Potential Career Change

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Apr 23, 2008 9:17 am

I've been thinking about a potential career change and have been able to gather a ton of information from the posts here.  One thing I don't believe I've seen addressed is whether there's a difference in prospecting for fee based business vs. transaction business.  Do most of your fee based clients start off as transactional clients until they've gained trust or do you target different demographics for both types of clients?   Thanks in advance for any insight

Apr 23, 2008 11:08 am

Guess it depends on how you look at it.  We all think we are prospecting for the same quality of person.  Personally, a true fee model does not work so well with low net worth clients.  I know this is a "no Sh*t" statement, as nothing works well with low net worth people, but think of it this way.  You can do ok starting out with putting 50K into an A share mutual fund, nice ticket for a first year producer, but putting that in a fee based program at .75-1.00 % will not pay the mortgage.

If you plan on being primarily fee based, you need to prospect that way from day 1.  You just need to prospect more efficiently and qualify people a little quicker.
Apr 23, 2008 12:25 pm
HFJD:

I've been thinking about a potential career change and have been able to gather a ton of information from the posts here.  One thing I don't believe I've seen addressed is whether there's a difference in prospecting for fee based business vs. transaction business.  Do most of your fee based clients start off as transactional clients until they've gained trust or do you target different demographics for both types of clients?   Thanks in advance for any insight

 
You can look at it this way:  If you pitch a muni bond or a preferred or a specific idea like that, then you are more likely to start on a commission with that client.  If you find people who are not satisfied with the service from their advisor or their performance, you may be able to transfer all of their accounts over.  In that case, if you are doing fee based business, then you can start from the beginning.
 
You'll have to figure out what works best for you.  If you have a salary for a couple of years in the beginning, you have a better chance of starting fee based.
Apr 23, 2008 12:43 pm

Thanks for the insight.  Would you say that the majority of your prospects are currently working with one or more advisor?  I would assume that, when operating in the high net worth space, most of these people already have an advisor or have at least been pitched to a number of times.  It seems naive to think there are a lot of people sitting on a huge pile of investable assets that aren't working with at least one person and are sitting around waiting for your call.  But we all know the saying about what happens when you assume.

Apr 23, 2008 1:02 pm

It may be different for others, but for me, this is how it is.  You asked about prospects.  From prospects I've talked to, they have multiple financial services providers.  One may be an advisor, one may be a broker, another guy might do insurance, and on and on.  I've heard numerous times, "I have several advisors, I don't need anymore".  For these kinds of prospects, they could still be looking for the ONE person that provides what they NEED.

 
When I look at my clients, my best clients only have accounts with me.  Some clients have an attachment to someone, like a family friend, or a guy they've had a small account with for a long time.  In these cases, the client doesn't want to "do the mean thing" and end the relationship.  I say, ok, since I have 95% of your assets anyways, just let me know what you are doing.
 
When you get into really HNW people, they have money all over the place.  For instance, I have a guy who has only done a private placement with me.  He's got $5MM at a bank that I've been working on.
 
Something else you will find is that people will lie to you.  They won't tell you about this "other" account.  Once you have established trust, they may give it to you eventually.  This is so backwards because they are hiding something that we need to know about to make our best recommendations.
 
It isn't very often that you will find people with large amounts of money not being managed. 
Apr 23, 2008 1:26 pm

"One thing I don't believe I've seen addressed is whether there's a difference in prospecting for fee based business vs. transaction business. "

 
I think that this isn't what causes a prospecting difference.   In my business, I do fee-only, fee-based, and transactional business.  It depends on the particular client.  Therefore, I couldn't prospect based up this difference even if I wanted to do so.
 
IMO, what necessitates the need for different prospecting methods has much to do with whether a client with positive cashflow, but not significant assets, is a viable prospect.
 
 
Apr 23, 2008 5:13 pm

Very interesting.  On your last point, are these ever viable prospects for someone starting in a wirehouse environment or is the need to meet hurdles too great?  My example would be a young attorney at a large firm, pulling in a great salary but hasn't yet acquired enough wealth to open a 6 figure account.  Long term he can be a great prospect, but you may have been let go well before that happens.