the Clouds of Bureaucracy 67 Considering federal rules and regulations (DOL, SEC, FINRA) 67 Looking at state rules and regulations 70 Can you call yourself a financial advisor? 71 Governing Itself: Industry Organizations Weigh In 72 Recognizing that change comes from within 73 Taking the fiduciary pledge 73 Looking to the Future 74 Part 2: Mastering Core Competencies 77 Chapter 6: Pursuing Professional Development 79 Identifying the Core Competencies 80 Asset management 80 Liability management 81 Budgeting 82 Estate planning 82 Taxation 82 Behavioral finance 83 Getting a Formal Education 83 The American College of Financial Services 84 CFA Institute 84 CFP Board 86 The Institute of Business and Finance (IBF) 86 Obtaining Your Licenses to Practice 87 Financial Industry Regulatory Authority (FINRA) 87 National Association of Insurance Commissioners (NAIC) 88 Applying Certifications across the Financial Advisory Spectrum 89 Embracing Continuing Education 90 Chapter 7: Getting Budgeting under Your Belt 91 Guiding Clients on Household Budgeting 91 Estimating income 92 Identifying and estimating expenses 92 Shaking the piggy bank: Savings 96 Establishing spending and savings guidelines 97 Exploring Helpful Technology Tools 97 Leveraging the Power of Auto Pay and Payroll Deductions 98 Chapter 8: Brushing Up on Asset Management 99 Developing a Client's Investment Policy Statement 100 Exploring the client's goals and objectives 101 Defining your duties and responsibilities 103 Establishing portfolio selection guidelines 103 Concurring on a rebalancing frequency 108 Setting parameters for performance monitoring and reporting 108 Agreeing on an Investment Philosophy 109 Active, passive, or somewhere in between 109 Individual securities versus packaged products 111 Cautioning Clients on Hot Money Investments 115 Comparing Revenue/Compensation Models 115 Asset-based fees 116 Commissions and sales charges 116 Chapter 9: Delving into Liability Management 117 Assessing a Client's Risk Profile 118 Following a formal process 118 Using the income replacement approach 124 Taking the needs-based approach 125 Reviewing Insurance Lines and Products 125 Life insurance 126 Disability insurance 127 Health insurance 127 Homeowner's insurance 128 Auto insurance 128 Liability insurance 128 Annuities 129 Comparing Revenue/Compensation Models 130 Collecting a one-time, up-front commission 130 Getting paid in installments 131 Embracing transparency 131 Chapter 10: Excelling in Estate Planning 133 Addressing Estate Planning Essentials 134 Naming heirs 135 Naming beneficiaries 136 Planning for business succession or continuity 136 Accounting for estate taxes 138 Managing estate liquidity (or lack thereof) 139 Considering capital market conditions at time of death 140 Preparing for Estate Settlement Complications 140 Handling differences over a closely held business 141 Anticipating a struggle for control 142 Helping Clients Pass along Values, Not Just Wealth 143 Checking out donor-advised funds 143 Considering private family foundations 144 Brushing up on CRTs and CLTs 144 Teaming Up with Estate Planning Attorneys and Family Accountants 145 Chapter 11: Tackling Taxation 147 Reminding Yourself That You're Not an Accountant 148 Adding a Tax Advisor to the Team 149 Managing Capital Gains: Don't Let the Tail Wag the Dog 151 Using Tax-Deferred Accounts to Maximize Compounding Returns 152 Exploring Tax-Free and Tax-Lighter Investments 153 Buying municipal bonds 154 Investing in tax-exempt securities 155 Slashing Taxes with Retirement, College, and Health Savings Accounts 156 Contributing to a retirement plan 156 Socking away money in college funds 157 Trimming taxes with an HSA 158 Taking a Nibble Out of Taxes with Charitable Contributions 158 Chapter 12: Getting Up to Speed on Behavioral Finance 161 Recognizing Irrational Factors That Drive Thinking and Behaviors 162 Myopic loss aversion 162 Confirmation bias 162 Mental accounting 163 Illusion of control 163 Recent extrapolation bias 164 Hindsight bias 164 Herd mentality 164 Muting Irrational Thoughts and Behaviors 165 Appealing to the Rational Side of Your Client's Brain 166 Step 1: Acknowledge your client's fear 166 Step 2: Tell your client to take a deep, cleansing breath and smile 166 Step 3: Introduce a rational argument 166 Step 4: Have your client explain the strategy back to you 167 Riding Out Market Cycles: Balancing Fear and Greed 167 Calming common fears 168 Reining in greed 168 Part 3: Providing Superior, Personalized Service 169 Chapter 13: Formalizing Your Client Due Diligence Process 171 Deciding Whether You Want Clients or Consumers 172 Serving consumers as a broker/agent 172 Serving clients as a fiduciary financial advisor 173 Considering the Factors That Really Matter 174 Mastering the Four As of Due Diligence 176 Assessment 176 Audit 178 Action 179 Alignment 180 Chapter 14: Developing a Personalized Financial Plan 183 Obtaining Your Client's Input 184 Going Deep and Broad with Every Client 185 Copy 186 Capital 187 Consequences 188 Outlining a Client's Financial Plan 189 Focusing on cash flow 190 Considering savings and investment goals 190 Accounting for taxes 191 Addressing insurance needs 192 Connecting the financial plan to the estate plan 193 Connecting the financial plan to the client's business succession plan 193 Making Your Job Easier with Tools and Guides 194 Reviewing the Plan Regularly 196 Chapter 15: Offering Collaborative Value-Added Advice 197 Recognizing the Benefits of a Collaborative Approach 198 Aligning your compensation model with that of other professional advisors 199 Delivering optimal results 199 Creating a system of checks and balances 201 Leveraging the power of specialization 201 Collaborating to Serve Your Clients Better 203 Teaming up with your client 203 Partnering with your client's lawyer 204 Working with your client's accountant 205 Working on your follow-through 206 Taking on the Role of Your Team's Quarterback 206 Acting as the central point of contact 206 Maintaining separation among advisors base on their roles 207 Shopping solutions 208 Chapter 16: Adjusting Your Service Level to Different Clients 209 Building a Tiered Client Service Model 210 Scaling services to different clients 210 Giving your best clients concierge care 211 Scoring Your Clients 212 Considering demographics 213 Weighing psychographics 215 Assigning clients to service level brackets 216 Rewarding Quality Clients 217 Hosting special events 217 Inviting clients to breakfast or lunch 218 Recognizing the need to budget your time 219 Chapter 17: Benchmarking Performance 221 Measuring Portfolio Success Against a Chosen Index 222 Tuning in to the clients' mindset 222 Recognizing the limitations of stock market indexes 223 Using a blended benchmark 223 Keeping it simple with your clients 224 Riding the Personal Benchmark Trend 225 Establishing the client's personal benchmark 226 Using the personal benchmark to keep calm a client's nerves 227 Using both relative and absolute benchmarks 229 Tailoring Performance to Each Client's Needs 230 Own It! Don't Make Excuses for Poor Performance 231 Part 4: Building Your Clientele 233 Chapter 18: Earning Clients and Making a Career for a Lifetime 235 Adding Value before Asking for Referrals 236 Making a choice: Sales or consulting 237 Differentiating yourself as a trusted advisor 237 Speaking to Clients in Plain English 238 Showcasing Your Value Proposition 240 Ask clients about their past experiences 241 Write your elevator pitch 241 Quantify your value and qualify your expectations 242 Being Humble and Honored to Serve Your Clients 243 Chapter 19: Raising Your Profile with Networking and Marketing 245 Establishing an Online Presence 246 Creating a website as your home base 246 Hosting your own blog 248 Becoming active on LinkedIn 249 Creating a Facebook page for your practice 250 Claiming your business in online directories 251 Making the most of your certifications 252 Getting Connected in the Real World 252 Discovering what you're passionate about 253 Getting involved in a charitable cause 254 Serving on boards 254 Developing cross-industry professional alliances 255 Building Your Own Sales Force 256 Marketing to fellow financial advisors 256 Leveraging home office leadership personnel 257 Encouraging and rewarding client referrals 258 Promoting Yourself over the Long Haul 259 Chapter 20: Teaming Up to Build Synergies 261 Choosing Your Preferred Role: Lone Wolf or Leader of the Pack 262 Considering the pros of flying solo 262 Considering the cons of flying solo 263 Collaborating with Other Financial Advisors 266 Teaming up for joint-work opportunities 266 Sharing unique techniques and skills 269 Finding your niche: Minder, finder, or grinder? 270 Exploring broader practice partnerships 271 Part 5: Running Your Practice as a Business 273 Chapter 21: Transitioning from Solo Practitioner to Business Owner 275 Gut Check: Deciding Whether Starting Your Own Firm Is the Right Move for You 276 Determining how tethered you are to your current firm 276 Considering a change in roles and costs 277 Putting All the Pieces in Place 278 Structuring your business 278 Choosing a broker/dealer platform 279 Sketching your organizational chart 279 Staffing your firm 281 Dotting your i's and crossing your t's 281 Getting someone focused on rainmaking 282 Battling client attrition 283 Measuring Success in Terms of Profit Margin 283 Achieving Growth through Mergers and Acquisitions 284 Planning Your Exit Strategy 284 Bailing out with a buyout 285 Choosing a successor to take over 285 Handling your own estate planning 285 Avoiding the die at your desk scenario 286 Chapter 22: Structuring Your Firm as a Well-Oiled Machine 287 Organizing Your Business by Department 288 Minding the business: Administration 288 Finding clients: Business development 289 Grinding out the work: Client service 291 Identifying Business Development's Focus Areas 292 Getting your firm's foot in the door with 401K plans 292 Expanding opportunities through corporate benefit programs 293 Networking through trusts and estates 293 Easing the burden of household's financial manager 294 Delegating Responsibilities to Client Service Associates 294 Assigning Administrative/Operational Responsibilities 295 Managing the office 295 Harnessing the power of client relationship management (CRM) software 296 Coordinating the workflow for new clients 297 Outsourcing accounting and legal 298 Chapter 23: Divvying Up Your Business: Equity Participation 299 Keeping Some Profits in the Firm 300 Adopting a Founder Mentality 301 Playing the role of visionary 301 Serving as the primary rainmaker 302 Avoiding the temptation to deal with day-to-day operations 303 Offering Equity Buy-in to Team Members 304 Being selective 304 Putting your agreements in writing 305 Proceeding When Equity Ownership Doesn't Matter 305 Maximizing annual compensation to advisors 306 Having no desire to ever sell the business 306 Chapter 24: Ensuring Business Continuity and Planning for Succession 309 Creating a Hit-by-the-Bus Business Continuity Plan 310 Protecting Your Heirs' Interests with a Buy-Sell Agreement 312 Planning for Succession 314 Picking a successor with the right credentials 314 Addressing personality and values compatibility 315 Considering transferable skills 316 Sizing up a candidate's leadership potential 316 Accounting for loyalty 317 Part 6: The Part of Tens 319 Chapter 25: Ten Tips for Being a Successful Financial Advisor 321 Let Your Conscience Be Your Guide 321 Beware of False Profits 322 Protect Your Clients from Predators 323 Don't Use Big Words 323 Remember That Good Service Makes Up for Other Shortcomings 324 Be Active in a Community Cause 324 Be Eager to Acquire New Information and to Share What You Know 325 Focus More on Skills, Less on Tools 325 Appreciate the Trust Your Clients Place in You 326 Always Ask: What If I'm Wrong? 326 Chapter 26: Ten Business-Building Activities 327 Schedule Client Review Meetings 328 Keep a Log of Friends and Family That Your Clients Mention 328 Sponsor One Charitable Event Each Year 329 Break Bread with Your Best Clients 329 Be Responsive: Practice the Same-Day Rule 329 Attend Every Party You're Invited to 330 Have an Elevator Pitch 330 Welcome All Prospects, Large or Small 330 Stop Selling and Start Telling Stories 331 Be Active on Social Media 331 Appendix: Financial Advisor Resources 333 Index 343
Ivan M. Illan, CFS, has directly raised and managed over $1B in assets from both institutional and retail clients. He's the founder and chief investment officer of an independent wealth management firmbased in Los Angeles. As a Forbes Contributor, an Investopedia Premier Advisor, and Five Star Wealth Manager, Ivan's insights are published routinely on both the financial advisory profession and capital markets.