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Practice Makes Perfect

Christiane Delessert, an advisor with National Financial Partners in Waltham, Mass., was thinking about retiring. But like many reps, she didn't have a succession plan in place to get there. With $420 million in assets under management, over 100 households, and a team of seven at her hybrid b/d-RIA practice, she could never find the time to draw up a plan that would allow her to head for the exit.

Christiane Delessert, an advisor with National Financial Partners in Waltham, Mass., was thinking about retiring. But like many reps, she didn't have a succession plan in place to get there. With $420 million in assets under management, over 100 households, and a team of seven at her hybrid b/d-RIA practice, she could never find the time to draw up a plan that would allow her to head for the exit. “I never forced myself to look at the next five years down the road,” she says. But that's exactly what NFP helped her do with its new practice management program. Now, Delessert says she is confident about the future of her 14 year-old practice after her eventual retirement, and even has plans to double the size of the business over the next five years.

Industry consultants say many independent broker/dealers are shifting their drive for growth inward by developing programs that will help existing reps build their businesses and increase production. In the process, these programs are also meant to attract new talent. That's because recruiting away from competitors has gotten so expensive in the independent space over the last four years or so. For the first time, indie firms are offering sign-on bonuses — an old wirehouse tactic that just recently made its way into the goodie bags of recruiters at indie firms. (Some firms are offering as much as 40 percent of trailing 12-month production upfront — an astronomical sum for independent firms which already operate on single-digit profit margins, according to consultants.) “There is a scarce supply of advisors out there. Traditionally, independent firms recruited away trained reps from wirehouse firms, but those [firms] stopped training during the rough market. Now there are not enough qualified reps to fill b/ds' recruiting appetites,” says Philip Palaveev, senior manager for Moss Adams, a Seattle-based accounting firm specializing in financial advisors.

Bill McGovern, a former business development executive for Raymond James Financial Services, who now operates consulting firm B/D Search in St. Petersburg, Fla., says these new practice-management offerings are filling a real need among advisors. “Only a small percentage of reps who go independent can run a business. Many are good at sales, maintaining relationships and investing, but most don't come over to this side equipped to deal with paying taxes, hiring the right staff or developing a strategic growth plan,” he says. And that's where b/ds are helping out.

Customized Help

NFP is just one of the b/ds that has recently thrown a lot of resources behind new practice management offerings. In the spring of 2006, the firm developed its Strategic Growth Institute, a two-day conference that takes place at Harvard University, and caters to between five and seven firms at a time. Each firm pays about $5,000 to attend the conferences, which include private sessions between each firm and a consultant, who helps them benchmark their financials against practices with a similar makeup, as well as identify opportunities for growth. Before attending, participating firms are asked to take a close look at their financial performance, and identify organizational obstacles they may face. During the conference, a customized plan is developed for each firm, and then the consultants make follow-up calls each month for six months to ensure that the measures are implemented, and to resolve any interim snafus. A second session is scheduled six months after the initial meeting to benchmark the firms' progress, and to make sure the changes stick. “We try to keep them focused on strategic plans, which often take a backseat to everyday issues,” says Elliot Holtz, executive vice president of Marketing and Operations at NFP.

Delessert, who took part in the program in May, says the constant follow-ups after the conference helped her to stay focused. “We're a relatively small firm. Left alone, I'm not sure we'd be taking the time to implement any strategic plan because there is so much everyday client work that needs to get done,” she says. Since attending the meeting, her firm has revamped its marketing materials to focus on attorneys, hired an operations manager, established an operations manual that includes a checklist for handling new clients, and developed a plan to ensure Delessert Financial's compliance is in order. “All of those things have been in the back of my mind, but because of the follow-up conference and the monthly calls we feel like we have to get it done,” Delessert says.

Setting Goals

Then there's AIG Financial Advisors, which has developed four general coaching programs since 2005 for its 2,000 reps. Collaborative Coaching is a year-long program taught by the firm's regional vice presidents who help advisors set three- and five-year goals for their businesses. Subjects covered include: What market do you want to focus on? How are you targeting that market? How can you turn your practice into a viable business? The Exclusive Coaching program is geared more specifically toward increasing advisor-production levels, and has one component that covers transitioning into a fee-based practice. The Power Coach program is a shorter, more intensive 120-day program, during which advisors team up with peers. They hold daily 15-minute calls to track one another's progress on customized goals set at the beginning of the four-month process. There is also a weekly coaching call between the group of participants and a coach. Lastly, there is the Branch Builder Institute, which helps branch office managers hone their recruiting and retention skills.

Over 200 of the firm's reps participate in the program, and so far participants have made significant improvements in their numbers. In 2006, participants increased production by between 25 and 150 percent, says the firm, compared to an average 22 percent increase among reps that had not participated in the programs. Participating advisors have also experienced an average 40 percent increase in assets under management.

Communicating With Clients

Pamela Dumonceau, a rep with AIG Financial Advisors in Aurora, Colo., has participated in the Exclusive Coaching program since 2005. After building her business for 10 years, she was still looking to reach more clients, and add more assets to her book. With just $10 million and 100 client households, Dumonceau says, “I couldn't get enough people to get to my door and trust me with their money.” However, she did have conditions on how far she'd go to get those extra clients: “I was not interested in doubling my production by doubling my time in the office.”

Dumonceau says the program helped her communicate her value to clients, who then brought her more assets. While she already had a long list of services for clients, including portfolio management, tax-eduction strategies, retirement income and distribution planning, and family wealth planning, the key was to actually make them aware that it was all there. “I wasn't effectively communicating [that I offered these services] so they could actually appreciate my work,” she says. So now she offers quarterly “market watch” letters, semi-annual in-person reviews, special reports on reducing taxes and other financial topics and a client appreciation event.

Today, Dumonceau has 200 client households, and about $70 million in assets under management. She's raised her account minimum from $250,000 to $500,000, and has doubled her production in the two years since she signed up for the coaching program.

Work In Progress

Raymond James Financial Services launched something called the Creating Client Advocates (CCA) program in 2003 to help advisors simplify the process of building great client relationships (and, as a result, increase production). It consists of four steps: find, consider, delight and refine. The idea is that advisors must sharpen their skills for finding the right clients, consider whether or not there is a fit between a prospective client and the financial advisor's practice, then define an investment plan, “delight” clients with exceptional service initiatives and finally, refine the processes. The program's six coaches, who are registered corporate coaches and members of the Worldwide Association of Business Coaches, help advisors implement the model.

Michelle Berry, a Raymond James Financial Services rep in Granbury, Texas, says serving her firm's 900 client households was becoming an overwhelming task, and she realized she needed to systemize the way she handled accounts to make it more manageable. Since she already had the so-called “find and consider” parts down, the CCA coaches worked on her service offerings, and helped her standardize the firm's processes so that her assistants could take on more tasks.

Now her assistant takes over some of the smaller accounts that have less complex needs, while little tasks like monthly letters or weekly calls are put into an automated client relationship management system. Berry is able to focus on top clients who needed more financial-planning help than she had been able to provide. “I didn't need to attract prospective clients. I needed to identify what I had, and figure out how to get my clients to become advocates for me. Now my top clients are getting more priority from me, and they've started referring friends of similar magnitude,” she says.

Since she joined the program in 2004, Berry has increased her revenue by 20 percent. And whereas four years ago she had just two clients with $1 million or more in investable assets, today that number has grown to 30. Production over that same period has increased 23 percent, and her assets under management have grown 19 percent each year. That's good news for Berry — and good news for Raymond James. David Patchen, regional director of Sales and Supervision at RJFS, says production numbers for reps in the program are almost triple those for reps that haven't participated. Those are promising numbers for any independent b/d that's working on thin margins.

A Growing Effort

The challenge for firms going forward will be to expand the practice-management programs to take on more advisors. Many firms work with a small percentage of their total advisor force through their practice-management programs. Dennis Gallant, principal of consulting firm Gallant Distribution Consulting, says the volume of reps going through these programs is still low. NFP takes five to seven practices at each of its Growth Strategy Sessions; Raymond James is currently coaching 40 offices; and about 200 of AIG's 2,000 reps are enrolled in its coaching programs.

But there's a good chance firms will figure out how to do that. These days, firms say boosting revenues from existing advisors with practice-management programs is almost on par with recruiting when it comes to growth strategies. “Practice management wasn't really discussed even five years ago,” says Patchen. “Now, same-store sales increases are just as important as recruiting.” In fact, these programs could become recruiting incentives themselves. “When advisors join a new firm, they're only thinking ‘How easy is my transition going to be to join?’ It's easy to understand their shortsightedness, but they have ask whether six months down the line the firm can get them from $500,000 to $2 million.”

AIG Financial Advisors President and CEO Jim Cannon echoes that sentiment. “When you think about the traditional b/d, it usually offers the basic operational help, products, compliance and back-office support. But coaching and business development is the fourth leg of the stool, which producers, who already have a foundation, can use to grow,” Cannon says.

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