Creating The Ideal Financial Planning Practice

What is the ideal financial planning practice? To be successful, must you follow the industry maxim, “grow or perish”?

We at Pareto Systems think not. We believe, in fact, that you can be enormously successful with a small number of clients: 100 or less.

And we judge success by other criteria: when you generate a steady flow of referrals from existing clients; when you are no longer necessary to the day-to-day operations of your business; and when your practice becomes an entity of its own, with the right people in the right roles, doing the right jobs.

Unfortunately, too many financial advisors depend on an excessively large number of non-referred clientsoften impersonally termed “files” or “accounts”to sustain their business. And most advisors spend more time working in their business than on it. That is, their lives serve their businesses instead of the other way around.

The Pareto Principle

The Pareto Principle, commonly known as the 80/20 rule, tells us that 80% of our productivity stems from only 20% of our clients. What is more interesting, and usually overlooked, is an extension of the principle that says 80% of our productivity derives from only 20% of our activities.

It always has amazed me that, on any given day, if you are unstructured, you’ll spend 20% of your time doing exactly what you should be doing and 80% of your time completing tasks that are best left to someone else.

Think about it this way: Every task in your office has a $ sign attached to it, from making coffee and handling administrative tasks ($15 per hour) to meeting with top clients and managing their portfolios (potentially thousands of dollars per hour).

Doesn?t it make sense to commit to investing 80% of your time and client budget on your top 20% of clients? That would go a long way toward insulating clients from competitive forces, uncovering hidden assets, triggering referralsand keeping them happy.

Consider: People hire you to manage their financial portfolio. But what do they value most? Contact. What?s the No. 1 reason (year after year when surveyed) that investors give as their main reason for changing advisors? Lack of content. “I didn?t hear from you.”

When we all started in this business, every client was “Super Elite.” Our service and attention to them was fantastic. We fed on a stream of referrals from these clients.

But then we hit critical mass: We get one too many clients and our attention spreads too thin. We no longer consistently deliver the same quality of service that we did when we started.

We got too big for our level of service. We bought into the idea of “grow or perish” instead of what we should have done”profit or perish.” Big isn?t better. Profitable is.

I asked earlier, “What is the ideal financial planning practice?” Here is my answer: managing $500 million for 100 clients; to see each person 3 times each year; to send each client a great newsletter 3 times a year; and, to hold 2 incredible client events per year.

And I like to work the “Ts,”Tuesday till Thursday, 10 till 2. I would work only with top clients. I wouldn?t have an office. And I would delegate all client service duties to a dedicated personremoving me from day-to-day operations.

Permission Marketing

A steady stream of quality referrals (a form of permission marketing) has long been considered the necessary achievement for any sales profession or business. The existing client approaches an acquaintance and “asks permission” to provide you, the advisor, with the acquaintance’s name and phone number.

Yet, less than 10% of advisors say they receive enough referrals to sustain new business. Doesn’t it alarm you that the art of getting quality referrals, arguably the most efficient and easy way to grow one’s practice, has been so neglected and poorly developed?

Typically, I find that advisors take from 3 to 8 years to build the trust required to start eliciting referrals from their existing clients. Wouldn’t it be nice if you could shrink this timeline to 1 year, 6 monthsor even one appointment?

The key, we?ve learned from top advisors over the years, is to practice client-centered marketing. These top advisors have systematized and documented their practices from the ground up to ensure they can maintain a proactive stance.

Implementing a structured plan will generate a flood of quality referrals. Why? Because a methodically laid out practice, with ironclad systems and procedures, creates educated, enthusiastic and dedicated “fans.”

These fans stick with your business because you successfully have satisfied certain basic human criteria for long-term relationships that are built on trust and integrity.

To realize a plan that systematically generates referrals (or, as I like to say, to “turn a book into a business”) requires the critical steps outlined in the chart.

Why These Steps Transform a Business

Clients love to brag about when they are treated well. When you provide successful systems, people can?t help but share their pleasure and relief with others.

If you provide them with appropriate “rules,” they will do as you request. You can determine what you want clients to do and when. You thereby create a totally integrated system of service and management based upon trust.

Once you have optimized every aspect of your financial planning practice, this splendid hybrid of practice management, permission marketing and systemization becomes the lifeblood of your business.

You employ your elite clients as your primary marketing resource. They spread the word about your financial planning practice and, perhaps, book your initial meetings with prospective clients.

Perhaps you are thinking your clients won’t change or don’t want you to change. Existing clients often resist change, but once they see how your new program positively impacts service and performance, they embrace the initiative and become your biggest “fans.”

Your new clients, those whom your existing clients recommended, will expect the high standards you?ve established. They’ll also demand that their referrals follow the same rules they follow.

Result: Your referral timeline shrinks to a few months, perhaps weeks, dayseven hours. The cycle is complete and the process continues.

If any of the above seems unrealistic to you, let us assure you that this kind of financial practice is thriving now. Advisors are adopting and implementing this program as I speak. They may be your competitors!

The Benefits at a Glance

o You gain control of your financial planning practice and recapture your life.

o Productivity escalates.

o Marketing is eliminated. You concentrate exclusively on your core competence consulting with clients and their friends and family.

o Profitability skyrockets. You are flooded with qualified recommendations to prospective clients.

o You turn your book into a business! And you create a business with real value. Your assets triple! Can you think of a better investment?

Dennis Moseley-Williams is a spokesperson for Pareto Systems Inc., Spring Hill, Florida. You can reach him at inquiries@paretosystems.com.


Reproduced from National Underwriter Edition, June 18, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.