The Fast Track: Letting Go

Recently, I had my weekly call with my client Bob Reed, of Personal Financial Advisors, LLC in Covington, Louisiana. Like many advisors today, Bob was very concerned about his business in this recession: how the economy will affect his business going forward, how his clients were handling the downturn, and even how well it was going to survive.

I just had to smile. I’d been working with Bob since 2005, helping him create a plan to grow his business based on his personal goals, and then helping him implement that plan. In a nutshell, the goal was to create a firm that he didn’t have to run, so he could concentrate on managing investments and spending time with his family from his new home in Tuscaloosa, Alabama. Our plan was working: revenues, which had nearly doubled over the past 3 1/2 years, remained steady during the past six months, as had his $80 million assets under management, thanks to $12 million in new client money over the past year. What’s more, client portfolios under his management have done far better than most of the other practices I’ve seen. Not only did Bob Reed have nothing to worry about, his firm is still ahead of the goals we set four years ago, and positioned for continuing success, even in this market.

The success of Bob Reed’s firm–and its resilience in the aftermath of the Mortgage Meltdown–is one of three varied examples that I’ll write about in this and the next couple of columns, which illustrate the power of what I call indentifying the “unique ability” of each advisory firm (with a tip of the hat to Dan Sullivan, the Strategic Coach). More often than not, advisors want to be told how to make their firms fit a predetermined business model. But over the years, I’ve found that lasting success comes from helping advisors determine what they and their firms do best, and then custom-building a practice to maximize those skills. This strategy can take a bit longer (up to four or five years to see the results of a new business plan), but as Bob Reed and the others will show, it’s well worth the time and effort.

Bob’s Two Strong Abilities

In the case of Personal Financial Advisors, Bob Reed had two very strong abilities, which provide an invaluable lesson for any advisor who is following the current trend of growing their practice by adding professional employees: He had a very clear vision of what role he wanted to play in his firm–managing client portfolios–and he has the rare ability to get out of the way and let his people do the other jobs that need to be done. He delegates authority, trusts the people he hires, and doesn’t micro-manage.

Back in 2005, Bob’s “firm” (comprising himself and an administrative assistant) was generating about $400,000 in annual revenues. At the time, he knew he wanted to grow his practice, and he knew he needed help to do that. But unlike many advisors, he wasn’t looking for a consultant to come in and solve his business problems; just someone to help him create a plan that he could implement. He also wasn’t driven to make a lot of money right away, which enabled him to set very realistic goals: $1 million in revenues within seven years (by 2012).

Yet even with all this going for him, it took Bob about 1 1/2 years to get comfortable with the plan that we created together, before we could implement it. It’s my experience that it’s far easier to devise a business plan that will make an advisory firm successful than it is to implement that plan successfully. That’s because for any plan to succeed, the owner(s)/advisor(s) have to believe in it, and most advisors need time to get comfortable with a plan before they really buy into it.

Bob Reed knew he wanted to focus on investments: portfolio structuring, asset allocation, research, investment selection, etc. So he needed help with the other phases of the financial planning process. His big decision was whether to take the traditional path and hire what I call a client service advisor; an entry-level advisor who would simply take the more mundane tasks off his desk, and over time, gradually assume more complex duties until they became qualified to handle their own clients. His other option would be to make a leap of faith, and hire an experienced CFP who could perform all the other planning and advisory functions from day one, except investment management.

The reason most advisors opt for a client service advisor rather than an experienced lead advisor is not only because their “investment” in this new employee is smaller, should things not work out as planned, but it’s easier to mold an inexperienced advisor into the older advisor’s way of doing things. While less risky, the problem with this solution is that it’s also less effective: it leads to young advisors trying to be clones of their mentors, rather than developing a style based on their own strengths.