Off on the right foot

Now, with the market having improved and become somewhat more stable, the rookie advisor is making a comeback.

“I think the market collapse dramatically changed both the consumer and the advisor psyches,” says George Hartman, president of Market Logics Inc. in Toronto. “Aging and retiring advisors need to be replaced. And when you combine a declining advisory population with a more interested and engaged public, it creates an ideal condition for somebody new to enter the business.”

A new generation of advisors brings a positive injection of youth and enthusiasm to the industry. But these newcomers are entering a complex, competitive environment.

“Entering the industry has become a lot more challenging than what it was 10 years ago,” says Richard Menezes, vice president and head of training and practice management with RBC Dominion Securities Inc. in Toronto. “The products that are available and the needs of the clients are much more complex, and that is a big challenge in itself.”

In facing those challenges, young, eager newcomers are bound to make some mistakes – and there’s nothing wrong with that, according to Hartman. Occasional missteps are a part of any learning process. But rookie advisors can build more successful, profitable practices if they know the common pitfalls made most often by newcomers.

Here are some of the most common mistakes made by rookies – and by many experienced advisors as well – and how to avoid them:

– Working without a plan

The barriers to entering the financial advisory business are relatively low compared with other industries, yet the financial advisory industry offers the potential for high revenue. This perceived promise of high income with little cost can create the false impression that a new advisor need only set up shop and watch the money roll in.

“One of the biggest mistakes a new advisor makes,” Hartman says, “is not approaching his or her new role as a business, and not making business-like decisions.”

A key step in treating a financial advisory career as a business, Hartman says, is the creation of a business plan. A business plan, he says, is like a road map showing where you want your business to go and how you plan to get it there. This plan details the opportunities and the challenges you may face on your way toward achieving your goals, and how you plan to deal with them.

Your business plan doesn’t have to be a lengthy document, Hartman says, but it should include such elements as your vision, your target market and how you plan to fund your business.

Don’t feel that writing a business plan means committing to a permanent document or strategy. It can – and should – be reviewed and revised often. The mere process of writing this plan is valuable in helping you clarify your goals. (See sidebar at right.)

– Lacking adequate capital

No rookie entering the business should expect to be hitting the jackpot with big revenue and income right out of the gate. New advisors should have sufficient funds to support themselves for at least the first six to 12 months of their careers.

“Otherwise,” Hartman says, “you are going to enter into a ‘poverty mentality,’ in which you are afraid to spend money. That could affect decisions on your marketing programs, support staff and technology.”

– Underestimating the time commitment required

Right from the beginning, Menezes says, rookies need to be aware of the amount of time they will need to commit to their careers in order to survive in the financial advisory business.

“We are seeing a fair number of individuals looking at this job as a nine-to-five commitment,” Menezes says, “when, in fact, it is much more than that.”

If you are a new advisor, Menezes says, be prepared to work 60 to 80 hours a week for the first three to five years after starting your business. In addition, you should pay attention to how you are managing those work hours, particularly when it comes to prospecting.

“The first thing that tends to go is the amount of time an advisor spends in building his or her business,” Menezes says. “[Advisors] prospect to build a business, and then they tend to fade away from it and then wonder why their business isn’t growing anymore.”

– Taking on every client

Most rookie advisors make the mistake of taking on as clients anyone and everyone who is willing to work with them. That’s because rookie advisors often feel they cannot afford to turn down business.

Although no rookie advisor can reasonably expect to start with a profitable book of “ideal” clients, Hartman says, there is a middle ground between being too selective and not selective enough. After you have started building your book of clients, look at your roster and identify those clients you most enjoy working with – perhaps because you have a good rapport, share the same interests or share an investment philosophy.

These are your “preferred” clients. They may not be ideal, but they are clients you get along with and with whom you are most likely to form long-term relationships. Begin prospecting for more clients like these preferred clients, and you will build a book of clients with whom you are likely to form deep, long-term relationships.

“You shouldn’t be chasing every client,” Hartman says, “nor should you narrow the field too much.”

– Skipping training

Having financial designations and courses under your belt is always beneficial in the financial advisory business. Courses improve your ability to serve clients, and the credentials that go along with those designations add to your credibility. But waiting until you have gone into business to begin taking courses can take a toll on your schedule, which should already be full with the pressures of starting a business.

That’s why Jeff Gallant, 23, financial analyst at Gluskin Sheff + Associates Inc. in Toronto, recommends taking as many courses as possible prior to entering the industry. Gallant completed 11 securities courses while he was still in university.

“Having that many designations right out of the gate,” Gallant says, “shows that you are passionate about the industry and you are thinking ahead.”

More important, having earned some designations in advance can help free up time to focus on prospecting and growing your business. Once you are in the financial advisory industry, it is important to maintain a balance between continuing education and running your business, says Keir Clark, branch manager and senior wealth advisor with Toronto-based ScotiaMcLeod Inc. in Fredericton.

– Not having a value proposition

Most established advisors have an “elevator speech” that explains in one or two sentences what the advisor does for clients. Telling your story in a compelling way is a key part of your prospecting strategy, Hartman says. But how can you tell a compelling story when you are new to the industry and lack experience?

“Your value proposition obviously can’t be about your success in the industry or the number of years you’ve spent working on behalf of clients,” Hartman says. “So, it has to be about your passion, your beliefs and the processes you are going to follow.”

As a rookie, your objective is not to sell yourself as an advisor, Hartman says, but to meet people so you can start up a conversation.

“Talk about something people will latch onto,” Hartman says, “and make them less concerned about your lack of experience.”

– Taking rejection personally

Many advisors underestimate how challenging it can be to deal with rejection – being told “no” repeatedly by prospects – throughout the early stages of their financial advisory careers. But negative responses are an inevitable part of prospecting that every successful advisor has had to go through.

“Advisors should not let themselves become discouraged and give up,” says Menezes. “They need to continue to be positive and carry on with their prospecting activities.”

Dealer firms should help new advisors prepare in the recruitment and training stage for this sometimes unpleasant aspect of the job, Menezes says. Firms should ensure their recruits understand what is involved in the process, and how to deal with rejection.

You continually have to reassure yourself of your role as an advisor, Clark says, which is to introduce yourself to as many people as possible. It can take some time to adjust to the initial “no” responses you may receive. Says Clark: “I had to remind myself that there are only two kinds of people in the world: people you know and people you don’t know. You just have to keep adding to the people you know.”

– Overdoing community involvement

Becoming involved in your community can be a great starting point as a rookie advisor. For example, attending local chamber of commerce events or becoming a member of a service club can help build your network of prospective clients. Although it’s tempting to become involved in as many events and organizations as possible, spreading yourself too thin can affect how others perceive you.

“How you commit as a member of a club will reflect on how you run your own business,” Clark says. “If you are only showing up part-time or having to cancel appearances, the other members are not going to see you as a reliable person.”

Focus on a few community groups that you are genuinely interested in and to which you will be able to dedicate a reasonable amount of time and energy.

Creating your business plan

One of the most important steps in entering the financial services industry is the creation of a clear, concise business plan, says George Hartman, president of Market Logics Inc. in Toronto.

This crucial one- to two-page document should outline the following:

– Your vision

What do you hope to accomplish overall with your practice? Do you see yourself serving a small book of high net-worth individuals or running a bustling, multi-advisor firm with hundreds of clients? Your vision statement requires significant thought and should be based on your personal values and goals.

– Your target market

What type of clients do you want to serve? As a rookie advisor, you can expect your target market to change over time. In the beginning, you may not have the luxury of turning down business, but you still can identify the clients you prefer to work with and seek new clients who share similar characteristics.

– Products and services

Identify the products and services – such as life and health insurance, investment products and financial planning – that will be required to meet the wants and needs of your preferred clients.

– Marketing

You will need to plan how you are going to market yourself and attract clients, says Richard Menezes, vice president and head of training and practice management with RBC Dominion Securities Inc. in Toronto.

Include your social activities and community groups in this part of your business plan, because networking is an important part of marketing.

– Funding

Identify the source and level of funding you will need to operate your practice during the startup period.

“If you come into the business with no money,” Hartman says, “and have to rely strictly on cash flow from the business, every dollar ends up going toward your living expenses.”

Include the amount of personal capital or line of credit you have set up to see you through the first six to 12 months of your business. IE

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