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It was a cold winter evening in December 2003 when Joe Sheehan first laid eyes on Eric Kittner. Kittner, then 25, had been an auditor at Arthur Andersen, the accounting firm that was destroyed in the Enron collapse. Kittner was working at a local CPA firm in St. Louis, but was looking for something more interesting. The thought of another tax season made him cringe.
Sheehan had been a financial advisor for 15 years, the last 10 with the Moneta Group, an independent financial-planning group where he also served as a managing principal, overseeing an office of 27 reps. While he had successfully targeted clients with $2 million or more in investable assets, his annual production was stuck below $500,000, which he attributed to his time-consuming supervisory duties. “I was running as fast as I could, but I wasn't getting anywhere,” Sheehan recalls. But with the right kind of help, he was sure he could provide the level of client service that could facilitate a jump to the $1 million mark.
By a few degrees of separation (Sheehan's son was friends with Kittner's sister-in-law), both wound up at the same holiday party that night. During their conversation Sheehan learned that Kittner, a Philadelphia native who attended Catholic University, had amassed a lot of experience in his brief professional life. In addition to conducting corporate audits, he had handled estate-planning issues and had analyzed the tax treatment of property sales for individuals and small business owners.
Despite decades between them — Sheehan was 54 — the two men hit it off. The more they spoke, the more they realized their interests were aligned. Sheehan saw that a young man with Kittner's technical knowledge could be a great asset to a high-net-worth practice. He also realized that Kittner would not be a typical sales assistant — he would cost a lot more to hire and would expect to play a major role in taking the practice to the next level.
Over the next few months, the two men hammered out an arrangement. Sheehan talked about his vision for the practice — serving as a family CFO for high-net-worth households and providing high-touch, responsive client service. Kittner finally came on board as a sales assistant and partner in the practice. Sales assistant is actually a misnomer because Kittner considers himself a professional consultant. And his base salary — which Kittner declined to disclose — is comparable to what CPAs with his experience were making at the time (roughly $80,000-range, recruiters say) plus a bonus plan: roughly 10 percent of annual revenue growth.
Takes Money to Make Money
So far, Sheehan's investment has more than paid for itself. “My business has grown twice as fast in the last two years than it did in the previous five,” Sheehan says. In fact, his gross production is up to more than $800,000 from $450,000 just two years ago. And assets under management have grown 25 percent per year over the last two years to $125 million.
Sheehan says he could not have done this well with a traditional sales assistant who only brought a Series 7 and a sunny personality to the table. Kittner handles complicated client queries such as the tax implications of selling a home in one state and buying in another. He often accompanies clients when they meet with an estate-planning attorney. He has also obtained the certified financial planner (CFP) license to go along with his CPA and now plays an important role in making investment recommendations for clients.
Sheehan, meanwhile, is spending more time prospecting and getting in front of existing clients. And both men agree that having a CPA on tap gives the practice a special edge when talking to clients about investment and planning choices. “The tax background is huge,” Kittner, says, “Everything we do has some type of tax implication.” For Sheehan, the partnership also opens up the path to a possible succession plan. While the two have ongoing discussions about that possibility, nothing formal has been arranged.
Sheehan isn't the only financial advisor who has reaped the rewards by investing in professional talent at the sales assistant role. Chandler Taylor, a Moneta advisor who manages $3.4 billion in assets, hired Cynthia Barnes, a bank broker of nine years, to help organize his book of business and run the day-to-day operations. Barnes, whom he met when the two sat for their CFP exam, joined Moneta after she became fed up with selling commissioned products and was seeking more of a financial-planning role. “It's given me a huge lift,” Taylor says. “She's extremely organized and technically competent, which reduces my red time — everything outside of planning the future of the practice, seeing clients and looking for new clients.” That extra level of expertise is the reason Moneta reps are able to maintain longer client relationships than at other firms, he says.
Rob Roxas, a Wachovia Securities rep in Wayzata, Minn., has also garnered the benefits of hiring a more skilled assistant. When he needed a sales assistant in 2004, he passed on the usual candidates and paid a premium to hire a young CFP. The assistant became Roxas' “client service manager” and, thanks to the added planning capability, his practice's production has jumped from $350,000 to $828,000 in just 18 months.
An Emerging Trend
Broker coaches and recruiters say they expect more advisors and reps, particularly those with high-net-worth clients, will come to understand how much leverage they can derive from investing in a sales assistant with a professional background — even if the starting salary is twice what a typical clerical assistant can command.
“It's really the wave of the future,” says Katherine Vessenes president of Vestment Advisors, a consulting and training firm for advisors based in Minneapolis. Vessenes, who has advised Sheehan on practice-management issues, is also co-author of Building Your Multi-Million-Dollar Practice (Kaplan Business, 2005). “The top advisors are going to bite the bullet and spend the money and their businesses will really take off,” she says.
At the very least, it will leverage the advisor's time and give him peace of mind because he will know that his well-heeled clients are in good hands. “Financial advisors need to focus on what they do best, which is the high-level client touch points and prospecting,” says Vessenes. “If you want to work with high-net-worth people, you need someone skilled, not someone making $28,000 to $40,000 a year.”
And, given the growing complexity of financial-advisory work, the professionalization of the sales assistant makes a great deal of sense, particularly for independent brokers, CFPs and advisors working in RIA practices. “For an independent advisor, the CPA makes a lot of sense,” says Howard Diamond, chief operating officer of Diamond Consultants, a recruiting firm in Chester, N.J.
Even so, many advisors are too cheap or too risk-averse to make the leap. Reps, who are muddling through the way Sheehan once was, may feel that they can't afford to reduce their own take-home pay to take a chance on hiring a professional assistant. That's fine, says Vessenes, if they're comfortable in the knowledge that they are unlikely to ever break into the bigs and are handicapping themselves when it comes to finding and serving wealthy clients. “It's going to limit how well their business will grow,” Vessenes says. “Advisors need someone who is knowledgeable and detail-oriented. Otherwise, something is going to fall through the cracks, leaving them open to unhappy clients and potential lawsuits.”
It can be particularly challenging for wirehouse reps to bring in their own professional assistants, but some million-dollar producers have made the investment. “There's no way you can build your business without the right people supporting you,” says Bruce Pomerantz, a Wachovia Securities rep managing $1.37 billion in assets. “Don't be greedy. Don't try to keep everything for yourself.”
Pomerantz offers his sales assistants — who are not CPAs but have multiple broker licenses — equity in the practice by doling out monthly payments based on percentage of net revenue. He is keen on the idea of adding a CPA, too. “I've been thinking of doing something like this myself,” he says.
With his clout and cash flow, Pomerantz probably won't have trouble bringing in a CPA. But lesser wirehouse reps may run into obstacles. “The wirehouse firms are very rigid,” says Rick Peterson, an executive recruiter who works with the big Wall Street firms. “In fact, most brokerage firms won't do it.” At the big firms, he notes, reps have little say over who they're hiring, because often they are locked into a certain pay grade. Nevertheless, “wirehouses should be thinking along these lines,” Vessenses says. She adds that wirehouse reps could be at a competitive advantage when marketing against advisors like Sheehan.
The Need for Training
Then there's the longstanding complaint from reps that they shouldn't have to pay their assistants out of their own pocket, rather the firm should pick up the tab. Roughly 70 percent of sales assistants are compensated, in part, using broker overrides — an allotment of a rep's pay. In wirehouse land, there exists a major dilemma over how to structure sales assistant pay, which has fueled a tug of war between reps and management. A lot of reps in the lower to middle ranks feel caught between a rock and a hard place because the lower you are in the pecking order, the lower the quality of support you receive. Basically, it's a Catch 22: You can get a better assistant only by increasing your production, but without a first-rate assistant your chances of boosting production are low.
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