Increase Revenues, help clients by becoming a registered investment
Massachusetts Lawyers Journal - November 1995 Volume 3, Number 3
The Practicing Lawyer
By: Bruce Fenton
Today many lawyers and law firms are looking for new ways to increase revenue.
Meanwhile many of their individual and corporate clients have a strong need for
investment advice. The solution is for attorneys to meet their client's
investment needs by expanding their practice into the investment area. It is now
possible for an attorney or law firm to become registered with the NASD
(National Association of Securities Dealers) to oversee transactions and guide
clients' investment decisions. Registered attorneys can assist clients with the
purchase and sale of mutual funds, retirement and college planning, pension
plans, stocks from all major exchanges, government and municipal bonds, CDs and
Attorneys registered with independent brokerage firms can work with all of the
nation's top money management firms, mutual fund companies, and bank trust
departments. These attorneys receive the same commission rate that stockbrokers
and financial advisors receive. Not only does becoming registered greatly
increase revenues, it also enables attorneys to offer a unique level of service
and expertise to their clients. Attorney Richard VanNostrand of Mirick,
O'Connel, DeMallie, and Lougee, President of the Worcester County Bar
Association made a few observations; "Attorneys are trusted advisors as a
result, clients frequently approach them for advice when they come into sizable
sums of money." Attorney VanNostrand also said: "In the last five years many
attorneys have found it harder to make a living, like most people, they look for
ways to increase their income." A registered attorney who matches their
investment expertise with clients' investments needs is able to provide a unique
and valuable service and increase their revenue.
Jamie Probber, an attorney from New York City with 12 years of legal experience,
recently entered a registration program. "Becoming registered is very good for
many attorneys because it is a natural extension to many legal services that
attorneys perform, it also opens new doors and provides attorneys with new ways
to market themselves." Attorney Probber said that becoming registered was a
unique way to expand into an interesting area without greatly altering his legal
practice. "It is very important that registered attorneys work with all funds
and investment products to set themselves apart from major investment and fund
companies who recommend proprietary products and investments from their own
inventory." Attorney Probber gives particular focus to ERISA pension plans and
investments for wealthy individuals. He added "It is prudent for attorneys who
engage in trust management and fiduciary relationships to increase their
knowledge level by becoming registered with the NASD."
How do I remain objective and avoid conflicts of interest?
This is perhaps the most common concern among attorneys. It is imperative that
attorneys expanding in this area do not harm existing client relationships by
creating a conflict of interest. There are two actions an attorney can take to
avoid this. First, in carrying out transactions an attorney should make sure
that they work with an independent clearing firm that does not apply pressure or
bonuses for certain investments. This way, attorneys can maintain complete
objectivity with all investments they recommend. A registered attorney should
stress to their client that they have all mutual funds and all other investments
available to them. Unlike a proprietary firm, a registered attorney has no
incentive to recommend anything other than what is right for the client.
Secondly, the attorney should lay out a clear fee schedule that separates legal
and investment fees, a client should also be aware that an attorney is receiving
a commission for investment business. When billing clients, the law firm should
not include any additional charges or fees for investment advice or time spent
with a client discussing investing.
How do I receive compensation?
According to Forbes Magazine, last year the average full service stockbroker
earned about $90-100,000. An attorney with a well-developed client and contact
base should be able to increase their income by a similar amount. Attorneys and
law firms who focus on large estates and pension plans, or those which have
internal trust departments could generate substantially more. A reasonable
expectation would be that an attorney would net about .5% of the assets they
manage each year. Thus a registered attorney with $100 million in client assets
can average about $500,000 income per year. Many individual transactions such as
mutual funds and annuities can net a registered attorney as high as 2.5% on a
single transaction. Due to an existing client base attorneys can increase
revenue with a minimum amount of effort. Attorneys have two advantages over
regular registered investment professionals: they have an existing client base
and they have additional legal knowledge they can apply to their practice.
How do I know that I am recommending the right investments and how do I stay
educated in the investment field?
With over 19,000 money managers, 4000 mutual funds, and thousands more stocks
and bonds it can seem overwhelming for a registered attorney to keep on top of
all the latest financial developments. Thanks to the information age, is fairly
easy to stay informed. The easiest way for an attorney to gain leverage and
reduce the need for knowledge about market intricacies is to pass on the day to
day account management to a more qualified expert. Mutual fund managers, and
money management firms can fill this role. An attorney recommending mutual funds
and money management firms to his or her clients can rest assured that the
assets are being professionally managed by a large, professional and full time
team. A registered attorney who tries to pick their own stocks and bonds for
clients will find themselves needing far more information. Selecting appropriate
mutual funds and money management firms for clients is fairly easy for an
attorney with basic financial services knowledge. Attorneys can also make use of
independent services such as Morningstar's mutual fund rating company, CNBC, or
online stock and mutual funds quote services. Quote services work through a
computer modem and usually cost about $50-$80 per month for a limited use plan.
Does my law firm have to provide custody of assets, statements, and account
The clearing firm, which should be a high quality nationally recognized
investment firm, has custody of the client assets (in client name). The clearing
firm handles account insurance, statements and other account paperwork. The
clearing firm also sends trade confirmations, prospectuses and client statements
with the attorney's name on them. When a client wishes to make a transaction the
registered attorney calls a trade desk directly and gives them the account
number and trade information.
How does an attorney become registered and what are the costs?
To become registered an attorney needs to pass the Series 7, a comprehensive
NASD securities exam. Attorneys can pass the exam after 3-10 weeks of study.
Study time depends on how intensely the attorney studies the materials and
whether or not they take a `cram course.' Before taking the exam the attorney
must be sponsored by an investment firm. Ideally, the firm will also provide
marketing assistance, business consulting, advice and clearing services on an
ongoing basis in a simple `turn-key' program. The total costs are usually about
$1200 for an individual or $2000-3000 for a mid sized firm.
Who is available to assist registered attorneys?
Most money management firms and mutual fund companies have marketing
representatives who specialize in assisting registered persons. These
individuals can answer questions, provide literature, conduct seminars with
attorneys and even speak with select clients. The investment firm that sponsors
the attorney should provide even more personalized and intense support for the
registered attorney. Many individual transactions, such as mutual funds and
annuities can net a registered attorney as much as 2.5% on a single transaction.
What types of practices benefit the most by becoming registered?
Attorneys and firms who benefit most from registration are those which focus on
estate planning, wills and trusts, ERISA law, pension plans, and those who deal
with wealthy individuals or small to mid-sized companies. Clients who can
benefit from having a registered attorney range from middle class IRA and CD
holders to wealthy mutual fund and managed account investors and companies of
all sizes. Tax attorneys and other attorneys who directly deal with client
assets also can benefit by becoming registered.
What changes could I expect in the way I do business day to day?
The amount of effort an attorney puts toward expanding their investment practice
will directly reflect the increase in revenue they see. At a minimum, an
attorney will want to send out a mailing to their clients and associates to make
them aware of the services they are able to offer. A seminar in which the
attorney and a guest speaker objectively discuss various investment services is
also useful. Another good way to increase business in this area is for the
attorney to offer free financial planning reviews to each client in which the
attorney can recommend investments. Attorneys who wish to expand more
aggressively may wish to invite non clients to seminars through advertising or
by sending out invitations in bulk (the attorney should make sure that they
comply with legal advertising regulations). An attorney can also expand their
practice by meeting with local business owners and CFOs to discuss their pension
plans. The attorney can offer to review their pension plans for compliance with
ERISA regulations (at no charge) and then review the investment performance of
the plans and make recommendations.
In addition to increased revenue, becoming registered can give attorneys many
other benefits. The added investment service increases referrals because of its
unique nature. Existing business can increase because the program reminds
clients that the law firm is `full service' and capable of assisting with a
variety of needs. Registered attorneys have the ability to confidently recommend
clients to an investment professional (that is, the in-house attorney). The name
of the firm is kept in front of clients through statements and additional
contact. Being registered can open new doors to large estate managers and
pension plan administrators who enjoy having their legal and investment concerns
taken care of under one roof. Attorneys can gain positive publicity through
seminars and press relating to this program. Registered attorneys have a
competitive advantage over non registered attorneys.
Becoming registered is not for every attorney; it calls for a change in how
business is conducted and the way attorneys present themselves. Once registered,
attorneys need to realize that their income from investment business will
increase with the amount of effort taken to expose clients to their new
Atlantic Financial helps attorneys become NASD registered and offer investment
services to clients. Email : Inquiries welcomed.
Copyright 1996 Bruce Fenton