An oft-quoted industry statistic states that approximately one-third of new financial advisors will leave the industry within their first two years of business. The numbers are even more dramatic for rookies heading into their fifth year, with half of new advisors bowing out of the business by that time.
By implementing the appropriate strategies, however, rookies can effectively weather the challenges associated with establishing careers as advisors, and increase their likelihood of success in the industry.
In many cases, new advisors are simply unaware of how difficult it is to build careers and the length of time required to develop practices.
That was the case for Jason Morgan, an Oakville, Ont.-based advisor operating under the HollisWealth Inc. banner, who started his financial advising career eight years ago. Although Morgan was nervous about leaving his first career as a chartered accountant, he was excited about a profession with an emphasis on developing relationships with clients.
Coincidentally, it was establishing those relationships that became the most difficult part.
Says Morgan: “The phone doesn’t tend to ring on its own. It tends to be more of a proactive approach in going out to find the people.”
The process of finding potential clients takes time, and the next step of converting those prospects into clients requires an even greater amount of patience, says Sara Gilbert, founder of Strategist Business Development in Montreal. She says it’s important to focus on relationship building, as opposed to product selling.
“People with money don’t want to go to a 23-year-old and say, ‘here’s my retirement plan,'” says Gilbert.
You have to be willing to put in the time to sell your skills — not products — to prospects, clients and centres of influence.
It’s also important to begin strategically planning your career from your very first days in the industry. One of the first things to consider is the type of firm for which you want to work. You should understand a firm’s business model, and determine what would suit you best.
For example, are you looking for a firm that provides such resources as technology and wealth management experts? Or, do you like the idea of starting somewhere where you can make your own choices in those areas? Would you rather join an established team or start your career by indulging your independent streak?
Morgan says he knew what he wanted from the very beginning. “I wasn’t considering joining another team or being a smaller cog in the bigger wheel,” he says. “I really wanted that entrepreneurial opportunity.”
He did his research and joined an independent brokerage firm in 2006. By taking that approach, he felt he could build his business his way, but still benefit from that firm’s training program for new advisors. He was also comforted by the fact that he could start his career with a salary.
Money is a factor for anyone making a fresh professional start. New advisors should consider the compensation models of different firms before choosing which one to join. In addition, think about how much of your own money you can afford to put towards setting up your practice, to cover things such as administrative expenses and marketing.
To increase your chances of success in the industry, long-term thinking is critical. This is why it’s a good idea to create a business plan, says Joanne Ferguson, president of Advisor Pathways in Toronto.
It’s not enough to define how many clients you want to take on or what you estimate your revenue to be. Rather, advisors should identify the specific steps that will generate those numbers.
“Unless you really map out about how you’re going to get there,” says Ferguson, “you might be sitting there looking at your plan, thinking, ‘well, that’s great, now what do I do?'”
Define the vision you hold for your practice and three main strategies that will help you achieve that vision, suggests Ferguson. Also, set out goals for the first year and specify two or three concrete actions that will keep you on track to reach those goals.
For example, if your goal is to appeal to small business owners, your individual steps might include:
> joining your local chamber of commerce;
> attending networking events;
> ensuring you talk to at least three business owners at each event.
Small steps like these can help lead you beyond that five-year mark. In fact, it is looking beyond your first few years that will help determine your success, according to Morgan.
“If you’re young and you’re starting out in this business, you shouldn’t do it unless you’re in it for the long term,” he says. “If you’re in it for the long term, that patience and persistence will eventually pay off.”
This is the first component of a three-part rookie survival guide. Up next: Prospecting tips for new advisors.