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.