Nearly a year into the current economic crisis, many in the advisory profession continue to grapple with plunging incomes, unsettled clients and poor credibility.
Worse yet, many advisors, even at the very high end, have forgotten how to develop business in difficult times. For an inside look at what's working -- and what's not -- Research turned to 10 of the industry's best-known coaches. Who better than they to assess the landscape?
As Matt Oechsli, who heads the Oechsli Institute in Greensboro, N.C., puts it, "The biggest challenge for all of them is they've forgotten how to sell themselves because they've been leaning on other crutches. If you can't personally market in the world of the affluent, you're done. There's a ton of room for improvement."
Almost to a person in interviews, the coaches zeroed in on a few common denominators:
o It's an important time to be disciplined. If you have a business strategy and structure that you really believe in, don't change it now out of fear. Chasing opportunity while undermining your business model could set your practice back by years.
o Don't expect same-old same-old to prevail. The advisor-client engagement has changed forever. Bill Bachrach, president of San Diego-based Bachrach & Associates, frames it this way: "Unprecedented crisis creates unprecedented opportunity but not everyone views it that way. The advisor at most risk is the one who says this will pass and things will be just like they were before. This is like the people who lived through World War II. Their point of view of the world was never the same again."
o In many cases, advisors have behaved like consumers: in over their heads; wrongly using profits to fund overindulgent lifestyles; basing budgets and expenses on 20 percent growth; and relying almost exclusively on client referrals and market growth for new business -- only to find that the "business" was only solid in boom times.
Despite the downside, the coaching experts believe that advisors who work at it will emerge from the meltdown with a better business and stronger clients.
"We're going to come out of this with more weathered advisors -- even the younger ones. I have 22-year-old people on my team who are going to say: 'I remember the fall of 2008.' Ultimately, it's going to be good for business, good for advisors and good for clients," observes Rebecca Pomering, CEO of Seattle-based Moss Adams Wealth Advisors and a longtime industry coach. "No one believes this right now because we're all going through such pain. But in the end, a correction is good for everybody, even investors. If we think this is an accidental blip, we're missing the point."
Here are 10 top insights from 10 coaches to help you put your practice in the win column:
1. Get real about marketing. Advisors have let their marketing skills atrophy at a time when their advice is needed as never before, according to Stephanie Bogan, president of Quantuvis Consulting in Redlands, Calif. "Advisors are consistent in that they know there's marketing opportunity but have no idea how to capitalize on it," she says. "Firms that get out there now and position themselves as experts in troubled days are going to recover faster and bigger."
Even for the most successful rainmakers, marketing should be viewed as a business function and not as a model based on an advisor's charm or personality. Among Bogan's top tips: Hold "town hall" meetings and conference calls with your clients. Give market commentary to community leaders, attorneys, alliance partners and corporate human resources executives. Have a couple of lunches a week with your strategic partners.
"Most advisors have already mitigated the damage -- cutting income or laying off staff. Whatever they've done, they've done," Bogan added. "Now, they must move into action mode and for most of them that means marketing, real marketing."
2. Farewell, investment advisor. Bachrach could not put it more bluntly: The old investment advisor value proposition is dead. "What essentially has been revealed is this idea that I could ask you a few questions about your goals, build a little rapport, place your money in some kind of asset allocation strategy, and do an annual review -- those days are over," he notes.
What replaces it? True, holistic, full-service financial planning. Saying the typical investment advisor value proposition was never very client-centered anyway, Bachrach thinks forward-thinking advisors will seize the opportunity and do what they should have been doing all along.
The rest? "In technical jargon, in my opinion, they're screwed. And with my tough-love coaching hat on, they deserve to be," he says. "This market has exposed this whole belief system for what it is and I think that's good. It will force advisors to be better advisors."
3. Manage your business's financials. Coaches have talked about it for years and now business financial management is emerging as a top concern for advisors as well, according to Pomering. In past years, most advisors have seen profits soar but at the same time they failed to watch their expenses while investing in staffing and other areas. Now, Pomering says, "We have to be so much more deliberate in the pace of investment because we don't know how long this market will last.
Getting a good handle on your financial expectations and your performance is more important than it's ever been before." While she says she can't think of a better market in which to be actively hiring, marketing and acquiring, Pomering cautions: "You need to be conscientious and conscious about how you invest and you need to understand your expected return on investment. I wouldn't invest willy nilly."
4. Personal relationship is everything. To whom do the affluent assign blame for their portfolio woes? New research from Oechsli Institute says 27 percent blame Wall Street; 20 percent, the government; 18 percent, themselves; 13 percent, all of the above; 5 percent, their financial advisor. As Oechsli puts it: "It's back to basics.
The personal relationship trumps all." With the affluent giving a thumb down to institutions and government, Oecshli says advisors with true skills and industry knowledge have a huge opportunity to win new business.
But, he warns, "You can't just say you're a trusted advisor, you have to be a trusted advisor. You can't just say you deal with comprehensive wealth management. That has to be the context of what you do, and you have to do it extraordinarily well. Everybody's been blowing smoke and the affluent are in a 'just the facts, Ma'am' mode. Fancy elevator speeches and value propositions -- forget them."
5. Simplify, simplify, simplify. Over the past months, Joe Lukacs, president of International Performance Group in Melbourne, Fla., has watched his coaching clients streamline their practices. Not only are they asking: What's the best way to do business? They are asking: What's the simplest way to do business?
Like a lot of professionals, many advisors are looking at a longer horizon until retirement. To that end, Lukacs has created what he calls an anti-burnout schedule. For three weeks of every month, participating advisors work on tactical measures and during the fourth week they are completely strategic. During that period, they operate out of the office, working on professional improvements, attending conferences or engaging in downtime.
Lukacs himself has been on the schedule for six months. "Our current way of doing things is unsustainable. We've got to find a different path," he says. "It's all about creating, and this is energizing."
6. Create a sustainable practice. Advisors tell clients to manage their money carefully but often don't practice what they preach. "It always surprises me how many practices continue to have trouble with their business finances. As they say on airplanes, before you try to help anybody, put on your own oxygen mask," notes Seattle-based Philip Palaveev, who as president of Fusion Advisor Network coaches advisors on a daily basis.
Some of his key advice: Keep a rainy day fund of three to six months in operating expenses. Don't add people without understanding their roles and responsibilities, and never hire without a job description. Establish a viable partner draw, meaning every partner should be prepared to meet their personal needs out of salary, not salary plus profits.
Finally, Palaveev says, many firms have become complacent, often relying on a single source of referrals. "A lot of practices are having a hard time restarting their growth," he contends. "But you've got to stay proactive, and building the development skills of everyone in the firm is critical to that."
7. Master the ideal client relationship. A firm's success can be as simple as this: alignment and fit. As Tracy Beckes, president of Tracy Beckes and Associates in La Conner, Wash., puts it: "The main thing here is that life gets easier: more results with less effort."
Beckes has a formula for creating the ideal client fit. Personal and professional strategy = client = service = process = people = business model. "Once you're clear on this, you'll know which clients will resonate with the firm, exactly what services and products to deliver, how to structure the firm, how to hire talent.
There's a huge opportunity industry-wide for people to take a look at what's in and out of alignment personally and professionally," she says. "Everybody thrives when an advisor has the courage to put their stake in the ground and say: 'This is who we are. This is when we're at our best.'" Not only will seasoned advisors benefit from examining their business through the lens of the formula, in Beckes' view, but it could save younger advisors years of trial and error.
8. Rethink referrals. A lot of advisors today aren't feeling referable so they're focusing on protecting existing relationships while failing to create new ones. And that's mistaken thinking, according to Bill Cates, president of Referral Coach International in Laurel, Md. Typically, advisors wait for a client to say something nice about them -- then follow it up with a request for referrals.
That's not good enough in today's climate. "Use what's going on in the market as a reason to ask, not a reason not to ask," says Cates. "A lot of folks are getting bad advice, or no advice, and are looking to change advisors. They won't do that until they're introduced to someone they trust."
9. Engage in self-care. As an advisor, you manage your clients' finances. But who's managing you? That's a question Diane MacPhee, who heads DMAC Consulting in Long Beach Island, N.J., spends a lot of time on when coaching clients. In this environment in particular, she says it's important to ask: As an advisor, what are you really afraid of? What kinds of things are you reluctant to say to clients or staff?
When you approach your work week, do your actions match your intentions? As MacPhee notes, "Advisors need to get with themselves first before they can be effective with their clients. I'm very big on self-care." MacPhee is also big on having fun -- encouraging one advisor to roller blade, another to play the piano.
Above all, she says, it's critical for advisors to communicate their inner concerns. "It's still a bit taboo talking about these things but it's really important for advisors not to stuff it," she adds. "Take a self-inventory on a regular basis and in manageable pieces you can pick one or two or three things that can really make a difference."
10. Stay proactive. CEG Worldwide's top coaching clients are experiencing one of their best years ever. How? By following founder John Bowen's five-point roadmap: focus on doing "more" on "less"; hold rediscovery meetings with all clients; offer a "second opinion" service as a way to get new clients; get in front of centers of influence; and build strategic alliances, particularly with accountants.
One advisor brought in $40 million in net new assets in one month by offering second opinions to clients' friends and associates. "What we remind people is that this is an extremely disruptive period -- and that's when great wealth is really built," says Bowen, headquartered in northern California. "Take that creative tension and harness it."
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