From the May 2014 issue of Investment Advisor • Subscribe!

Letting Go to Get to the Next Level

To grow their firms, advisors need to learn to do things differently

Advisors need to understand that what got them to this level is not going to get them to the next level. (Illustration: Gary Waters/Ikon Images/Corbis) Advisors need to understand that what got them to this level is not going to get them to the next level. (Illustration: Gary Waters/Ikon Images/Corbis)

One of my favorite movies is “The Legend of Bagger Vance,” in which eccentric caddy Vance (played by Will Smith), carries the golf bag of Rannulph Junuh (played by Matt Damon), a formerly good player, who hasn't played since his devastating experiences 10 years prior in World War I, in a match against golf legends Bobby Jones and Walter Hagen. At one point, one of Junuh's supporters asks Bagger Vance why Junuh is playing so poorly. Vance answers: “He still thinks he's Rannulph Junuh.”

“But he is Rannulph Junuh,” cried the fan.

“Well,” replied Bagger Vance, “he is, and he ain't.”

Bagger Vance's challenge was to get Rannulp Junuh to realize he wasn't the player he used to be, so he could play golf in a way that would work for him in the present. Like Bagger, one of the biggest challenges we have as business consultants is to get owner-advisors to let go of their old ways of doing business. Yes, their approach has gotten them to this point—no question about that—but 10 out of 10 times, it's not going to get them to the next level. How can I be so sure? Because if it was working, they wouldn't be talking to me.

Simply put, advisors who want to grow a more successful business and reach their goals cannot rely on their experiences up to this point. What they have to understand is that what got them to this level is not going to get them to the next level. The truth is that when they reach the point when they realize they need to change, they need to change. They need to tell themselves: What I’ve done to get my business to this point is not what I’m going to do going forward.

I have a great owner-advisor client in the Midwest who does almost everything I suggest—the kind of client you dream about. But in our initial meeting, he stated in no uncertain terms that he never wants to have a partner: He had a partner once, it turned out badly and he never wants to repeat that experience. But he did want to grow his firm significantly larger. So we created the foundation for a successful one-owner firm, hired some great employees including two advisors, trained them, supported them and built systems that maximized operational efficiency. For a few years, the firm was running great, growing nicely and making an impressive profit margin. Then it reached capacity, and his firm didn't grow for two years.

About that time, I got a call from my client, who said he wanted to hire another advisor—a CFP who is also a CPA—and merge the smaller accounting firm with his advisory business. This was the business model we had been using—and it wasn't easy finding young advisors who were okay without a partnership track. But I saw a bigger opportunity in this experienced accountant: We could bring the accountant into the advisory firm as a partner, help him sell his accounting firm to the employees, and stipulate that, when appropriate, they refer clients to the advisory firm. Of course, my advisor client didn't want to do it at first, but to his credit, he listened with an open mind and eventually decided to take my suggestion. We closed the deal and doubled the size of his firm in eight months with a new partner.

To help owner-advisors let go of what worked in the past and focus on building a business of the future, we’ve developed the following four-point process:

  1. Face the fact that you’re not that cool. Yes, you’ve built a successful small business, but you’re not Steve Jobs. You can continue to pat yourself on the back and stay where you are, or you can admit that you don't know everything about building an advisory business and learn to do things differently. Of course, consultants don't know everything either, but some of us have seen what worked and what didn't in hundreds of advisory firms over many years, so we have a pretty good idea. The important thing is to allow yourself to try new directions. If they don't work out the way you want, make adjustments or try something else.

  2. Build a foundation for growth. I can't emphasize this step enough: You can't build a cigarette boat out of a canoe. To grow an advisory firm, you need to create an advisory firm that's ready to grow. The first thing we do is put the right people in the right jobs (this is necessary in almost every firm). Often, employees who have been there longest have been promoted far beyond their abilities and expertise, so we need to move some people around and create training programs to make them good at their jobs. Then, we make over client service because firms usually aren't in the same business they started in. We also upgrade technology, take a hard look at which clients to keep and which strategic partners (accountants, technology providers, custodians or BDs, compliance firms, banks, etc.) will help the firm get to the next level. By taking these logical small steps to create an efficient business, we also help firm owners—and employees—accept the fact that we are building a “new” firm by doing things differently. With the firm and its people positioned to do things differently, significant growth becomes possible.

  3. Cocoon your business. When a firm is positioned for growth, it's essential to let it grow organically; that is, like a caterpillar becoming a butterfly. You have to protect what you have from outside influences: no business books, no practice management articles, no conferences, no outside ideas—simply your own innovation. All of that is important to what the business is now and where the owners want it to go.

  4. Stop the clock. Once an owner-advisor has an efficiently running firm, invariably his or her inclination is to put the pedal to the metal and start growing as fast as possible. Ironically, at this stage, it's essential to slow down, to be the tortoise not the hare. This is the critical point in the development of a business. It's ready to grow, but in which direction? The answer will determine the future of the firm, but there's no hurry. On the contrary, you need to resist the urge to put pressure on yourself to make a decision and, instead, listen to the business—and your own heart—and let the answer come to you. Once a business is running efficiently, the direction to grow usually becomes obvious. If you take the time at this point to determine the right direction for your firm, it's going to grow a lot faster later on.

By taking each of these steps, owner-advisors create firms that are ready to grow and take advantage of the right direction—or opportunity—when it appears. In the above example, the addition of a new partner worked for two reasons. First, having seen the original shape of the firm, I knew that the owner's bad experience with a former partner was the result of a firm that wasn't ready for another partner: like many firms, it was structured around supporting one lead advisor and had no capacity for another one. What's more, it had a one-advisor mentality and adding another advisor was just throwing a monkey wrench into its workings.

After repositioning the firm for growth, it was ready to add another partner successfully. The key to that transition was that the owner-advisor was willing to let go of the way he was doing business and take new steps to build a different firm—a new firm. When an opportunity to grow presented itself, not only was his firm ready to take a new direction, he was mentally ready to set his experience aside and do something that he said he would never do again. It was an amazing leap of faith in his new firm, and a great example of what's possible when we let go of what we’ve done before and, like Bagger Vance said, forget the past to do what's needed now to get where we want to go.

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