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Practice Management > Compensation and Fees

More Than Words

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Large organizations consist of many layers, from the CEO and the board of directors down to the client-facing advisor. Just like the game of telephone we all played as kids, very often the messages that were crafted at the top are substantially altered by the time they reach the advisors who interact directly with clients. This “disconnect” is extremely commonplace in today’s corporate world and presents a great opportunity for the independent advisor. Let me explain.

A corporation creates its mission statement and this statement becomes its governing document for future decisions. The mission statement is based upon the values of the organization. These values, or deeply held beliefs, are those things which we as individuals hold dear. The mission statement includes language pertaining to clients. Let’s take an example and assume it says something like, “We will always place our client’s interests ahead of our own”. Sounds good, right? After all, if you do what’s right for the client, and you have enough of them, you’ll be successful.

But in many large corporations there’s an additional piece to this peculiar puzzle. They are called shareholders. Shareholders demand performance, plain and simple. Shareholders want a rising stock price. Because of this, there is a significant amount of pressure to produce a profit. Middle management feels this pressure and transfers it to the advisors they manage. Since producing a profit will have a profound impact on everyone’s compensation, the greater the profit, the greater the compensation. Most everyone is on board. From the CEO to the board of directors, from middle management to the client-facing advisor, this list also includes the shareholders. So far, everyone is on the same page, generating revenue. And all is well, right? Well not exactly. I said “most” everyone is on board. There’s a very important person that is not exactly in sync with this mission. This person is actually the most important person in the entire equation. He’s even more important than the CEO. This person is the client. You see, without them, there’d be no corporation. Without them there’d be no shareholders.

The result of this “disconnect” is that the primary focus becomes generating revenue. Now don’t misunderstand. We all want to make a good income and live a nice lifestyle. I’m completely on board with that. But let me propose a different way to look at things.

I believe revenue is a byproduct of customer service. If you do what’s right for the customer, at all times, the revenue will follow. I also believe that large organizations will likely never be able to fully adopt this philosophy because as long as it is making a profit, it is not likely to change its colors. Therefore, the independent advisor will always have an opportunity to thrive.

So make it clear to your clients that you are there to serve them and place their interests ahead of your own. It must be more than mere words. It must be your primary purpose.


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