Description
Book SynopsisA 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 competencie
Table of ContentsIntroduction 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
