I’m Now Getting Paid for What I Do
Switching to Advisory Case Study
After 33 years in the financial services industry, Scott Richardson made a decision that upended the way he did business and led to a 60 to 70% increase in revenue. He transitioned to an advisory service model.
“It changes your life,” Richardson said. “You’re able to do things you never were before.”
Although Richardson’s decision was borne of necessity in the face of the Department of Labor’s (DOL) fiduciary rule, the advisory service model turned out to be one that fit well with his relationship-focused style of advising. Even as a transactional broker, his focus was on building connections and emotional attachments to his clients, usually through activities that didn’t directly contribute to revenue. “All along, I was trying to find value I could add to clients, but I wasn’t getting paid for it,” he said. “Now I’m getting paid for what I do.”
Even with the DOL fiduciary rule no longer a consideration, Richardson loves the advisory business model. “In 2017, after Trump repealed DOL rule, one client wanted to go back. It was a $2 million account, so I didn’t want to lose it, but I said no. I said, ‘Bob, I know everything about you, your finances, and your family. We’ve been together 33 years. I’d hate to lose you, but this is my business model. I’m not going back.’ And he stayed.”
In one initial push, Richardson transitioned about $20 million in assets into advisory, comprising around 25% of his book of business. “I couldn’t do it piecemeal,” he said. “It’s like trying to cut your arm off really slow to see if it will hurt less. Well, no. It won’t. The best thing to do is dive right in.”
Despite fears that his clients wouldn’t accept the new service model, he found almost all were completely on board for the change. “I sat down with my top clients, and I said, ‘Look, the government is changing the way it regulates us, and that’s going to change the way we do business.’”
Throughout the process, he only lost one client relationship. “It’s something you never want to see happen,” he said, “but it won’t devastate you.”
Richardson described the new structure as similar to having an attorney on retainer. Instead of paying commissions, they have his experience at their disposal at all times, in a more holistic way. “I told them if they wanted to go somewhere else, to a bank or wirehouse, they were going to get put in a wealth management system anyway. But they couldn’t beat my fees,” he said. “I only had one client who looked at me and in a joking manner said, ‘I guess it’s better to deal with the devil I know.’”
For Richardson, determining a fee structure was one of the hardest parts of the process. “I wanted to be less expensive than banks and wirehouses, which are at 1.4%, but I didn’t want to undercharge either,” he said. “If you charge too little, you can rarely raise your fees. You’d have to start over and resell everything again. So I started my first pricing tier at 1.15%, then went down from there. If fee compression hits, I have room to adjust.”
Strong relationships were what ultimately helped Richardson set his fee and sell it to his clients. “It depends on how your clients look at you. If they see you as salesperson, they’ll treat you like a commodity. If they see your relationship as valuable, they’ll be willing to pay for that,” he said. “I have 35 years in the business, so I’m charging for my expertise and wisdom.”
In an advisory service model, Richardson enjoys the freedom of helping clients in ways that wouldn’t have generated commissions in the past, such as helping an 85-year-old client buy a car. He’s also appreciative of the expanded product universe.
“Before, if people wanted XYZ fund, I had to fill out forms and make a case for why I was going into another commissionable fund. It made me hesitant to do it,” said Richardson. “Now, if I see an investment that would be better for a client, I don’t have to resell myself all over again. I can just make the trade. It makes clients feel like I’m not going to churn to make more money off them.”
While learning new systems has been a challenge, Richardson overall has found the transition to be liberating. In addition to the revenue boost, he’s able to take vacations and manage his clients’ investments in a way that truly serves their best interests. “It’s a whole different psychological landscape,” he said. “The shackles are off.”
With around 40% of his book already transitioned, Richardson is planning to start transitioning the next batch of clients. All new business is advisory.
If you’re interested in working with a partner who believes in the important work you do, invests in your success, and is fully aligned in creating long-term value for both your clients and your business – contact the Cetera Business Development team today at 866-669-3189 or visit cetera.com.