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From Agent to Advisor

Changing your perceptions and maintaining client relationships are some of the keys to building a successful advisory practice.

By James P. Ruth

In your quest to become a financial advisor, the first major change you must recognize is that your insurance company is no longer your most important relationship. Your most important relationship will be your broker/dealer. It will control everything that is critical to your success including:

  • Your compensation

  • The products and services you can offer

  • Whether or not you can register as an investment advisor

  • Whether or not you can charge a fee, and if so, how much

  • The contents of your letters and presentations

  • What you call yourself (agent, advisor, consultant, financial planner, etc.)

Selecting a broker/dealer
Choosing a broker/dealer will be one of the most important decisions you will make in transitioning from agent to advisor. Start by making a list of the products and services you need in order to be a financial advisor. Then find a broker/dealer who offers those products and services.

Keys to building a successful practice
There are four main strategies for building a successful advisory practice. Each is important in its own right, but when combined, they unlock some of the secrets of successfully making the transition from agent to advisor.

Strategy 1: Change your perceptions.
As you make the transition, you must be aware that perception is everything. It's not just the perception of your existing clients, prospects or other professional advisors; it’s the perception you have of yourself. You have to decide if you are going to be an insurance agent or a financial advisor.

  • Announcing your career change
    Probably the most important transitional tool is the announcement letter you send to your existing clients, prospects and other professional advisors. Choose words that will strategically reposition your career for the future. A good announcement letter contains four elements. The first announces your career change. The second lists the education and credentials you have achieved (or will be pursuing) to prepare for your new career. Number three describes the new services and products you will offer. The last is a positive reinforcement of your new role as a financial advisor/planner.
  • Using designations
    Another important issue you must address in changing and maintaining perceptions is the use of professional designations. The overuse of designations can often create confusion in an already overcrowded marketplace. A financial advisor should select one designation he believes best describes his practice and use it exclusively.
Probably the most important tool is your announcement letter to clients, prospects and other advisors.

Key strategy 2: Determine your compensation structure.
Once you've made the decision to become a financial advisor/planner, you'll have to decide the compensation structure for your practice. This will determine the various registrations, licenses and disclosures you will have to earn or make. You can choose from four basic practice models:

  • Fee Only. As the name implies, this means your entire compensation is based strictly on fees you charge for planning, product recommendations or portfolio management.

  • Commission Only. This means that you receive commissions from the sale of financial products as compensation for your planning services.

  • Fee and Commission. This usually means that a fee is charged for the preparation of a plan and commissions are earned for product implementation.

  • Fee with Commission Offset. Under this arrangement, the planning is provided for a fee while any commissionable products implemented would act as an offset against all or part of the plan fee.

Setting up your practice
So what's the best way to set up your practice? Like other practitioners, my practice has evolved over many years. Today, we have a fee- and a commission-based practice. We charge a fee for preparing a financial plan and give the clients a choice of compensation structures for product implementation. We will either receive a fee for the management of their investment portfolios or earn a commission for placing a financial product. This approach allows us to adapt to different situations without limiting our options. Our experience has shown that it is easier for attorneys and CPAs (at least the ones who are not competitors) to give us referrals, knowing that we can charge a fee for our services.

Key strategy 3: Market and build your relationships.
Your first objective in building an advisory practice is getting clients. Once you have clients, your next task is to maintain the relationships throughout your career. Probably the most gratifying part of our business is the number of unsolicited referrals we receive each year. It is our primary source of new business. Another way we attract clients is to offer seminars to the public or through sponsoring organizations. The programs always focus on retirement and investment planning. While other subjects are covered during the program, these two items seem to generate the most interest.

The following are steps you can use to build and maintain your relationships. Although some may seem basic, in combination, they do help to generate and maintain powerful relationships.

  • Walk to the elevator. We don't say goodbye to our clients at our front door; we walk them down the hall to the elevator. They appreciate the extra effort and attention.

  • Use personal note cards. Hardly anyone today takes the time to write personal notes even though people really appreciate them and it sets you apart from everyone else. The cards look like invitations when they are opened, and they are--they are invitations to do business and refer business to a thoughtful financial advisor.

  • Recognize birthdays. The contact is probably more important than the sentiment. Over the years we have used personal letters, cards, certificates and other forms of recognition.

  • Make good use of the telephone. Our organization ends all phone calls with "have a great day" or something similar. This is a subtle way to remind clients that we are a positive influence in their lives.

  • Sponsor client-appreciation events. Our biggest successes have been with group events that include both spouses. Not only do clients get to meet each other; there is a group dynamic, which creates increased prestige and "referability" for the advisor/planner.

  • Offer specialized resources. Each year, we send our clients a letter containing a checklist of about 30 reports they can order from our office. For example, Long Distance Care Giving, discusses how to care for elders who are out of town.

  • Send newsletters. You can write your own newsletters or use a professional service that publishes financial newsletters. The important thing is to have your name in front of clients regularly, with information that reinforces the image you wish to project to your target audience.

  • Send holiday greetings. Thanksgiving, Christmas or other holiday cards are well received, especially if you do something different. For example, we use these cards to inform our clients of the charitable contributions we have made during the past year.

  • Make good use of your website. Our website is designed with one purpose in mind: we want to be the financial gatekeeper to the World Wide Web for current and prospective clients. It includes information about our company, links to over 20 other financial websites, various financial calculators, newsletters, articles, market quotes, portfolio tracking and other information.

  • Use distinguished service awards. Every month, a $50 bouquet of flowers and a certificate of appreciation are sent to an employee who has provided outstanding service to us. Employees who have received these awards know we appreciate what they do and are now motivated to help us build and maintain client relationships.

  • Use tribute gifts. Our Rotary Club and the MDRT Foundation have tribute programs we can use to recognize client accomplishments or memorialize deceased family members.

Key strategy 4: Adapt to change.
What does the future hold for financial advisors? No one knows for sure, but certainly there will be change. Amid this mixing bowl of change, though, there is reason for great optimism. This period is often referred to as the information age. While it is true that consumers have access to vast amounts of information, it is also true that until advanced technologies can provide our clients with relationships, service, knowledge and judgement, there will always be a role for professional financial advisors.

The only sure thing about the future is that we must be willing to adapt to change--constant, rapid and revolutionary change.

James P. Ruth, CFP, is a registered representative and president of Potomac Financial Group, a financial advisory practice in Gaithersburg, Md. You can reach him at 301-948-3900 or at


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