Nearly a year into the current economic crisis, many in the advisory profession continue to grapple with plunging incomes, unsettled clients and poor credibility.
Worse yet, many advisors, even at the very high end, have forgotten how to develop business in difficult times. For an inside look at what’s working — and what’s not — Research turned to 10 of the industry’s best-known coaches. Who better than they to assess the landscape?
As Matt Oechsli, who heads the Oechsli Institute in Greensboro, N.C., puts it, “The biggest challenge for all of them is they’ve forgotten how to sell themselves because they’ve been leaning on other crutches. If you can’t personally market in the world of the affluent, you’re done. There’s a ton of room for improvement.”
Almost to a person in interviews, the coaches zeroed in on a few common denominators:
o It’s an important time to be disciplined. If you have a business strategy and structure that you really believe in, don’t change it now out of fear. Chasing opportunity while undermining your business model could set your practice back by years.
o Don’t expect same-old same-old to prevail. The advisor-client engagement has changed forever. Bill Bachrach, president of San Diego-based Bachrach & Associates, frames it this way: “Unprecedented crisis creates unprecedented opportunity but not everyone views it that way. The advisor at most risk is the one who says this will pass and things will be just like they were before. This is like the people who lived through World War II. Their point of view of the world was never the same again.”
o In many cases, advisors have behaved like consumers: in over their heads; wrongly using profits to fund overindulgent lifestyles; basing budgets and expenses on 20 percent growth; and relying almost exclusively on client referrals and market growth for new business — only to find that the “business” was only solid in boom times.
Despite the downside, the coaching experts believe that advisors who work at it will emerge from the meltdown with a better business and stronger clients.
“We’re going to come out of this with more weathered advisors — even the younger ones. I have 22-year-old people on my team who are going to say: ‘I remember the fall of 2008.’ Ultimately, it’s going to be good for business, good for advisors and good for clients,” observes Rebecca Pomering, CEO of Seattle-based Moss Adams Wealth Advisors and a longtime industry coach. “No one believes this right now because we’re all going through such pain. But in the end, a correction is good for everybody, even investors. If we think this is an accidental blip, we’re missing the point.”
Here are 10 top insights from 10 coaches to help you put your practice in the win column:
1. Get real about marketing. Advisors have let their marketing skills atrophy at a time when their advice is needed as never before, according to Stephanie Bogan, president of Quantuvis Consulting in Redlands, Calif. “Advisors are consistent in that they know there’s marketing opportunity but have no idea how to capitalize on it,” she says. “Firms that get out there now and position themselves as experts in troubled days are going to recover faster and bigger.”
Even for the most successful rainmakers, marketing should be viewed as a business function and not as a model based on an advisor’s charm or personality. Among Bogan’s top tips: Hold “town hall” meetings and conference calls with your clients. Give market commentary to community leaders, attorneys, alliance partners and corporate human resources executives. Have a couple of lunches a week with your strategic partners.
“Most advisors have already mitigated the damage — cutting income or laying off staff. Whatever they’ve done, they’ve done,” Bogan added. “Now, they must move into action mode and for most of them that means marketing, real marketing.”
2. Farewell, investment advisor. Bachrach could not put it more bluntly: The old investment advisor value proposition is dead. “What essentially has been revealed is this idea that I could ask you a few questions about your goals, build a little rapport, place your money in some kind of asset allocation strategy, and do an annual review — those days are over,” he notes.
What replaces it? True, holistic, full-service financial planning. Saying the typical investment advisor value proposition was never very client-centered anyway, Bachrach thinks forward-thinking advisors will seize the opportunity and do what they should have been doing all along.
The rest? “In technical jargon, in my opinion, they’re screwed. And with my tough-love coaching hat on, they deserve to be,” he says. “This market has exposed this whole belief system for what it is and I think that’s good. It will force advisors to be better advisors.”
3. Manage your business’s financials. Coaches have talked about it for years and now business financial management is emerging as a top concern for advisors as well, according to Pomering. In past years, most advisors have seen profits soar but at the same time they failed to watch their expenses while investing in staffing and other areas. Now, Pomering says, “We have to be so much more deliberate in the pace of investment because we don’t know how long this market will last.
Getting a good handle on your financial expectations and your performance is more important than it’s ever been before.” While she says she can’t think of a better market in which to be actively hiring, marketing and acquiring, Pomering cautions: “You need to be conscientious and conscious about how you invest and you need to understand your expected return on investment. I wouldn’t invest willy nilly.”
4. Personal relationship is everything. To whom do the affluent assign blame for their portfolio woes? New research from Oechsli Institute says 27 percent blame Wall Street; 20 percent, the government; 18 percent, themselves; 13 percent, all of the above; 5 percent, their financial advisor. As Oechsli puts it: “It’s back to basics.
The personal relationship trumps all.” With the affluent giving a thumb down to institutions and government, Oecshli says advisors with true skills and industry knowledge have a huge opportunity to win new business.