Secret Weapon

Seth Streeter, president of Mission Wealth Management, garnered a $20 million portfolio and he credits much of the heavy lifting to a $10-an-hour intern

Earlier this year, Seth Streeter, president of Mission Wealth Management, garnered a $20 million portfolio and he credits much of the heavy lifting to a $10-an-hour intern working for his Santa Barbara, Calif., firm. The intern spent last summer developing procedures for dealing with clients — from holding meetings to sending out letters — that played a critical marketing role in reeling in the account. “Without that, I don't know if we would have secured the client,” says Streeter.

Interns are not in the habit of playing a key role in a firm, but advisors will find it hard to go wrong hiring one for the summer, or at any time during the year. It's an effective way to get a lot of work done on the cheap, freeing up staff to spend more time with clients and on other frontline moneymaking activities.

Usually tech-savvy, they are also often able make all sorts of back-office improvements at a fraction of the cost of a professional. Ultimately, interns may turn into homegrown talent you can hire to work full-time after graduation, able to hit the ground running from the start.

Recognition of these benefits is also contributing to an increase in the use of interns by advisors. About 15 percent of respondents to a 2005 survey conducted by the Financial Planning Association said they “regularly” use interns. That's up from just 9 percent in 2003.

For interns, the experience also can provide invaluable lessons. Take Andrew Hartos. For the past two years, the University of Minnesota sophomore has been an intern at Legacy Financial Advisors in Minneapolis, both during the school year and summer vacations. The work has helped him decide to become a finance major and pursue a career in that area when he graduates. “When I started here, I didn't have a major figured out,” he says. “This has definitely peaked my interest in business.”

Still, using interns successfully isn't a guaranteed success. Manage them wrong and you'll wind up wasting your time — or maybe even losing a client. Frank Addonizio, a financial advisor with Ameriprise in Danvers, Mass., who has also worked in the area of practice management for the firm, recalls an advisor who lost a potential account when an intern inputted the financial data for a report into a computer and made too many mistakes, something the rep only discovered during his first client meeting.

“It made him look like he didn't know what he was doing,” says Addonizio. The upshot: Before you go ahead and hire an intern, it's imperative to understand how to do it right, from what types of tasks to assign to how much client contact to allow.

Search and Hiring

The first step, of course, is knowing where to look for them. Most advisors establish relationships with several nearby universities and scout for candidates in their job-placement departments. Deena Katz, an advisor with Evensky & Katz in Coral Gables, Fla., teaches two undergraduate courses at Texas Tech University in Lubbock, Texas, that are aimed specifically at financial-planning students who want to enter the school's internship program.

She hires two students from the program every summer. Tom Menzel, an advisor with Legacy Financial Advisors and Hartos' boss, on the other hand, uses about three interns every year, usually having them work part-time during the school year and full-time during the summer. He lets his interns know when he hires them that they have to find their own replacements when they graduate. In some cases, advisors also recruit local high school juniors and seniors looking for summer jobs.

Then there's the matter of pay. Some advisors give their interns course credit but no money. Many, however, say that's a mistake. “Paying them makes them more accountable,” says Streeter, who offered only unpaid internships for many years, only to have interns come in late frequently, call in at the last minute to say they couldn't make it or simply fail to show up at all. “Otherwise, they don't perceive it as a job,” he says. He has hired about 40 interns over the past 10 years.

Indeed, other advisors also report seeing a night-and-day difference when they give interns money, usually somewhere between $8 and $12 an hour. Bruce Fenton, president of Atlantic Financial in Norwell, Mass., who has used interns for 14 years, has also gone through periods of hiring paid and unpaid internships. He's found that when he pays them, interns not only produce higher-quality work, but he also is able to enforce rules on punctuality and taking days off. He also has an easier time assigning whatever menial work has to be taken care of. “If they're paid, you're in a better position to have them work on what you really need done,” he says. “Otherwise, you have the feeling they should be doing something more meaningful than putting confirmations in a box.”

The Work

It's also important to have a clear idea of what you want their duties to include. Sounds like a no-brainer, but “the biggest problem for a lot of advisors is they don't know what to do with the intern once he gets there,” says Katz. Ideally, that means developing real job descriptions. If you don't do that, you at least need an understanding of the types of tasks they'll perform.

Some advisors, like Katz, have their interns do entry-level work, like taking notes at client meetings and helping to fill out applications. Advisors may find the payoff surprising. Fenton, for example, hired two interns who spent much of their time stuffing envelopes and doing other grunt work to publicize upcoming seminars. Because the alternative was hiring an outside firm to do the job, Fenton figures it saved the practice as much as $5,000 per seminar.

Once they prove their worth, financial or otherwise, they can go on to meatier tasks. Fenton, for example, recently hired an intern who started out doing menial tasks like filing. But after several months he realized that the young man, an accounting major, was ready for more challenging work. So Fenton allowed him to branch out, performing basic bookkeeping duties and working on internal financial records.

Similarly, Lloyd Williams, a business coach specializing in financial advisors who also ran his own firm, says he usually asked interns to start out working as technical assistants, doing data entry and the like. “We had them perform tasks that were easy to teach and would help them see the business from the ground up,” he says. As soon as they seemed to have mastered those duties, however, he would then assign them to one of two tracks, operations or consulting, and give them more substantive work.

Some advisors give interns important assignments that no one else has time to do. Andrew Miller, an advisor with AXA in Denver, recently had an intern spend six months combing through a directory of 19,000 companies he wanted to court, arranging them according to location, proximity to the firm and other criteria. Since February, Miller has been able to add at least one company a week from that list to his client roster.

Making Contact — Or Not

The big question, however, is whether interns are allowed client contact or not. Williams, for his part, counsels his own clients to let their interns have some interaction with accounts. In his practice, he often permitted interns to talk to clients, doing things like conducting initial interviews or calling if there had been no previous contact with the firm for the past 90 days.

Other advisors, however, allow their interns to have little or no contact with their clients. Fenton, for example, only lets interns talk to clients when it comes to tasks like confirming an RSVP to a dinner invitation. “If we let them do more than that and they say something wrong, there could be big trouble with compliance,” he says.

Whatever an intern does, it's essential that the advisor provide training. Williams had them study the firm's operations manual. Fenton has a computerized description of every intern job, with instructions for how to do it. For answering the phone, for example, there are guidelines for everything from correct voice inflection to what to say when taking a message. “At the end of the day, it's the advisors' responsibility to make sure the intern knows what he's doing,” says Addonizio.

If all that training sounds time-consuming, it is. Addonizio figures you should spend as much as an hour-and-a-half a day, three times a week giving instructions and reviewing work, at least at first. Still, according to Williams, the time is well worth the effort. Says Williams, “It means you can have $100-an-hour professionals doing $100-an-hour work and $10-an-hour interns doing $10-an-hour work.”

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