Your number one responsibility 
- stick around

In the last few years there has been a huge shake up amongst financial advisors and for those have decided that they are not going to carry on, one of the key priorities has been neglected – financial survival.

The need to rejig the business, obtain the qualifications, and make sure you are compliant have all been front of mind issues.

However in discussion with a number of advisors who have decided that they are not going to carry on, one of the key priorities has been neglected. That is the financial survival for the advisor.

Indeed, in my view, financial advisors should be an example to their clients. Wise in their decision making, prudent in their investments and of substantial financial substance themselves. The reality is that I believe that most financial advisors now have less net profit than they did two years ago. Indeed many have really bought a job.

Whilst no one would argue the need and the benefit of the recent changes, it is high time that we focus on making sure that we continue to be a vibrant and growing group of competent advisors.

It is not a complex business; it is all about having the right model and consistently promoting it to existing and potential clients.

Let us look at the components and see what you can do about it.

Firstly, if you are proud of your advice, charge for it. Fees for advice are becoming more common, and if the overseas experience is any indicator, also represents a greater level of engagement and commitment from the client. Paying fees up front for the process means that you have the customer’s attention, and an understanding of the objective nature of your process.

The fee structure should be directly related to the value of your input. You may choose to charge by the hour, but this leaves you with little opportunity to grow your practice as you are limited to the hours available.

Again a combination of fees for work and additional income from achieving the client objectives seems to be a sensible model. I am amazed at the number of advisors that are reluctant to discuss fees with their clients and rely totally on commissions. Not that I have any problem with commissions, it is just one way of getting paid, but it is in a way the soft option.

Recently I was in Vancouver, attending the Dan Sullivan Strategic Course. This is a course available only to entrpreneurs that are prepared to sacrifice large amounts of money and time to improve their skills. In my group of 14, almost all of them received a fee from the client, mainly upfront. These were not only financial advisors, but business coaches, real estate people and in one case a professional public speaker. In discussion it was generally agreed that obtaining a significant upfront fee from the client was the best indicator of having their interest and willing participation in the process, and also a level of commitment that generally made them more loyal for the long term.

The second component is business efficiency. Regrettably it is not practical to provide the same service to all clients no matter what the fee is. At the end of the day if you are to succeed and flourish, you need to have ever increasing values. Values in terms of the type of client you are dealing with, values of the size of their portfolio or risk requirements and values in terms of their long term willingness to refer like minded people to you.

It is a funny old world, people who pay for quality service, are happy to refer you to others. It is almost an affirmation of their correct decision to work with you in the first place. If there is no perceived value or it is very low on their priority list, referrals do not flow. But the first requirement is that you be referable. In the same way that I would not take advice from somebody on my garden if they didn’t have one of their own, nor would I take advice from a financial advisor who clearly had less income and wealth than I did. It seems to me that to be a leader, the first requirement is to demonstrate leadership.

Another component which is critical is efficiency. I see advisors spending endless hours prospecting for new clients, endless hours of down time doing administration themselves and regrettably many of them waffling around providing 50 page reports to a customer that wants short, concise and practical answers.

Have you ever evaluated your service against a simple principle of efficiency? Generally speaking there are dozens of things that can be done by somebody at a much lower hourly rate than you.

Again going back to Dan Sullivan, it highlights the fact that people who have a skill should maximise the time they spend using it and minimise all else. The old saying that caught my imagination many years ago from Dan Sullivan was that ‘Frank Sinatra does not move pianos’. If you have great skills in front of the client, and are utilising the hard won expertise and qualifications that you have, then completing forms, emptying the waste paper basket and returning idiot phone calls, should not be part of your daily activity.

Yet too often an advisor perceives that until he becomes ‘successful it is not affordable to have competent staff. Rubbish. You will never break through to the next level until you admit that your job is face to face with customers helping them succeed financially. All of the rest of it should be done by somebody else. Until you come up with a way to make that pay for you, you are unlikely to ever build a practice that is going to see you and your clients into a happy retirement.

Another area is the acquisition of clients. We come from a history where financial advisors built their particular client base brick by brick. Face to face meetings, phone calls, seminars, advertising and promotion. Frankly these days that is too hard for many.

There are plenty of clients out there and many of them would be perfect for your practice.

As the only specialist in matching up clients bases when the time comes to buy or sell, one feature I notice is the lack of focus on getting the right sort of clients. Not that there is ever the perfect customer base to purchase, but it needs to be pretty close to what you have and better so as to drag you forward rather than back.

The issues that we deal with when somebody is selling are many , and our main role is to actually match the client bases to the needs of the purchaser. To maximise the win-win to all concerned, the customer base has to look pretty much like the perfect customer base for the purchaser.

Given that we have been doing this for years we are often able to help with advice on what to do when it comes to seeking out the right additional customers. In addition there are many skills and processes needed to assimilate new clients into your practice. Any client that perceives that they have been ‘sold’ is likely to vote with their feet! It is an important part of the process that the new clients not only come on board but feel that they have actually advanced their financial peace of mind by doing so.

The fundamental issue is this. In an environment where there are fewer and fewer advisors and more and more people requiring advice, one of your responsibilities is to be financially successful yourself. This is nothing to do with the quality of your advice or your research or anything else. It is with you being an efficient and effective business person. At the end of the day a financial services practice is a business and must succeed if it is to follow through on its promises to look after its clients in the long term. The only way that we are going to build truly professional people and have others beating down the door to join the advisory profession is to turn it into a truly successful business.