Avoiding the Spiral

Many financial professionals are giving away their time, energy, and expertise for free in the form of unpaid sales presentations and elaborate financial plans with the hope of selling product on the back end. If they do make a sale, it’s barely enough commission to pay their overhead. Add in a few years of performance losses and the result is disillusionment and burnout. I’ve met countless financial professionals caught in this paradigm, many of whom got into this business for entrepreneurial freedom and control over their own time. Now, they’re feeling totally trapped in a vicious downward spiral of more work and less income.

The bad news is that the problems are systemic. The factors that create this downward spiral are part of the air that we breathe in the financial industry. They are the invisible by-products of otherwise acceptable and well-intentioned business practices and the evolution of technology and market-growth. What are the signs that you are caught in the spiral?

Problem 1: Free Consulting, which is sharing your hard-earned wisdom without getting paid, is nothing more than a marketing ploy to sell more products–and easily recognized as such by prospects.

Problem 2: Commission trap is the need to find more clients to whom you can sell more products in order to maintain your past business and lifestyle.

Problem 3: Overhead is the ever-increasing expense necessary to simply stay at the same level of business you’ve been doing. It acts like inflation eating away at your profit margin.

Problem 4: Performance losses happen when your clients lose money in an investment you sold them. The losses may occur as a result of normal market fluctuations, but you are the one who will suffer the consequences.

Problem 5: Commoditization is when your services and knowledge become merely average and available at every firm. With no discernible added benefit, it becomes a competition of price.

Problem 6: Overload occurs when you’re working harder than ever, you’re earning less, and there’s no light at the end of the tunnel.

Almost everyone in the financial services business finds themselves in the grip of these problems, but they are so caught up in the spiral, they can’t extract themselves long enough to even talk about it.

Acknowledging the problems is the first step. Talking about them invites new approaches and even better ways to serve your clients.

Here are three specific tactics to help break the vicious spiral.

Escape Tactic 1: Multiply Your Income

At issue here is how financial professionals have traditionally been paid–by selling products. It follows then, that most believe that in order to make more, they must sell more. The irony is that the way to actually make more is to sell to fewer clients. That is, instead of earning commissions from product sales alone, charge fees. Earning a perpetual and recurring income stream completely free from the need to sell gives you more time to meet with clients and prospects, and helps establish and solidify relationships.

Complete the income multiplier exercise below and discover what charging fees could mean for you. Fill in the numbers based on your top 30 clients.

The first step to multiplying your income is to eliminate as many back-office tasks as possible, such as creating reports, communicating or keeping up with your legal and compliance department, as well as developing marketing materials. All these tasks can be outsourced to a Turnkey Asset Management Program (TAMP).

Escape Tactic 2: Shift Your Role

Financial professionals charging a fee often mistakenly believe their role is managing money. In fact, there are simple systems for tracking money and filling out paperwork–what you really deserve to be paid for is managing your clients’ emotions. The industry tends to assume that what investors want is a way to beat the market and get rich quick. While that might sometimes be true, at the top of investors’ needs is peace of mind about their money– and no product can offer that.

To break the spiral, you must consciously shift your role to becoming a coach who helps clients attain peace of mind about their financial future. Once your clients understand how valuable this role is, they are more than willing to pay you to do it.

There are three traditional roles for the financial professional: