Journal of Financial Planning: February 2017
Rachel F. Moran, CFP®, is a financial planner with RTD Financial. She currently serves as president of the FPA NexGen community.
Most mature firms have a formal career path, well-thought-out policies and procedures, and an established client base. They may also have the ability to be a bit more selective with the clients they decide to onboard—one common criteria being a minimum asset or fee level. Although most firms would aspire to reach the level of success where they can confidently turn away prospects based on their inability to pay a higher fee, there may be a hidden downfall of this “filter.” If you are a mature planning firm with increased minimums, you may be inadvertently challenging your young planners to develop business in a network outside their own.
I work at RTD Financial, which was founded in 1983 by Roy Diliberto, a pioneer in the financial life planning movement. We were, and continue to be, on the forefront of comprehensive, values-based planning. As the business grew, RTD was able to be more selective in taking on clients. One natural progression was increasing our minimum fee. Although we don’t have a minimum asset level, our minimum fee of $2,500 per quarter does a sufficient job of “qualifying” our prospects. The prospective client who can typically meet this fee level is age 55-plus and approaching retirement within the next 10 years. This mirrors our ideal client: married, has two college-aged children, and $4 million in investable assets.
As a young professional in my late 20s, my personal network doesn’t consist of our ideal client (unless, of course, you count my parents’ friends—and I don’t). As a financial planner at RTD, I am expected to develop business. Although we haven’t implemented hard and fast targets, I know my efforts in this area are critical to my long-term success, and I’d like the opportunity to contribute.
Naturally, I tried to expand my personal network by joining the local chamber of commerce and attending networking and educational events through just about any outlet I could find. I quickly realized that the caliber prospects I was meeting at these events wasn’t getting me any closer to developing qualified business.
Frustrated, I turned to alternative opportunities to explore outside organic business development. These opportunities fall within two categories: getting creative and working within your constraints.
Getting Creative
I’m fortunate to work at a firm that values creativity and is open to new ideas. Three years ago, we developed a program called WealthBuilder, which is a reduced-fee offering geared toward young professionals. The fee for the first year is $5,000; which is half of our standard minimum fee. Over the second and third year the fee increases, reverting to our standard schedule in the fourth year.
This program has allowed our younger financial planners to work with successful individuals closer to their own age. By lowering our minimum to work with young professionals, we have greater control over their trajectory and develop them into our ideal client through an upfront investment of time. It’s rewarding to have the opportunity to help someone early on in their professional career; I’m able to have a greater impact on their future by ensuring that they are taking the right steps today. This also helps diversify our client base and expands the number of qualified prospects, allowing me to network within my peer group.
The WealthBuilder program is by no means perfect. We are working on formalizing the service model and incorporating an increased focus on technology to appeal to the demographic. We also need to monitor the program’s growth to ensure our planners have the capacity to serve both our standard and WealthBuilder clients.
If you’re a business owner who recognizes frustration developing business in your young professionals, you may consider appealing to their natural peer group by allowing your NexGen planners to cut their teeth on promising young clients, in the hopes that with your help, they will be able to reach your desired asset level in time.
You may also encourage your young planners to forge relationships with your client’s children. We often offer to help young college graduates develop a budget, decipher their 401(k) options, or select their employee benefits. This is a great opportunity for the lead planner to allow the NexGen planner to deliver advice and build confidence in a low-risk environment. We’ve also held family meetings to review complex estate plans, or to simply meet one another. Our clients have been very appreciative of this family-focused approach.
Building trust with the younger generation can be quite rewarding; providing guidance at their time of need may lead to the children eventually becoming clients in their own right, or following the inheritance of your client’s estate. Of course, the immediate benefits are that your NexGen planners gain experience, and you build goodwill with your clients.
Working Within Your Constraints
For NexGen planners, if you need to work within the business development constraints that have been set by your firms, I recommend developing relationships with allied professionals and joining quality volunteer organizations and/or serving on the boards of non-profit associations to foster strong relationships over time.
Centers of influence have consistently been a strong source of referrals for our firm. By facilitating the development of relationships with these individuals, you can gain their trust and remain top-of-mind when their client expresses a need for financial planning. Upon onboarding a new client, one of RTD’s young planners, Chris Vassallo, CFP®, makes it a priority to schedule a meeting with each of the client’s professional advisers. This proactive approach builds confidence in our firm and sets the stage for a productive working relationship. By building trust and mutual respect with these individuals, you’re able to encourage qualified referrals with a higher success rate, based on the inherent transfer of trust.
Another way to develop your network is through board service or volunteering for a non-profit organization. This is a great way to meet individuals in a non-threatening environment, while contributing to an important cause. I wouldn’t encourage you to join for the sole purpose of business development, but if it’s something you’re genuinely interested in, these shared interests could translate to prospect opportunities in the future.
I encourage young planners to be patient in developing business, especially within a mature firm. This is a relationship business, and building relationships takes time. Whether you’re able to get creative or need to work within your constraints, search for alternatives to traditional networking and find ways to develop relationships that are comfortable for you.
Learn More
Join the best and brightest minds of the next generation of financial planners at the annual FPA NexGen Gathering June 23–25, 2017, at North Central College in Naperville, Illinois. Online registration opens March 1, 2017. Visit www.OneFPA.org/Community/NexGen to learn more.