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By John Vann, CIMC

You’re an advisor with a successful practice, and you’ve been trying to determine how to convert your existing commission business to fee-based business. This is obviously not an easy task.

Thirty years ago, everyone did only transaction-based business—but we all felt like squirrels running around in a cage. Our productivity, and therefore our compensation, were directly related to how fast we could spin that cage. There was no other way.

For years, I followed the traditional model of commissioned brokers: made 60 cold calls a day, held seminars and asked clients for referrals. I became the No. 1 producer in my E.F. Hutton branch, averaging over 500 transactions a month. But because this business model was limited to the number of transactions I could make in a day, the frantic pace needed just to hold onto my No. 1 position left no room for further growth. It became obvious that I would eventually spin out. That’s probably why the career span of the average broker was only 3.6 years in the ‘70s.

How I did it
The solution was to convert all of my clients to fee-only managed money accounts. The problem was, and still is today, that if I spent all my time meeting with my clients to explain managed money accounts, I wouldn’t be able to maintain my status quo. This conversion required a business plan.

I had a focused plan that was achievable on a day-to-day basis.

Rather than try to convert all my business at once—the mistake most advisors make—my solution was to transition my transaction accounts to 100 percent fee-based accounts over three years. My initial goal was to have just one meeting per day at which I would talk about the idea of professional investment management. If the client was qualified, I would schedule an appointment.

Next, I set up an income plan of what I would need each month to maintain my financial leads and my status as a leading producer. I calculated that with 200 appointments a year for three years, I’d be able to generate enough business to justify spending all my time on building a fee-based business.

I allowed six months to build up to my goal of one appointment per day, five appointments per week, either from existing accounts or from prospective clients. This gradual process would develop two key elements for success in this business. First, I would fill up the pipeline; second, through repeated presentations, I would naturally improve my knowledge and skill sets.

There was an unexpected bonus, too. Not only did “fee-based money management” attract bigger clients; it also gave my existing clients the opportunity to consolidate their assets. When I converted one of my $100,000 clients, I was surprised to find out his portfolio was actually well over $1 million. As I began to talk to him about investment management and asset allocation, I became his trusted advisor rather than just another broker. He is still my client today, with over $75 million in corporate, endowment and personal investments.

I was surprised that my success came so quickly because I hadn’t set out to conquer the world. I simply had a focused plan that was achievable on a day-to-day basis.

Following are the distilled elements of my process that I believe any successful advisor can replicate:

Learn about investment management. It’s impossible to become an expert overnight. When I think back to the mistakes I made and the things I didn’t know, I feel like laughing.

Outline realistic, achievable steps with a realistic time frame.

Define what you do in a simple sentence that clearly distinguishes you from other brokers. You can say something like: “I specialize in assisting sophisticated clients achieve their financial objectives through the use of top-performing professional investment managers.” A statement like that solicits interest and the question, “What does that mean?”

Evaluate your existing clients in terms of type of business, quality of business and asset size. Start with the 80 percent of clients who give you only 20 percent of your business. That way, when you make a mistake, you’re not losing your biggest clients.

Use the Socratic technique. Articulate a solicitation (a one-sentence question) that is the genesis of your presentation, such as, “If you could have changed one thing in your investment program over the last three years, what would it have been?”

Learn to listen. Assess your conversion ratio. Just as important as why you did place an account is why you did not.

Review customer satisfaction and address their concerns. Become as skilled in this area as you are in getting appointments and creating opportunities to help your clients, and they will gladly provide you with referrals.

John Vann, CIMC, is the founder and CIO of Rushmore Investment Advisors and has been in the financial services profession since 1972. You may reach him at www.rushadv.com or at 800-564-8266.

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