Operating an advisory business is a little like hosting a radio talk show; you never know what question or situation you’re going to encounter. Both require a broad base of knowledge or at least a quick reference to the answer, as no one can possibly know everything about every issue. If your business model is strictly investing clients’ money, you must stay abreast of the markets and the multiplicity of investment vehicles, an area which is ever expanding. However, when you add financial planning to your offerings, and comprehensive planning at that, you add a layer of complexity which can challenge the most astute advisor.
One more point to make. If you do not engage clients in financial planning, and you work for a company that has a “back office” for selecting investment choices, then your load may be slightly less, that is, if you aren’t under constant pressure to continue bringing in new clients. Enough ranting, let’s move on.
This week, I received a referral from a current client. This referral had engaged a nationally recognized company to prepare a financial plan for him and his wife. They said it would take about two weeks to complete. Two weeks later, no plan. Explaining that there was a slight delay, they assured the client that it would only be another couple of weeks. Two weeks later, still no plan. It was at this point that the client bid them a not-so-fond farewell. Now this client is engaging me to do what this other firm was hired to do. Without divulging any personal information, let’s take a look at what’s different about this situation.
First, I live and practice in a community property state. Moreover, the local market is not a hub for company executives. Hence, we don’t see a lot of executive benefits programs here. Therefore, when I encounter a new client from another state, I must become familiar with the nuances of the case. I must learn about the tax structure of the state and consider any effects that might exist on estate planning, etc. In this situation, the client hails from a common-law state. Since I practiced in New Hampshire for several years I had a familiarity with this.
The client also has stock options. I have done a lot of work with clients’ stock options in the past, both non-qualified and ISOs, but I have forgotten much of the details since I haven’t worked with these in a while. Therefore, I had to bone-up on the specifics of each. With tax hikes on the horizon, making good decisions on when to exercise these options is even more crucial since NQs require that you claim the portion that’s “in the money” (assuming you exercise the option) as regular income and pay Social Security and Medicare taxes as well.
The fact that each situation is different is one of the main reasons why I love this business. It’s never boring!
Entries (RSS)
This one brings up a good question. What does your staff look like Mike? I know you have family helping you but I’m curious with all the different aspects of running a financial planning business, what does your support staff look like? How do you find time to research what you don’t know when it comes across your desk, market your services, manage portfolios, follow up on client issues, create the financial plans etc. and what would you say is the ideal support staff system?
Ramon,
My staff is me and my wife who works part time. I use Morningstar’s Office Edition for research along with Quotestream which is provided through my custodian, TradePMR. New clients (marketing) comes from existing clients and people I know. I conduct all my own research pertaining to managing my clients portfolios rather than “farm it out.” Most, if not all “client issues” are handled by my wife. I create all financial plans. The ideal support system? Of course, at this time it is small. Based on my experience in prior years, I think one advisor could use 2 to 3 support staff. I was a principal for a bank operation from 2001 to 2003. We had 2 assistants and 3 advisors. 1 assistant was responsible for all insurance paperwork and setting appointments and the other processed all other paperwork.
I hope this helps.
Mike
Thanks for your help. I do not think you know how valueable your blog has been to those that do not want to deal with corporate politics anymore and are looking for independence. Thanks for your work.
I agree with Ramon. Every time I read it there is something I can take with me.