The Decision that Drives Outstanding Success

Wednesday, February 22nd, 2012

Stand­out suc­cess is rare in every indus­try, includ­ing ours. Part of that is just the real­ity that by def­i­n­i­tion most com­pa­nies and most finan­cial advi­sors are aver­age performers.

But the prob­lem runs deeper than that relat­ing to human nature. Most busi­nesses and most finan­cial advi­sors start with huge drive and the will­ing­ness to take risks. As suc­cess comes and busi­nesses and finan­cial advi­sors become com­fort­able, how­ever they often lose that drive; as well as the appetite to take even mod­est and care­fully defined risks in their business.

A recent poll of busi­ness school pro­fes­sors pointed to Peter Drucker and Harvard’s Michael Porter as the most influ­en­tial thinkers on cor­po­rate strat­egy. Both Drucker and Porter have writ­ten about the ten­dency for suc­cess­ful busi­nesses to become com­pla­cent and resis­tant to change. I see this mir­rored in the reluc­tance by many advi­sors to move from the com­fort­able sta­tus quo and to make choices about more nar­rowly tar­get­ing resources and focus­ing their day.

The impor­tance of mak­ing choices

Most advi­sors start as gen­er­al­ists with an “all things to all peo­ple” approach. That strat­egy can cre­ate a base of clients and a level of suc­cess that will allow peo­ple to stay in the busi­ness; but at some point, most advi­sors using that approach hit a wall.

It’s at this point that I often hear from advi­sors, look­ing to sit down to talk about their sit­u­a­tion. Even when I sug­gest they con­sider evolv­ing their client focus towards a tighter direc­tion that has the poten­tial of dra­mat­i­cally accel­er­at­ing rev­enue and prof­itabil­ity, most advi­sors resist this change. Quite sim­ply, they pre­fer the secu­rity and com­fort of their cur­rent “all things to all peo­ple” approach to the uncer­tainty of chang­ing direc­tion for a more tar­geted busi­ness model.

The Har­vard Busi­ness School’s Michael Porter ranked today’s top author­ity on strat­egy has this to say: “Strat­egy is about mak­ing choices and trade-offs; it’s also about delib­er­ately choos­ing to be dif­fer­ent.” Mak­ing choices was also iden­ti­fied as a key to suc­cess by Peter Drucker, widely con­sid­ered the twen­ti­eth century’s lead­ing thinker on busi­ness strat­egy. Among his com­ments on the topic: “Effi­ciency is doing things right. Effec­tive­ness is doing the right things.”

The com­mon traits of top producers

In my years in the indus­try, I’ve spent time with many multi-million dol­lar pro­duc­ers. These highly suc­cess­ful advi­sors bring dif­fer­ent philoso­phies and approaches; attack dif­fer­ent client seg­ments and uti­lize a broad range of busi­ness mod­els. The one thing that most have in com­mon is an incred­i­bly high degree of focus in their business.

· In most cases they con­cen­trate on a well-defined client base. Whether retirees or busi­ness own­ers, physi­cians or retir­ing uni­ver­sity pro­fes­sors, CEOs or farm­ers; the most suc­cess­ful advi­sors typ­i­cally bring a sin­gu­lar focus on one or two clearly artic­u­lated niches. And often the most suc­cess­ful advi­sors focus on micro niches; I’ve seen advi­sors suc­cess­fully focus on snow­birds, divorced women and own­ers of Cana­dian Tire fran­chises and Toy­ota dealerships.

· Because they focus their busi­ness they can tai­lor it to the needs of their tar­get group in a way that a gen­er­al­ist advi­sor never could. They under­stand the issues and speak the lan­guage of their clients; as a result they become the “safe choice” among their client com­mu­nity and become more refer­able as a result.

· Their focused busi­ness model iden­ti­fies prospec­tive clients and builds vis­i­bil­ity among tar­get clients. If you’re tar­get­ing car deal­ers, it’s rel­a­tively easy to put together a list of prospects in your com­mu­nity and to iden­tify the asso­ci­a­tion they belong to and the pub­li­ca­tions they read.

· They have focused poli­cies and pro­ce­dures in place to deal with prospec­tive and exist­ing clients. They have a con­sis­tent process for get­ting in front of prospects. They also have clear min­i­mums on the clients they’ll accept and a well-articulated process for wel­com­ing new clients once they’ve signed on, and for how they com­mu­ni­cate with clients on an ongo­ing basis.

· They have a clear model on how they’ll run their busi­ness; includ­ing the role of fee based and man­aged money busi­ness, the for­mu­la­tion of invest­ment rec­om­men­da­tions and the role of finan­cial plans.

The reluc­tance to leave your com­fort zone

I’ve had many con­ver­sa­tions with advi­sors about chang­ing their busi­ness model or bring­ing greater focus to their busi­ness. While most acknowl­edge the poten­tial ben­e­fits of a more tightly tar­geted and bet­ter defined busi­ness, the major­ity is reluc­tant to make the leap. Quite sim­ply, the sta­tus quo is too com­fort­able for them to aban­don it.

A stand pat approach can work very well in a sta­tus quo world, but the real­ity is today’s world is any­thing but that. The road is lit­tered with once dom­i­nant com­pa­nies who have been left by the way­side (think about iconic brands like Polaroid and Kodak; or one time retail lead­ers such as JC Pen­ney or Mont­gomery Ward).

The dif­fi­culty was not that these com­pa­nies didn’t try to alter course; each of these com­pa­nies ulti­mately saw change com­ing and tried to adapt. The prob­lem was that they waited too late, only embrac­ing change when they were already in decline.

I’m not sug­gest­ing that suc­cess­ful advi­sors are going to go the way of Kodak and JC Pen­ney. Iner­tia is a pow­er­ful force and if you have an estab­lished client base that you are serv­ing well and evolve your busi­ness grad­u­ally over time, you can run a prof­itable busi­ness for many years to come; per­haps the bal­ance of your career. What you can’t typ­i­cally do with a tra­di­tional, gen­er­al­ist approach is to achieve dra­matic growth. Advi­sors with unfo­cused prac­tices tend to look very much alike. And if you look like every other advi­sor, dif­fer­en­ti­at­ing your­self, chal­leng­ing at the best of times, becomes almost impossible.

I sym­pa­thize with advi­sors who’ve spent 10, 15 or 20 years of hard work to build a suc­cess­ful busi­ness and com­fort­able lifestyle and don’t want to jeop­ar­dize it by mov­ing to a sig­nif­i­cantly dif­fer­ent model. The com­fort of the sta­tus quo is incred­i­bly seduc­tive. In my view, decid­ing to take an incre­men­tal, evo­lu­tion­ary approach to changes in your busi­ness so as to reduce risk and stress is an absolutely legit­i­mate choice; no dif­fer­ent from clients who want to avoid mar­ket volatil­ity by stay­ing on the sidelines.

But just as those clients shouldn’t then com­plain if their long term returns are lower than investors who took greater risk; advi­sors who take a low risk approach in their busi­ness shouldn’t com­plain if they’re not grow­ing as quickly as other advi­sors who have taken a more focused approach.

If you’d like more suc­cess, think about Michael Porter’s and Peter Drucker’s insights on how mak­ing choices dri­ves suc­cess­ful strat­egy. And con­sider whether you need to evolve your busi­ness to one that has a sharper focus and clearer direction.

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Tags: Appetite, Business Model, Business School Professors, Client Focus, Corporate Strategy, Financial Advisors, Generalists, Harvard Business School, Human Nature, Michael Porter, Peter Drucker, Profitability, Recent Poll, Reluctance, Standout, Tendency, Thinkers, Trade Offs, Will Allow People, Willingness
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How to Turn a Down Market into Client Loyalty

Wednesday, December 21st, 2011

Dur­ing the last month stock mar­ket have dropped and gyrated; some days by a whop­ping 5%, and in the case of many clients, wiped out this years gains. While this is bad for port­fo­lios, it doesn’t have to be bad for your client rela­tion­ships.

Will the mar­ket bounce right back, or con­tinue going down? Is this the begin­ning of the next bear? Who knows.  In terms of the growth of your prac­tice, it may not mat­ter. You do not have to be slowed down by the direc­tion of the mar­ket. The fact is the best and most suc­cess­ful advi­sors add clients in down markets.

I don’t mean to sug­gest that it will be pleas­ant. Is going through a down mar­ket easy? No. Can it be reward­ing? Absolutely.  Every­one looks like a genius in an up mar­ket. The pro­fes­sion­als stand­out when things are rocky. How do you build and strengthen client rela­tion­ships when the mar­kets are bad? Here are some suggestions.

1. Review your client port­fo­lios and make sure you are pre­pared for a mar­ket down­turn. Con­firm that posi­tions and allo­ca­tions have not got­ten out of whack because of mar­ket gains over the past cou­ple years. Eval­u­at­ing how those port­fo­lios might respond if mar­kets or inter­est rates changed sud­denly or sig­nif­i­cantly, and make any adjust­ments you think appropriate.
2. Be ready to describe to your clients how you have pre­pared for the pos­si­bil­ity of a mar­ket change. If the mar­kets begin mov­ing against you, have a com­mu­ni­ca­tions plan that includes mass e-mails or let­ters and the con­ver­sa­tions you will have indi­vid­u­ally in client appointments.
3. If the mar­kets con­tinue their slide, send out a com­mu­ni­ca­tion to all clients. Let them know you are watch­ing what’s going on, and are pre­pared to make any changes that are appro­pri­ate when the time comes. One of the more inter­est­ing things I have learned from work­ing with client groups is that they have lit­tle under­stand­ing of all the work you do on their behalf when they are not in front of you. Let them know. You don’t nec­es­sar­ily have to see them more fre­quently when times are bad but they need to under­stand that you are always dili­gently look­ing out for their best interests.
4. Bring your clients together. If you have put off or neglected an advi­sory board, or have been con­sid­er­ing start­ing one, now is the time to get it on the sched­ule. Engage your clients to tell you what they worry about. It may not be what you think. Get there guid­ance on the best ways of keep­ing in touch with the mar­kets turned bad again. What­ever their con­cerns, get them to tell you what kind of com­mu­ni­ca­tion with most effec­tively addresses their wor­ries. Would it be let­ters, indi­vid­ual reviews, or group meet­ings? Should you be dis­cussing their port­fo­lios, or show­ing them the impact of a down­turn on their finan­cial plans?
5. Act on their advice. When you imple­ment your com­mu­ni­ca­tion strat­egy, refer to your advi­sory board. Let all clients know that there is a group of clients you are actively engaged with to help you under­stand what kind of response would most effec­tively address what’s on their minds.

Many of the advi­sors I worked with in 2001 and 2008 were drained and exhausted by those dif­fi­cult mar­kets. The ones who kept in touch with their clients most effec­tively were rewarded for all that addi­tional work with larger prac­tices. Engag­ing your clients when things are bad will make your exist­ing client rela­tion­ships stronger and attract new ones.

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Tags: Allocations, Bad Relationships, Bounce, Client Appointments, Client Groups, Client Loyalty, Client Portfolios, Client Relationships, Communication, Communications Plan, Conversations, Direction, Genius, Interest Rates, Interesting Things, Little Understanding, Market Downturn, Market Stock, Standout, Stock Market, Whack
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Communicating Your Difference to Prospects (Dave Paradi)

Wednesday, March 23rd, 2011

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Com­mu­ni­ca­tions expert, Dave Paradi, dis­cusses how advi­sors can stream­line their mes­sage to prospects to make it more rel­e­vant, mem­o­rable and compelling.

Paradi out­lines the four steps to a stand­out presentation.

Also: Michael White — Three Tip Offs to Mar­ket Direction

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Tags: Autoload, Flv Player, Four Steps, Hana, Market Direction, Michael White, Paradi, Presentation, Prospects, Standout, Tip Offs
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