Ivan M. Illán, CFS, has directly raised and managed over $1B in assets from both institutional and retail clients. He's the founder and chief investment officer of an independent wealth management firmbased in Los Angeles. As a Forbes Contributor, an Investopedia Premier Advisor, and Five Star Wealth Manager, Ivan's insights are published routinely on both the financial advisory profession and capital markets.

Introduction 1

About This Book 1

Foolish Assumptions 3

Icons Used in This Book 3

Where to Go from Here 4

Part 1: Getting Started as a Financial Advisor 5

Chapter 1: Looking at the Big Picture 7

Understanding What a Financial Advisor Does (or Should Do) 8

Evaluating Yourself: Do You Have What It Takes? 9

Do you have the right personality? 10

What's driving you to consider this career? 10

What are your qualifications? 11

Deciding Whether to Fly Solo or Work in a Firm 12

Weighing the pros and cons of working in a firm 13

Considering the option of operating as a lone wolf 14

Thinking about starting your own firm 15

Taking Inventory: What You Need to Know 16

Complying with financial regulations 16

Brushing up on budgeting basics 17

Wrapping your brain around asset management 17

Knowing what liability management entails 18

Looking at what estate planning involves 18

Identifying key tax issues 19

Comprehending behavioral finance 19

Providing Superior Service to Your Clients 20

Performing your due diligence 20

Creating personalized financial plans 20

Teaming up for superior service 21

Creating a tiered service model 21

Assessing your performance as a financial advisor 22

Growing Your Client Base 23

Winning lifelong clients 23

Marketing your services 23

Teaming up with colleagues 23

Moving Up: Starting Your Own Firm 24

Getting started 24

Sharing revenue (or not) 25

Planning your exit strategy 26

Chapter 2: Deciding Whether You're Geared to Be a Financial Advisor 27

Evaluating Your Personality Traits 28

Do you like to teach? 28

Are you patient and supportive? 29

Are you willing to advocate for your clients? 29

Are you humble? 31

Are you well-connected? 31

Are you hungry for knowledge? 32

Questioning Your Motivations 32

Making a commitment to deliver value 33

Avoiding the siren call of commissioned sales 33

Balancing Leadership and Service 34

Embracing your leadership role 34

Maintaining a service-oriented mindset 35

Chapter 3: Performing a Self Background Check 37

Choosing a Career Path 38

Getting started fresh out of college 38

Changing careers from within the industry 39

Changing careers from outside the industry 40

Capitalizing on Your Personal Experience 41

Taking advantage of your childhood memories 42

Dealing with your own financial challenges 42

Helping others manage their finances 43

Evaluating Your Financial Position 43

Gauging your financial stability 44

Recognizing the risks of financial instability 45

Chapter 4: Deciding to Work for a Firm or Build Your Own Practice 47

Knowing Your Options 48

Hiring in as an employee of an existing firm 50

Setting out on your own as an independent financial advisor 52

Scoping out hybrid models 53

Investigating Different Revenue Models 53

Understanding the fee-only model 54

Collecting asset-based fees and commissions 56

Checking out the commission-only compensation model 56

Understanding how firm managers get paid 57

Getting On-the-Job Training as an Employee 58

Deciding where to go for your field training 58

Using internships to find the right fit 59

Finding Employment as an Independent Contractor 59

Affiliating with an independent broker/dealer 59

Finding work with an insurance-company-owned broker/dealer 60

Becoming a Registered Investment Advisor 61

Chapter 5: Surveying the Regulatory Landscape: The Fiduciary Standard 63

Familiarizing Yourself with Your Role as Financial Advisor 64

Recognizing the Confusion over Obligations and Care Standards 64

Sifting through the Clouds of Bureaucracy 67

Considering federal rules and regulations (DOL, SEC, FINRA) 67

Looking at state rules and regulations 70

Can you call yourself a financial advisor? 71

Governing Itself: Industry Organizations Weigh In 72

Recognizing that change comes from within 73

Taking the fiduciary pledge 73

Looking to the Future 74

Part 2: Mastering Core Competencies 77

Chapter 6: Pursuing Professional Development 79

Identifying the Core Competencies 80

Asset management 80

Liability management 81

Budgeting 82

Estate planning 82

Taxation 82

Behavioral finance 83

Getting a Formal Education 83

The American College of Financial Services 84

CFA Institute 84

CFP Board 86

The Institute of Business and Finance (IBF) 86

Obtaining Your Licenses to Practice 87

Financial Industry Regulatory Authority (FINRA) 87

National Association of Insurance Commissioners (NAIC) 88

Applying Certifications across the Financial Advisory Spectrum 89

Embracing Continuing Education 90

Chapter 7: Getting Budgeting under Your Belt 91

Guiding Clients on Household Budgeting 91

Estimating income 92

Identifying and estimating expenses 92

Shaking the piggy bank: Savings 96

Establishing spending and savings guidelines 97

Exploring Helpful Technology Tools 97

Leveraging the Power of Auto Pay and Payroll Deductions 98

Chapter 8: Brushing Up on Asset Management 99

Developing a Client's Investment Policy Statement 100

Exploring the client's goals and objectives 101

Defining your duties and responsibilities 103

Establishing portfolio selection guidelines 103

Concurring on a rebalancing frequency 108

Setting parameters for performance monitoring and reporting 108

Agreeing on an Investment Philosophy 109

Active, passive, or somewhere in between 109

Individual securities versus packaged products 111

Cautioning Clients on "Hot Money" Investments 115

Comparing Revenue/Compensation Models 115

Asset-based fees 116

Commissions and sales charges 116

Chapter 9: Delving into Liability Management 117

Assessing a Client's Risk Profile 118

Following a formal process 118

Using the income replacement approach 124

Taking the needs-based approach 125

Reviewing Insurance Lines and Products 125

Life insurance 126

Disability insurance 127

Health insurance 127

Homeowner's insurance 128

Auto insurance 128

Liability insurance 128

Annuities 129

Comparing Revenue/Compensation Models 130

Collecting a one-time, up-front commission 130

Getting paid in installments 131

Embracing transparency 131

Chapter 10: Excelling in Estate Planning 133

Addressing Estate Planning Essentials 134

Naming heirs 135

Naming beneficiaries 136

Planning for business succession or continuity 136

Accounting for estate taxes 138

Managing estate liquidity (or lack thereof) 139

Considering capital market conditions at time of death 140

Preparing for Estate Settlement Complications 140

Handling differences over a closely held business 141

Anticipating a struggle for control 142

Helping Clients Pass along Values, Not Just Wealth 143

Checking out donor-advised funds 143

Considering private family foundations 144

Brushing up on CRTs and CLTs 144

Teaming Up with Estate Planning Attorneys and Family Accountants 145

Chapter 11: Tackling Taxation 147

Reminding Yourself That You're Not an Accountant 148

Adding a Tax Advisor to the Team 149

Managing Capital Gains: Don't Let the Tail Wag the Dog 151

Using Tax-Deferred Accounts to Maximize Compounding Returns 152

Exploring Tax-Free and Tax-Lighter Investments 153

Buying municipal bonds 154

Investing in tax-exempt securities 155

Slashing Taxes with Retirement, College, and Health Savings Accounts 156

Contributing to a retirement plan 156

Socking away money in college funds 157

Trimming taxes with an HSA 158

Taking a Nibble Out of Taxes with Charitable Contributions 158

Chapter 12: Getting Up to Speed on Behavioral Finance 161

Recognizing Irrational Factors That Drive Thinking and Behaviors 162

Myopic loss aversion 162

Confirmation bias 162

Mental accounting 163

Illusion of control 163

Recent extrapolation bias 164

Hindsight bias 164

Herd mentality 164

Muting Irrational Thoughts and Behaviors 165

Appealing to the Rational Side of Your Client's Brain 166

Step 1: Acknowledge your client's fear 166

Step 2: Tell your client to take a deep, cleansing breath and smile 166

Step 3: Introduce a rational argument 166

Step 4: Have your client explain the strategy back to you 167

Riding Out Market Cycles: Balancing Fear and Greed 167

Calming common fears 168

Reining in greed 168

Part 3: Providing Superior, Personalized Service 169

Chapter 13: Formalizing Your Client Due Diligence Process 171

Deciding Whether You Want Clients or Consumers 172

Serving consumers as a broker/agent 172

Serving clients as a fiduciary financial advisor 173

Considering the Factors That Really Matter 174

Mastering the Four As of Due Diligence 176

Assessment 176

Audit...