Financial Advisors Switch From Face-Time to Phone Lines

By kyle stock

After piloting Air Force cargo planes for 20 years, Jeff Nelson overcame the odds to become a successful independent financial advisor.

Five years later, in 2010, he left it all to work in a USAA call-center. Now, Nelson helps eight to 20 people a day make important financial decisions and he doesn't have to take out the trash, agonize over expenses and revenues or drum up clients at chamber of commerce breakfasts.

"I always figured I would go work for a company and then go independent, but it worked out the opposite way," Nelson said of the move. "It just felt right in a lot of dimensions."

Some financial advisors are abandoning the eat-what-you-kill business model for salaried positions where they don't hold a fixed "book" of clients. Meanwhile, banks, brokerages and insurance companies are building call-centers to house such professionals in efforts to sell advisory services to less-affluent individuals and clients who manage their own portfolios.

Since the fourth quarter of 2008, financial services companies in the U.S. have added a net of 31 call-centers, according to the National Association of Call Centers, a nonprofit trade-group.

The offerings are well timed, as a wave of baby-boomers prepares for retirement and a mass of relatively inexperienced investors struggle to make sense of the volatility of markets during the crisis.



Buy-in From the Biggies

At least two of the four biggest Wall Street brokerages -- the so-called wirehouses -- are growing call-center operations.

In addition to its approximately 15,200 traditional advisors, Wells Fargo & Co. now has 400 advisors punching in at remote offices in Charlotte, N.C., Minneapolis and Salt Lake City, Utah.

The strategy was developed to lure "mass affluent investors," generally lower-income people who often balk at the fees of a bricks-and-mortar money manager, according to Yvette Butler, a managing director of Wells Fargo Advisors. But it's also catching on with self-directed investors, customers who handle their own portfolios but occasionally seek advice.

"What everyone has realized is that it makes more sense...to keep the customers you have and not lose them to other business models," Butler said.

In addition to its roughly 15,500 brokers, Merrill Lynch is building a stable of 600 or so advisors for its new Merrill Edge offering, a cluster of call-centers geared at households with less than $250,000 in liquid assets.

"Not everybody can achieve the goals they want to achieve in life with just a checking and savings account," said Rich Steinmeier, the managing director in charge of the initiative.

Morgan Stanley and UBS, the other two wirehouses, declined to answer questions for this piece, though Steinmeier said they have developed similar offerings.



Lower Barriers

The call-center model is also catching on with retail banks and insurance companies that have traditionally not offered much in the way of financial planning.

USAA, the bank and insurance company focused on military families, now has about 1,000 advisors like Nelson stashed in call centers around Arizona, Colorado, Florida and Texas. It plans to hire another 200 experienced advisors this year, according to Brandon Carter, vice president of USAA's financial advice and solutions group.

TD Ameritrade, a Nebraska-based online stock-trading firm, now has about 700 "investment consultants" taking calls and e-mails from customers, according to Lule Demmissie, managing director of the company's investment products and retirement businesses.

"We found that even if you are a self-directed investor, there are points in your journey where you require guidance," Demmissie said. "The end result is that it might make for a stickier client."

Mark Halverson, senior executive in Accenture's capital markets industry practice, said a lot of insurance companies have "high energy" around initiatives to build similar offerings.

"You'll notice that the word 'insurance' is not the name of any insurance companies anymore," he said. "They are hoping to capture a higher and higher share of wallet."

Call centers are also relatively cheap, compared with cost of advisory branches, local marketing and training advisors to build a book of clients.

"Ironically, the people who really need financial advice are often the ones who don't get it," Halverson said. "Basically, this allows for a meaningful advisory experience at a substantially lower cost."

While traditional financial advisors typically worked with clients of all ages, call-centers allow companies to segment advisors based on client demographics. For instance, calls from clients under the age of 35 can be routed to professionals more comfortable with discussing 529 college savings plans than fixed-income annuities.

"It's the not-your-father's-Oldsmobile concept," Halverson said.



Risk = Reward

It is difficult to measure the number of strictly-salaried advisors; they likely make up a tiny but growing share of the nation's 334,000 or so FAs. The call-center jockeys, like traditional FAs, come from a wide range of backgrounds. Some are wirehouse refugees, while others are switching careers or just getting out of college.

Almost all of them have Series 7 certifications and many have other FINRA designations and CFA designations.

"We find them in all kinds of places," including the company's own bank branches, said Butler at Wells Fargo.

Like every advisory business model, working for a salary has its benefits and drawbacks. For one, call-center advisors generally do not earn close to what their successful traditional rivals get.

In 2009, the median income for advisors was $173,015, according to Registered Rep magazine. In USAA call-centers, professionals in the "mid-tier" of the program earn salaries from around the mid-$50,000s a year to the high-$60,000s.

However, the hours are mostly fixed and the risk of essentially running a one-man business is removed. The average financial advisor works roughly 12 hours a day, according to a FINS.com survey, and more than four out of five traditional advisors quit or are washed out of brokerage firms within three years, according to CBM Group, a New York based consultancy.

In comparison, call-center advisors generally work 8-hour shifts and "making it" in the salaried model requires a job offer, rather than three frantic years of cold calls and community networking.

Merrill, for example, had originally planned to target promising recent or soon-to-be graduates for its Edge centers, but it has lured a lot of talent from traditional brokerages.

"Our turnover certainly isn't zero," said Steinmeier. "But if you think about the profile of someone who wants to be an FA, but doesn't have the Rolodex or the marketing skills, I think it's an outstanding job."

Write to Kyle Stock



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