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Success on Purpose
By John J. Bowen Jr.
Pursuing affluent investors, winning their business and building the practice of your dreams is, needless to say, a challenging goal. But as many successful financial advisors know, it is a goal you can achieve. The right practice framework is essential to reaching success in the financial advisory industry, and the most important aspects of this framework fit into seven categories, as outlined below.
To realize why a practice management framework is so important, first consider the landscape. There are approximately 765,000 registered financial advisors in the United States. About 400,000 of them work with individuals. If these 400,000 advisors are chasing 2.7 million wealthy households—those with more than $1 million in investable assets—simple math shows that there are fewer than seven such wealthy households per advisor.
It is little wonder, then, that just 16% of financial advisors say they are "very satisfied" with their current level of success. That said, there is good news: Many advisors have been able to take more than their share of the affluent investor market and significantly grow their incomes by transforming their practices.
Why are these advisors able to boost their productivity, build great businesses, do a great job for their clients and enjoy a quality of life they dreamed of, while so many others never seem to reach that point?
Unfortunately, there is no single magic-bullet solution. The key, though, is that they are highly organized about their businesses and deliberate in the decisions they make about them.
They do not stumble into things, but instead use a formal system for building their practices and maintaining their success. This philosophy of being successful on purpose is crucial to their achievements and supports everything they do.
Framework Basics
The most successful advisors have organized their businesses and all the decisions they make about them into seven key areas:
Attracting affluent private clients. In many ways, career success is a numbers game. To succeed on purpose as a financial advisor, you must work with fewer—and wealthier—clients. Focus your business by identifying and targeting a specific market niche. That means understanding who your ideal clients are—that is, the ones you are in the best position to serve profitably—and attracting a stream of them to your doorstep.
Strengthening client relationships. The old saying that "people don't care how much you know until they know how much you care" is absolutely true in our business. By working closely with their clients and implementing an approach that emphasizes collaboration, top advisors show clients how much they care about them as people, not just investors.
By strengthening your client relationships, you build the foundation for a wealth management business that will be in alignment both with what your clients want as well as with what you can profitably provide, all while achieving the lifestyle you desire.
Capturing assets and acquiring clients. Because investments produce the bulk of most advisors' revenue, you need to be systematic in your efforts to generate a stream of prequalified prospects and capture more assets from your existing clients. Most advisors do not do this enough—when, in fact, research shows that 84.6% of satisfied affluent clients would be happy to provide referrals. The business is there for the asking; you just have to ask for it on a regular and consistent basis. Also, since so many outstanding advisors owe much of their success to referrals from other professional advisors, such as attorneys and accountants, you will want to find and work with other professionals as well.
Managing the practice as a business. You may not have thought that you were signing up to be an entrepreneur when you entered the advisory industry. But that's exactly what you are—whether you own your own firm or not. You owe it to all your stakeholders—including your clients—to build not just a good practice and a good job, but also a great and deftly managed business.
One important difference between having a great business and having a great job is whether the business is sustainable without you. That is why top wealth managers build businesses that can hum along—even grow and expand—when they're not there.
Given the wealth of academic research on investment methodology and asset allocation, most advisors are already successfully managing their clients' assets. But when it comes to managing their practices, things are different.
Advisors often approach their businesses in a kind of entrepreneurial fog, caught up in the day-to- day necessities of making a living. Some firms provide advisors with ongoing training opportunities, but for the most part these are product-centric or technically oriented. Either way, little thought is given to practice management and business development.
Partnering with institutions and other professionals. By working with others, you can accomplish far more than you can on your own. Plenty of firms will want to partner with you because it works to their advantage, your advantage and your clients' advantage. Both you and your clients may be better off if you turn to dedicated specialists to provide many types of investment-related services.
Committing to lifelong learning. The biggest asset any of us has is human capital. That is why top financial advisors nurture their own human capital as well as the human capital of the members of their teams. Their reward is new ideas, rekindled enthusiasm and enhanced skill sets. And as you become more successful, it is even more important to be thoughtful about finding ways to become all that you are capable of being.
Realizing maximum equity. Whether they are equity stakeholders in their businesses or employees in an independent firm, the country's top wealth managers work to maximize their business' value. They focus on building businesses that run effortlessly and make their competitors scratch their heads in wonder of how they can pull it all off. Even if you are never going to sell your business, in the long run you likely will transfer your accounts to others. Therefore, it always pays to run your business as if you are planning to sell it for the greatest possible price no matter what your succession plans may be.
You can do that largely by interviewing centers of influence in your chosen target marget and using marketing techniques that show that you are the expert your niche needs most. With fewer, wealthier clients, top advisors are able to establish intimate client relationships and deliver better service. And as a result, they are trusted with more assets to manage, and generate more referrals for additional wealthy clients in their target niche.
You'll end up with more time for client-related activities, and your clients will end up with better service. At the very least, you should look for financial institutions that can help you bridge the gap between your current business model and a wealth management approach.
Business Building
As you review these seven key areas, ask yourself how many of them you already address as part of your overall business-building strategy. If you are like most advisors, you are not covering all the bases. Think about what is missing and how to add this to your efforts. That might mean delegating some of your responsibilities to others in your office. Or it could mean outsourcing certain functions to third-party providers.
Remember: Whatever approach you take, you must be deliberate and thoughtful in your actions. In order for your practice to be more successful, you can't just expect good things to happen. You have to make them happen by pursuing initiatives with focus and drive. When you do, you will find that success on purpose will fall into place and bring you to where you want to be.
Reprinted from: Financial Planning