Cheat Sheet

Success as a Financial Advisor For Dummies Cheat Sheet

From Success as a Financial Advisor For Dummies

By Dummies Press, Ivan Illan

Achieving success as a financial advisor is a not-so-simple matter of achieving success for your clients. You can’t exactly cheat your way to making that happen, but you can follow these guidelines.

Adopt the Right Mindset to Succeed as a Financial Advisor

The first step to achieving success as a financial advisor is to adopt the right mindset, which requires understanding what all being a true financial advisor entails. A true financial advisor must practice according to the following guidelines:

  • Uphold the fiduciary standard. Recommendations and advice must always be in the best interest of the client, not swayed by commissions or pressure from the firm.
  • Provide holistic financial advice. Advice must cover all aspects of a client’s financial health and wellbeing, including budgeting, savings, investments, taxes, insurance, and estate planning, although some areas can and probably should be outsourced.
  • Embrace transparency. Fully disclose conflicts of interest and compensation — fees and commissions.
  • Perform due diligence. Identify the client’s unique financial goals, research products and solutions to meet those goals, plug any gaps, and adjust as needed.
  • Be a team player. Be willing and able to bring in other financial and legal expertise to meet the client’s needs.
  • Be accountable. Take responsibility for the advice and recommendations given. The buck stops here.
  • Appreciate the gravity of the situation. Financial advice can have a huge positive or negative impact on the lives of clients and their families.

Successful Financial Advisors Master the Four A’s of Due Diligence

When you’re onboarding a new client, you need a clearly defined, repeatable process for evaluating the person’s financial situation and needs. Years ago, I developed a consultative framework to guide my own practice called The Four A’s of Due Diligence:

  • Assessment: Ask big questions to identify the client’s financial goals, such as What are you dreams for a fulfilling life? and What does retirement (if any) look like to you?
  • Audit: Dig into the details on current products/solutions by reviewing financial documents provided by the client, including the client’s investment portfolio and bank statements, life insurance policies, mortgage statement, family budget, and tax returns.
  • Action: Close any gaps between what your clients currently have and need to have in their plan to achieve their desired financial goals. Although the audit phase reveals gaps, the action phase plugs those gaps.
  • Alignment: Monitor changes in the client’s life and goals to maintain alignment with products and the household’s situation. Depending on the client, you may conduct regular reviews quarterly, semi-annually, or annually.

Fill the 3 Key Positions in a Financial Advisory Firm

Whether you practice as a lone wolf or choose to build your own firm, you must fill the following three key positions:

  • Minders run the business/practice, organizing, managing, hiring/firing, and setting goals and agendas. To be a minder, you must be a leader with excellent organizational, interpersonal, and communication skills. You may not be working closely with clients, but you will be leading and mentoring associates and staff.
  • Finders source new clients. These advisors are great at filling a pipeline and marketing services and solutions. Finders can be any age and at any level of experience, but they must have excellent interpersonal and communication skills and genuinely enjoy interacting with prospective clients.
  • Grinders do research, analysis, illustration, and paperwork. Whether it’s the research that drives discussion at investment committee meetings or running several insurance carrier illustrations, these advisors are the worker bees of the business. This is a great position for new college grads, because it gives them the opportunity to learn the business from the inside out. It’s also great for those who aren’t exactly people-persons.

Grow Your Client Base as a Financial Advisor

Obviously, your success as a financial advisor hinges on your ability to acquire and retain clients. Client acquisition is particularly important when you’re just getting started and haven’t established yourself as one of the top financial advisors in your area. Following are four ways to build and grow your business:

  • Earn your clients and referrals. By delivering value to clients, you not only retain clients but also grow your client base through referrals.
  • Create a tiered service model. Assign clients to categories, such as Platinum, Gold, Silver, and Bronze, and allocate your time accordingly; otherwise, you won’t have sufficient time to provide quality service to your best clients and engage in other marketing activities.
  • Market your services. The best marketing is an intellectual capital campaign. Sharing your specialized knowledge or perspective should be your crusade. Don’t engage in mundane, dialing for dollars activities. Build a website, maintain a blog, be engaged in relevant community activities, and don’t sell.
  • Team up with colleagues. You’re likely to have a tough time achieving success as a financial advisor if you try to fly solo. At the very least, you should team up with your client’s lawyer and tax advisor to develop a holistic, cohesive financial plan for each client. Beyond that, you can achieve even greater success by teaming up with other financial advisors through joint-work opportunities, especially if you specialize in one area and they specialize in others.