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Financial Planning > Behavioral Finance

The Zen of a Successful Practice

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As you undoubtedly know better than I, there’s a growing army of consultants offering to help advisors with everything from recruiting to branding to client communications. Some of them are very good–I’ve had the privilege of working with a few. Others are not so good. The biggest problem seems to be that some gurus work from one-size-fits-all prepackaged programs that assume a specific goal, rather than asking where advisors want their practices to go, and then helping them get there.

Despite rather wide variances in execution, I’ve noticed that many of the recommendations most consultants offer are strikingly similar: focus on a client niche, discard your least profitable clients, ask for referrals, charge more, write a business plan, leverage yourself with additional staff, yadda yadda yadda. I suspect the sameness of this advice stems from the fact that consultants all read the annual Moss Adams Studies, drawing their conclusions and designing their programs largely from the same data set. Not to say this isn’t good advice; many advisors seem to benefit from it. Yet I can’t help but wonder why advisors need all these consultants to tell them things they’ve already heard–and read–time and again.

When Jennifer Connelly called the other day to tell me why I should talk to one of her clients who is a consultant to advisors, I inwardly groaned. But since Jennifer is one of the best PR people I know–one of the rare few who really understand what her clients do and where they fit into the financial services world–I agreed to talk to Ray Sclafani.

True to form, the founder of ClientWISE in Tarrytown, New York, was indeed excited about what he does for the 300 or so advisors he’s worked with in his first year of operations. He also offered many predictable suggestions for advisors: define their processes, contact clients more often, don’t waste time on work someone else can do, etc. Then he said something that made my ears perk up, something that I hadn’t heard before, except in my own head: “But most advisors have heard these things before, so our focus is to find out why they aren’t already doing them, and help them get past their self-limiting beliefs.”

Self-limiting beliefs? Kind of had a Zen sound to it: the notion that we block ourselves with our own beliefs, and the implied promise that if we create our own problems, we can also create our own solutions.

“Most advisors have the knowledge and experience to solve their own problems,” Sclafani went on. “We just help them unlock the wisdom they already have.” Better and better; he was starting to sound downright enlightened. So I asked him to tell me more about how advisors get in their own way. He listed three underlying beliefs that many advisors hold, which seem to hold them back from being as successful as they want to be:

“They need to do things the way they’ve always done them.” Sclafani typically works with advisors who have been in the business from seven to 10 years. By most standards they’d be considered successful. And therein lies a mental trap: they must not be doing everything right, otherwise why would they engage a consultant? Yet they continue to believe that their current modus operandi has been the reason for their “success,” and are therefore extremely reluctant to change any part of what they do.

The problem, of course, is a failure to distinguish between the things you’ve done which contributed to your current level of success, and those behaviors that limited, or even detracted from, your success. If you want to make your practice better–improve client service, work fewer hours, bring more to the bottom line, grow larger–then you need to figure out what to change, and what to leave alone. It’s safe to say that nobody’s success derived from failing to follow up on referral leads, wasting time and energy on clerical work that could easily be done by someone else, or hiring the wrong people. Combine that with many Baby Boomer clients moving from the accumulation phase to the depletion phase, demanding more services and better communication as they go, and as Sclafani points out, stubbornly refusing to change can greatly hinder the success of your firm, with no one to blame but yourself.

“They are limited by their own capacity.” In retrospect, I have to admit to being guilty of this myself during my own career. When I ran this magazine I firmly believed in hiring the best people I could, hopefully folks who where smarter than I was. Yet I can recall articles I didn’t assign or projects I didn’t launch because I didn’t think anyone could do them as well as I could, and I just didn’t have the time and energy to do them myself. Those issues would have been better–and our readers would have been better served–had I been able to accept the fact that everyone does things differently, and even if they didn’t do as well as I could have, chances are it still would have been much, much better than not doing anything at all.

Perhaps you see a little bit of yourself in my mistakes. Many advisors also believe they have to do it all. Partly that’s because they did have to do it all when they started their firm. Partly it’s because they believe they are the only ones who can do the job right. Is it any wonder that owner burnout is reaching epidemic levels as advisory firms continue to grow? Even if you could keep tap dancing faster and faster until you finally decide to call it quits, consider how this affects the growth of your firm, your quality of life, your income and your staff’s, and most important, your ability to service your clients. As you well know, the solution is to build a team and create an organization, particularly when faced with the needs of today’s demanding clients: “To be a true wealth advisor,” says Sclafani, “you can’t do it alone.” The first step is to admit that to yourself.

“They don’t offer value.” This is the point that really got my attention: the one that separates Ray Sclafani from all the other consultants I’ve heard. He puts it this way: “Most financial advisors are afraid to articulate their value proposition–what they are worth–and to communicate it to their clients. That’s because, deep down, they don’t believe that they offer value to their clients.” It was one of those statements, that as soon as I heard it, I knew it was true. And it made me think how much financial advisors have changed.

In the old days, most independent advisors had started their careers as brokers or agents with no-holds-barred, sales-oriented wirehouses or insurance companies. Their jobs had been to move the product, and no one made any attempt to sugar coat it. These advisors realized their clients needed someone on their side of table who would put their interests first. So they left their usually more lucrative sales jobs to better serve their clients. The first and second generations of financial planners had no confusion about their “value proposition”–they knew that the independent advice they were offering was far better than their clients could get anywhere else.

Sure, it took a while to sort out what objective advice really is, and how it should be paid for. But those debates are largely behind us now. By those standards, today’s advisors offer their clients far greater value than ever before. Yet something’s been lost. The equation changed when we weren’t looking: not because advisors offer less value, they offer more–but because the rest of the financial services industry has changed as well. No-load institutional funds, wrap accounts, fee-based compensation, 12b-1 fees, TAMPs, variable annuities, 401(k)s: those clever folks on Wall Street have created a Chinese menu of products that at least appear to align their brokers’ interests with their clients. After all, not only are today’s financial consumers confused, so are many advisors themselves.

It’s harder today to see the difference between what independent advisors and wirehouse brokers do, so it’s harder for those advisors to articulate just what they are offering their clients. Sclafani’s answer is old school: forget about comparing yourself to what anyone else does, and go back to the early days of financial planning, when advisors first realized that comprehensive advice could have “a profound impact on the lives of their clients.”

That’s the essence of Sclafani’s message. If what you do has a profound impact on the lives of your clients, then you do indeed offer them value–great value. Your job is to create a firm that will enable you to have such an impact: hire the staff, improve operations, change service offerings, target the right clients, improve communications, etc, etc. If you do those things, you’ll know in your heart that you offer your clients profound value, and the roadblocks you put up to stop your own success will just melt away. You’ll find yourself doing all the things you know you should, because, hey, there’s no reason not to.


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