“Coach’s Forum” is a place in which you can ask your questions, tell your stories or give your opinions on any aspect of practice management. For each column, George selects the most interesting and relevant comments from readers and offers his advice. Our objective is to build a community of people with a common interest in making their financial advisory practices as effective as possible.
Advisor says: i have been in the financial advisory industry for only a little more than a year, after an attempt at another small business that, unfortunately, didn’t work out. Looking back, it was a great learning experience and I know that many successful entrepreneurs failed more than once before they got it right.
Now, I am starting over in an industry in which I have little formal training and only limited knowledge of what it takes to be successful. In your experience, what separates the most successful advisors from the rest of the pack? Do they think differently, or simply work smarter and harder?
Coach says: the quest for insight into what makes some advisors excel when others fail is global. Over the past six months, I have been making presentations at conferences in Canada, the U.S., Mexico and New Zealand entitled “Ten things top-performing advisors do – that others don’t.”
The central theme running through all 10 points is: managing your practice like a business.
To recap, here are the first five habits of top-performing advisors:
1. Have a clear vision for your practice
2. Create a plan to realize your vision
3. Understand your business’s metrics
4. Know your target market
5. Have a compelling value proposition
Now, here are the second five:
6. Manage your pipeline effectively
Top-performing advisors are extremely good at managing the flow of prospects through their business-development pipeline. And these advisors have a defined process to convert prospective clients into clients.
On average, top advisors have more prospects in their pipeline than other advisors do. Top advisors keep prospects there longer and have a disciplined process for deepening and strengthening those relationship along the way. Most important, because these advisors understand the metrics of their business (Habit No. 3), top-performing advisors can predict the conversion rate of prospective clients into clients with reasonable accuracy, which allows these advisors to control the momentum of their business.
Your objective in pipeline management is to move prospective clients along a continuum that steadily increases trust, confidence and rapport. This process provides an opportunity for you to demonstrate your value progressively so that prospective clients develop a greater understanding of what you do and why it’s important for them to take advantage of your knowledge and advice.
In fact, top-performing advisors go even further. They work to create such a positive impression through the pipeline process that participants will want others they know to have the same experience. As a consequence, top-performing advisors even get referrals from people who don’t become clients.
7. Use standardized processes to deliver customized solutions
The business of providing financial advice cannot be rendered to an assembly line-like process.
There are too many variables in people’s lives, too many emotional differences and too many available products and services. Thus, you can’t follow exactly the same rules of engagement every time. However, that fact does not prevent top-performing advisors from using standardized processes for efficiency in their operations.
For example, here is a standardized process being used by one top-performing advisor:
– The welcome. New, qualified leads are entered into the advisor’s client relationship management system, which automatically generates a “welcome” message to let prospective clients know the advisor will be following up personally.
– The introduction. A brief conversation to schedule a meeting in which to discuss the engagement.
– The engagement. Meet to determine if there is a “fit” between the prospective client’s needs and the advisor’s capabilities.
– The discovery. Complete a planning questionnaire, a risk-tolerance assessment and a document checklist. At this point, the advisor does a “reality check” to confirm that the client’s objectives are reasonable, given his or her personal circumstances.
– The analysis. The advisor completes an assessment of the client’s situation and determines recommendations.
– The presentation. The advisor reviews the client’s situation, describes findings of the analysis, illustrates recommendations and seeks agreement to proceed.
– The implementation. Required paperwork is completed and a first review is scheduled.
Although there are seven steps in this process, they need not all happen independently. The value is in the consistency and efficiency of the process and its ability to deepen and strengthen the relationship gradually while allowing for full customization of recommendations and implementation to recognize each client’s individual needs.
8. Integrate marketing, sales and service through segmentation
Most advisors regard client segmentation as a service-oriented activity. Top-performing advisors, however, understand there is interdependency among marketing, sales and service. Effective marketing leads to sales; sales results in a service commitment; service delivery provides marketing opportunities – and the cycle starts over. Consequently, top-performing advisors ensure there is alignment in the message their marketing conveys, the value proposition they offer and the service they deliver.
By understanding how segmentation affects all aspects of business, top performers know how to maximize the investment of their time and money. Allocating much of their marketing effort toward their best clients – people who already trust and respect them – results in more introductions and referrals.
Taking new product ideas to the best clients first leads to more immediate sales results for these advisors. Aligning service resources with these advisors’ highest-value clients improves profitability.
9. Make every client relationship profitable
Many advisors could argue that they have profitable businesses. However, although an advisor’s practice may be profitable overall, that often is because larger clients are subsidizing the costs of smaller clients.
Top-performing advisors, on the other hand, recognize that the simplest way to ensure a profitable practice is to make every client relationship a profitable one.
Profitability is the simple difference between revenue and expenses, so the key to having a profitable client relationship is to ensure that revenue exceeds costs.
Revenue often is a function of a client’s needs and financial capability; thus, in general, revenue is circumstantial. Expenses, on the other hand, are largely within the control of the advisor. This is not to imply in any way that all clients are not entitled to good service – they are.
Top-performing advisors implement policies and procedures that ensure service for lower-value clients is delivered in the most cost-effective way. This service often is delivered by systems, by technology or by other team members, thereby freeing the advisor to focus his or her service responsibilities on the highest-value clients. And because top-performing advisors know the metrics of their business, these advisors can determine a service delivery regime that ensures profitability of every client relationship.
Many top-performing advisors have clients whose service costs exceed those clients’ value to the business. The advisors choose to retain those clients for a variety of reasons – for example, serving the children of a top client – knowing that the client relationship effectively is costing money.
10. Create clients for life
The final thing top-performing advisors do well is to recognize that the lifetime value of a client far exceeds the initial compensation. As a result, these advisors work extremely hard to create clients for life. In fact, this goal is the most powerful motivation for adopting the other nine techniques.
The “lifetime value” of a client is the sum of:
– all revenue generated from products and services provided to the client
– all revenue generated from a new client as a result of introductions from that client
– all revenue generated from the new client as a result of introductions from that client, who came from introductions by a current client, and so on.
The lifetime value of a client could easily reach 50 to 100 times the compensation earned from the first transaction.
George Hartman is CEO of Market Logics Inc. in Toronto. Send questions and comments regarding this column to george@marketlogics.ca. George’s practice-management videos can be viewed at www.investmentexecutive.com.
This is the second part of a two-part article responding to a novice advisor’s question about what top advisors do differently. Part 1, which ran in our November 2015 issue, can be found at www.investmentexecutive.com.
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