Industry Leaders on Practice Management: Sales and Marketing

We convened with four industry experts in June to hash out the results of our groundbreaking Pursuing Practice Excellence. In this transcript, their insights on advisor sales and marketing

The panelists discuss how sales and marketing fit into a definition of practice management. The panelists discuss how sales and marketing fit into a definition of practice management.

As part of AdvisorOne-ActiFi's Pursuing Practice Excellence research on advisor practice management, on June 13 we gathered four industry leaders to explore the findings of the research. The August 2012 Investment Advisor cover story provided highlights of that conversation, and our three-part series of articles addressed the specific findings from 1) a survey of 954 advisors; 2) an online survey and telephone interviews with 52 executives and consultants from across the industry who run practice management programs, and 3) an analysis of the gaps between the advisor portion of the survey and the industry leaders.

To extend that conversation to advisors' benefit, on AdvisorOne we are providing transcripts of the roundtable, which was moderated by Jamie Green and John Sullivan of Investment Advisor and AdvisorOne, and Spenser Segal and Brian Stimpfl of ActiFi.

The four panelists at the in-person discussion in Chicago were David Patchen of Raymond James, Kim Dellarocca of Pershing, Kirk Hulett of Securities America and Jim Komoszewski of Investment Centers of America.

The focus of this article, from the beginning of the roundtable, is on what the panelists believe are the key roles of sales and marketing in driving an advisory firm's growth, regardless of whether that firm is an RIA or an independent broker-dealer practice.

Jamie Green, Investment Advisor: You’re here today as far as a culmination really of the nearly year-long partnership between ActiFi and the Investment Advisor Group. Our intent was to devise a practice management survey, to field it, to analyze it and report on the study that we’re calling “Pursuing Practice Excellence,” which we humbly believe is a groundbreaking study that goes beyond what many already helpful benchmarking studies provide to the industry.

But we also think practice management is in many ways vaguely understood by all the industry participants. It’s often eschewed in favor of one company or one business model. The ways that you measure practice management success varies from company to company and from business model to business model as well. So part of what we wanted to do was have an objective, comprehensive study that looked at advisors, what they say they need, they want and what they’re doing; but also survey the key partners of advisors to see what you’re working on, what you’re providing and to figure out what the gaps are.

Certainly you could be advocates for your own companies and what you’re doing, but we determined that you also had the big picture for the industry, and that’s part of what we’re trying to do here.

Spenser Segal, ActiFiSpencer Segal, ActiFi: This is something that we’ve been thinking about for a couple of years now. We obviously spend all of our time talking about practice management to people, whether they be advisors or institutions, and noticed that there really was no definitive definition of practice management and that this was an area that was moving very quickly. I’ve been at this about eight years now and have seen the level of commitment that firms have [to practice management] evolve dramatically. I was looking for some data myself as to, first of all, is there definitive data on what practice management is? Is there any information as to what people are offering? There’s really nothing.

I still would say we’re maybe in the second inning of a nine-inning game. The practice management needs of a purely independent RIA are very different than the practice management needs of a W-2 employee in a bank branch. We wanted to make the study comprehensive so that we could look at the different advisor types similarly; from a financial institution leader to a pure custodian, all the way over to a firm that only has employee advisors. As we extend this to coaches, consultants, people who are on the front lines delivering practice management, there are a lot of lights where we can take this further.

There will be much evolution and if we don’t take a snapshot and have objective, hard data to benchmark, we can’t measure where it goes. In subsequent studies, we’ll be able to reference this data and actually be able to measure how advisors’ perceptions have changed.

Brian Stimpfl, ActiFi: Everyone talks about practice management, but so many folks are focused on having programs on practice management. Coming from a background where many of you are now and spending so many years in that environment, I can tell you that I focused on how you show the value proposition of what you’re actually spending dollars on and how that translates into success of your clients, of their clients and, of course, success in the enterprise that you’re working for. What are those key metrics, those key questions that we want to ask over and over again? I think we don’t really know what those are yet.

There’s a lot of competition in the industry, but it’s just going to make all of us and all of our advisors better if we can find out how to bring them forward, being better practice managers, better business people.

Green: While advisors believe that, yes, practice management is important to the relationship, the definition is broad. One thing we noticed in particular was that the idea of including sales and marketing in a practice management definition made sense. Advisors want practice management advice that’s tailored to their needs, but they also want somebody to help them, to whom they are responsible for following through [see separate transcript from the roundtable on coaching]. What are their plans for whether to spend their money and time on sales and marketing or client service? Anything here that was surprising to you? Anything that didn’t ring true?

Kirk Hulett, Securities AmericaKirk Hulett, Securities America: If the topic is, “How do you define practice management?” my clarifying question would be, “How do you define sales and marketing?”

When I read that I was of two minds. One, if you define sales and marketing as referral systems, the strategy around marketing for a practice, segmenting clients, branding and what you’re objective is, I’ve always thought that was part of the definition of practice management. {Second] the one area I think that has fallen outside, at least the way we do practice management at our firm, is sales skills. Those skills needed to take on a client, or a prospect I should say, from introduction to close. We don’t support that because in the independent broker-dealer world, we’re sort of assuming those are the table stakes. We’re dealing with veteran advisors, mature practices. We assume they come to the table with those skills. Maybe that’s the wrong assumption. Maybe that is actually an area that we can actually deliver more value. What do you mean by sales and marketing?

Segal: We literally put it out there as and let the advisors define it however they chose.

John Sullivan, Investment Advisor: Have you gotten any request from advisors for that kind of help?

Hulett: Sparingly. But when we go in and do our diagnostics in working with advisors or groups of advisors, we certainly will come across the fact that asking for referrals is a challenge. Being proactive at building a network is a challenge. It isn’t the structure behind it as much as their interpersonal skills or their competence in being able to do it.

Segal: One of the things we consistently see in more experienced advisors is, relative to sales and marketing, the lack of definition of the sales process. If there are multiple advisors in the practice and they want to use sales pipeline management, they don’t have common and clear definitions as to the stages a prospect goes through. There’s not much rigor around that and, as to whether those terms exist, they’re not commonly shared. So that’s a big gap that we tend to see with experienced advisors. It’s just not having a clearly defined sales pipeline.

David Patchen, Raymond James Financial ServicesDavid Patchen, Raymond James Financial Services: One of the great things about practice management, and I think I can speak for the group here, is some of our top advisors really help us drive content, tools and tactics.

In this specific space, two years ago, Carter Financial, which is a very large independent RIA that still has broker-dealer relationships with RJFS in Dallas, asked if we would put together a sales training program for their younger advisors. My initial response was “No”. I met with David Lee, who really owns our Practice Intelligence [practice management program] website, and then grabbed a couple of my colleagues, my fellow regional director counterparts. The more we brainstormed around the request, the more we realized that we may be onto something.

So we put together a two-day program that covered many of the things you were mentioning, Kirk: referral strategies, much of the typical or traditional tools and tactics around customary practices, but also a very core component on the actual sales training mindset, tactics and tools. What happened was the senior advisors who participated realized that they had what we later termed prospecting atrophy.

If you look back at what happened in our industry for 20 or 30 years, you ask the question, “How do you grow your business? I grow by referrals, and I don’t even ask, because we had a raging bull market that worked.” What’s happened, as we all know, is we’ve had 10, 11 challenging years now and there are two categories: There are people who really never had good selling skills, and there are people who had them, but they’ve atrophied due to lack of practice.

This program eventually morphed into what we call the Zen Advisor Program, and we have done that all over the country. The challenge about sales education is it’s not a one-stop endeavor. You’ve got to have ongoing, continuous, perpetual follow-up in order for it to really have legs.

Kim Dellarocca, PershingKim Dellarocca, Pershing: I would agree with a lot of what you’re saying. I think the point that you hit on, Kirk, is that the mature advisors tend to be the ones you’re working with but the opportunity around the next generation is really important.

The way that business development was done in the past is changing dramatically. It’s much less expensive to develop a training program and to bring advisors through those programs and help them develop those skills than it is to continue to play the recruiting game. So how do you even shift the whole business development process and paradigm? It needs to change as you talk to and relate to a whole new type of investor.

So you’ve got the [Generations] X and Ys, and the demographic changes that are happening and you also have where wealth is shifting to women, to their heirs, to totally new demographics in terms of Indian Americans, Chinese Americans, money that is coming from abroad, moving it here.

The pool you’re selling to is changing, so the process has to change—not just because we have to make sure people follow a process and are systematic in their business development efforts because that’s really good for just doing good business; but also who they’re talking to is changing. The demographics are changing at a pace that’s incredible.

Hulett: Young people don’t like the word “sales.” They don’t want to be salespeople. The Gen Xers, the Millenials or Gen Yers, they don’t want to be salespeople. So that’s why a big part of what we taught was questioning techniques and tactics: teaching people how to ask better questions rather than teaching them to close someone. That’s a concept that young folks just don’t have a lot of interest in. They don’t want to close anyone; they want to commence something. They want to educate, they want to build relationships.

Dellarocca: And that’s in synch with what the investor wants. It’s no longer a business of finding the need and filling it. It’s not sell, it’s listen.

Segal: You’re not closing the deal, you’re opening a relationship?

Hulett: You can go deeper because you know how to ask the right questions, and you know how to listen actively.

Dellarocca: And replay it back. Women are a great example. If you talk to a woman about the ins and outs of a particular investment product or a lot of risks or those kinds of things, you’re going to get the glaze over. You’re not going to get the close that you want.

If you talk to her in terms of the benefits for her family, that she won’t be a burden on her children or [jeopardize] the security that she desires, you’re going to have a much different conversation, a much different relationship—and, by the way, retain those assets that are going away when the male is no longer part of the relationship.

Green: We talked about the veteran advisors. Once upon a time, those advisors were getting sales training when they went to Merrill Lynch and stayed for two years, or they went to the insurance companies or the banks, and now that’s not happening. Do we need to have more sales training programs specifically for those younger advisors who aren’t getting it elsewhere?

Dellarocca: I think that’s what perplexed Kirk, and I agree with him on this definition of sales and marketing. All of us have growth programs. Maybe the essence of growth is finding new clients and developing those relationships. So that’s where I got a little bit concerned too. Also, do advisors really understand the drivers of sales and marketing? A driver of sales and marketing isn’t just chumming for new prospects or getting in front of a new prospect; it’s also what kind of client experience you are creating. Value propositions extend beyond your elevator pitch to, for example, women, who like a lot of eye contact. Does it transcend to that level?

Patchen: I would put these in two categories: lead generation and conversion or acquisition. That’s what sales and marketing means to me. And I would tell you that there are inherent challenges, based on the changes that we’ve seen in the marketplace, around creating leads, generating leads. People are telling me they have less leads today than they have had in the past. Even my top advisors are telling me that when they sit with a prospect, fewer prospects are actually becoming clients.

One of the gaps there is what I’ve come to term, which they appreciate, premature presentations. If you present too early and lay your cards on the table, we know what the response typically is: “I want to think about it.” Your chances of having a successful conversion after you’ve gone that far down the road are obviously much lower. It goes back to what you were talking about, Kim. If we do a good job really collaboratively designing what the client is looking for, there is never a presentation or a close; it’s just an affirmation or confirmation of all that you’ve agreed upon during the discussions.

Jim Komoszewski, Investment Centers of AmericaJim Komoszewski, Investment Centers of America: Practice management has become a buzzword in our industry. It’s become cliché. The terminology that we use has become cliché to the point where we’ve watered and saturated everything down.

But one definition I can come up with is most of us are trying to get everybody to look like one practice. We have to take a step back and look at sales trainings. The question we have to ask ourselves is, “Why did we rifle through thousands of new advisors over the last 15 years to have a 70-some-percent failure rate?” And I think it’s because we’re training them all to look and act and dress and talk like one rep, one advisor.

Now where I’ve taken things completely different is to treat each and every advisor or each and every practice as if though they’re completely unique because they are. So if I take an advisor who’s in Iowa; let’s just say he’s an ex-college athlete, no college degree, a hero in a town of 650. The way he goes through a sales process will clearly be different from the Harvard MBA who moves to Manhattan and opens up a practice. Therefore the process, the sales process, should be completely different. Those two individuals should have a process that plays to their communication style, to their level of expertise.

Where we failed as an industry is training, because we have a huge issue right now of bringing younger advisors on. We have aging advisors and that’s just the way it is. I know it takes more work, and I know it takes more effort, and it takes more resources and dedication; but my experience has been that when we meet them at an individual level, if I don’t lead with solutions and instead I say, “You know what, Jamie? Let’s thoroughly assess your personality, your experience, your passions, your demographics, and let’s build the sales process that will be most beneficial to you and your clients.” That’s the process that I’ve seen work over the last four or five years in the world of practice management.

Step one has to start with an accurate, thorough assessment of the practice—of the current state of one’s practice. Can you imagine going to Mayo Clinic Group and a doctor saying, “Mr. Komoszewski, great to see you. You’re about 40 or so, from Minnesota; you should probably take 10 milligrams of this.” Well, don’t you want to know a little more? Generally speaking in the industry, we are leading with solutions. We have sales training programs for people that we cram through, but we’re not even sure what their problems are. So I think step one is to comprehensively assess the current state of their practice including their sales process.

The second thing I want to know is what their goals are. I want to know exactly from an advisor, do you want to grow your practice? Maybe you don’t. Maybe you want to trim it down and get more assets from what’s already there. I don’t know what the answer is. I believe the answer is going to be different every time.

Step three, a critical part of the process, is to create a customized strategy for that individual and their practice. To bridge the gap between where they are today and where they would like to be in one, three, five or 10 years, or whatever that horizon is. I believe that step three for every practice should be completely different. Last year, of 160 practices that I work with, there weren’t two curriculums that were the same. Not even close. Last year we had an average annual increase at GDC of 40.9%.

But since 2008 the average GDC increase was 29%. And I believe that, at least in part, that was due to the fact that through that assessment, we hit them right where they needed it. If I have a blanket program with blanket solutions, and I lead with those, a lot of that’s just going to filter off. That’s part of the problem.

The last point that I’ll make on that, and then I’ve already made up for my silence earlier, is getting advisors to the sales process. I think you would all agree that is half the battle. Getting them through the process and continuing on with it, having them stick with it, that’s the other part of the problem.

So when it comes to sales and marketing or the sales training process, I think a lot of firms have failed at bringing them through a process and getting them well-lubed-up for the job. We know that we can get them to things. We know we can get them through training. Getting them through the implementation or execution stage, that’s far more difficult; that’s where we come in. We’ve got very highly successful, motivated people.

Stimpfl: What I’ve heard from folks on this panel is that the demographics are changing, the needs are changing, the markets are changing. So when you look at a program like you described, Jim, where it seems to be a lot more in-depth—there’s a lot more assessment, there’s a lot more work done, but obviously at the end of that rainbow is a lot greater success than the 70% failure rate that you cited—what do you find are the costs of doing that, and how do you scale that?

Komoszewski: Well, that’s a good question. Because of the scalability, I can only deal with so many advisors at one time, but the average advisor that I dealt with last year was about $595,000. So you do the math. If I can grow a $600,000 producer by 40%, that’s OK. Here’s the other thing: If I do group programs, they’re far less effective because it’s to the general masses. It’s not specifically to their need.

The most important thing for evaluation or an assessment, in my belief, is not even so I can identify and assess what’s wrong. That’s actually a distant second. The first reason that I created the comprehensive evaluation is so that advisors can see where the shortcomings on their report card are. That will increase awareness to the fact that my overall GPA is 3.8, but I got 4 A’s and I got a D. All of a sudden they are asking me to help them because they have increased awareness.

The last thing that most salespeople, especially successful salespeople, want is somebody like me to come in the door and say, “Listen, I’m going to look at your program. We’re going to find some things—and I’m going to use a really technical word here—that ‘suck’ and I’m going to try to fix it for you.” It just will not go over well. But when they go online and answer these questions, and then the information gets kicked back to me, I send them the report and just say, “Call me if you’d like to talk.” Nobody is judging them, and it puts them in a different ballpark. I believe that’s actually the main reason why we do evaluations.

The second thing, is once we identify those, it doesn’t matter how important we think they are if they’re not willing to allow us to address them. And that’s really, really critical. I just moved over to Investment Centers of America, so I got re-assigned across boundaries for the third time here from Jackson. It will be different for me at ICA, but since I’ve only been here for a week, I’ll tell you my experience at NPC. I had four practice management consultants and that’s all we did. I ran it like an attorney shop, billable hours. Everybody needed to be on the phone, one-on-one consultations five hours a day, four people or so plus myself, so we’re hitting 25 practices a day. Weekly calls, five times a day. We were able to still reach a lot of people and be able to do it that way.

But the bottom line is this: If I have my group program, where let’s say the average GDC increase last year was 15% and my one-on-one was 40%, I’d rather have that 40% of 150 practices at $600,000 than a 10% or 12% increase on 100 reps at $100,000 or $150,000.

The other thing about practice management, from my standpoint, is [that it represents] an opportunity to increase revenue. There are three R’s I’m concerned with on practice management.

One of them is [revenue] growth, organic growth. It’s tough to recruit these days, especially against you guys. I also believe in retention. I believe if I can show an advisor how to grow from $3.8 to $4.5 million [while cutting the work week from] 55 hours a week to 40 hours a week, he’s not going to leave that firm without calling and talking to me first. The third thing is from a recruiting standpoint. If I can offer solutions to that magnitude, and they’re unique, I believe that I can help to recruit advisors.

I had dinner last night with a bunch of advisors and they said, “You know what, Jim? We’ve seen all this practice management stuff. We’ve looked at four or five other firms. It’s all the same.” And I said “Wait a minute. No, it’s not.” That’s our problem as an industry; they all think it’s the same thing, and it’s really not.

I would argue that the four of our programs are probably distinctly different from our other counterparts and it has to be that way. But I think mine is actually distinctly different in that I took the risk of doing that one-on-one; really digging in deep, one practice at a time and getting those results. It’s not as expensive as somebody might think. It’s not as time-consuming as somebody might think. I have the same solutions that we all do in my back pocket. The difference is that I’m just delivering [them] one-on-one, based on the goals that they’ve set or in the assessment that they’ve done.

Visit our Pursuing Practice Excellence home page for additional reporting, data and insights into this study. 

View our additional transcript on AdvisorOne on the industry leaders' roles in advisor sales and marketing. 

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