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Practice Management > Building Your Business

A Fresh Start

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By the turn of the 19th Century, Andrew Carnegie had built the world’s largest steel manufacturing empire. He had a policy of tearing down old steel mills and rebuilding new ones on the same site with the latest technology. When he completed the new, high-tech mills, he never hired back the old workers. It seems that those highly trained workers could not adapt to the new way of doing things. They resisted change rather than embracing it, so Carnegie found it easier and cheaper to hire workers who didn’t know how things were done in the past. He hired new workers right off the boats and trained them from scratch.

Since the meltdown of the stock market in early 2000, investors have undergone a major structural change in their thinking. The question you must ask yourself is: Would the clients who hired you in the late 1990s hire you now? Or would they rather find a new advisor who has new skills based on their current wants, needs, and concerns?

During major structural shifts in any industry, many of the existing workers are left behind: think of the auto industry in the early 1980s. Can you re-engineer and readapt your business, your mental models, and your skills to keep up with the rapidly evolving needs of today’s investors? Investors today want more than ever from their financial advisors. They want collaboration and a partnership with their financial advisor, and they want an advisor who truly understands their deepest aspirations, dreams, and fears. They want to work with a financial advisor who helps them use their money to make a life, rather than helping them use their life to make money.

In this new era, many of the sales skills that you used to convince people to buy investments in a hot market will fall on deaf ears. However, the Baby Boomers who represent the majority of the clients and prospects for financial advisors have greater needs now. The reduction of their retirement portfolios because of the decline of the markets has put them in a situation where they need competent, professional financial advisors more than ever.

Re-Engineer Your Business

There are four key areas that you must rethink and re-engineer to keep up with today’s more savvy and jaded investor.

Number one is marketing. This is the core of any business. You must be able to consistently acquire new clients who are willing to pay for your service. Number two is practice management. There is no sense in acquiring clients if you cannot deliver services that they need. Number three is technology. You are now competing with the Internet where clients can get many products, services, and information for free. This is a critical area that can either empower you or put you out of business. Number four is products. Clients’ perceptions of what they want and need are shifting, and as they age, they also will need new products. You will now need to marry products, service, and advice into a seamless offering for your clients. Let us take a look at each of these areas individually.

Marketing vs. Selling

The DNA of the financial services industry is based on sales. Traditionally, whoever made the most sales was revered as the most successful financial advisor. In the old days, clients were eager to get into the markets to participate in the great bull market. It was easy to attract people, and advisors used sales skills to convince them to sign on the dotted line and to buy loaded products rather than no-load products.

However, today’s consumer has been sold by a product-centered advisor one too many times. The industry created unrealistic expectations and oversold investors with big promises, and investors, having been “once burned,” are now “twice shy.” The challenge is marketing: attracting qualified, motivated prospects who are interested in having a meaningful conversation about how you can help them achieve their life’s goals.

Marketing is more strategic and process-oriented, while sales is more tactical. Salespeople think differently than marketing people. Usually, when I ask financial advisors how they market, they say something like this: “I market through referrals.”

“Great,” I say. “How would you describe your referral process?”

“Well, I don’t really have a process,” they usually respond, “but if one of my clients refers me to a friend and that person calls me, I usually have a very high closing ratio.”

Well, duh! Of course you have a high closing ratio. Those people sought you out. You really would have had to put your foot in your mouth not to have been able to get them to sign on. They were already a 10 on a scale of 1 to 10 in motivation to buy.

Today, however, most people are not eager to get into the market. In fact, they are worried about the risk of the market. In order to thrive in the future, financial advisors will have to develop much more sophisticated marketing processes that proactively explain the benefits of their services and their payoffs to wary prospects. This is a major structural shift from selling a hot product to offering intangible services, and it requires a much higher level of sophistication. I believe that the offer that affluent investors are most likely to respond to has much more to do with financial life planning and using your money to create the life you love, rather than beating the markets. Advice, coaching, problem-solving. and educating clients to make smart decisions about their money will be the dominant skill sets that separate the winners from the losers.

Practice Management

In the old product-centered days, most advisors were lone rangers. When they ran across a prospect, they turned on their sales charm to make a transaction. But today, most clients recognize that investment products are available nearly free over the Web.

Let’s be blunt. All advisors have access to the same information, products, and markets. They are commodities. You cannot differentiate yourself through products very effectively. But you can develop investment management processes and problem-solving processes to help your clients through key life transitions. This will be one of the distinguishing attributes of successful advisors of the future. Do you have organized, documented, systematic processes that help people through major life transitions such as sale of a business, retirement, divorce, death of a spouse?

Practice management today assumes you are managing a team. You cannot provide service and processes on an ongoing basis without a competent and professional support team. Typically in a team, one person is responsible for attracting and converting prospects to clients, and other team members are responsible for ensuring that the clients receive a high level of service.

This is a major challenge because many financial advisors do not have very effective management skills. But chances are that you really can’t wear every hat in your business, so you need to assemble and train a team that is effective at delivering service and making your clients happy while you are running the business and generating new opportunities.


Many advisors in the old days had only one computer. They used their persuasion skills and product brochures to sell. The Internet has changed all that. Today, almost every one of your clients has a computer and access to the Internet. As you build your team, you will find that you need to set up a network with a server or use an online application service provider (ASP) to provide process-oriented, value-added services and advice.

You can actually run a financial planning and investment business with a laptop computer and Internet access. There are many ASPs that provide financial planning software, investment management services, and market information. Using e-mail and Web conferencing services effectively will dramatically enhance your ability to stay in touch with your clients.


In the past, many financial advisors selected products based on their ability to generate revenue for the advisor. But products with the highest commissions or fees are rarely the ones that had the best results for clients. Today, clients are evaluating you more on the results you achieve both in their investments and in their lives.

Since many financial advisors are Baby Boomers themselves and are in the same situation as their clients in terms of needing to retire, a simple rule of thumb is to provide your clients with the same type of products that you would buy for yourself. Exchange-traded funds and other extremely low-cost investment products are likely to be the most efficient products of the future. In the bull market of the 1990s, heavily loaded products could still generate acceptable returns for clients. But almost every expert is predicting a lower equity premium for the coming years, and it will be much more difficult to generate acceptable returns with heavily loaded products.

If you are adaptable and change with the times, you will find that you are well-positioned to attract affluent investors who truly want and need your services. If you continue to do things as you have done them in the past, you will find your business slowly declining and clients leaving you.

Reading magazines like this is one way to help keep up with the evolving market. But it is not enough just to read. You must make real changes in your mental models, in your practice, in your actions, and in your conversations with your clients. If you do, the future looks bright for you, because there are more people than ever before who need your help.