Thousands of financial advisors coached by CEG Worldwide have one thing in common: they want to improve their businesses and be more successful. We know from our research and long experience that this means something other than hit-or-miss attempts at improvement, or a haphazard business plan based on trial and error. You can learn from what highly successful advisors are doing, and this column and next month’s can help.
The engine for all our work is the research we do on some of the most successful advisors in the business. From the beginning, we’ve undertaken trend research to identify the best practices that set apart elite advisors. Our most recent study of 2,094 advisors — advisors who’ve been in the business at least five years and have a minimum of $50 million in assets under administration — was the largest study we’ve ever conducted.
Once again, at the leading edge we found a distinct group of elite advisors whose businesses are characterized by higher incomes, fewer clients and markedly different methods of conducting business. As the first chart shows, these advisors (who fall into what we have mapped out as “Quadrant 4″) have an average income 3.3 times greater than Quadrant 1 advisors, and year over year their income grew 2.3 times as much as that of their Quadrant 1 brethren.
This study reinforces our contention that the most successful advisors become that way not because of good fortune or time spent in the business, but because they employ a particular set of optimal business practices in five areas: growing the business, specialization, running the practice as a business, client service and business systems.
Growing the Business
Elite advisors understand that without regular growth, their businesses will not — and cannot — prosper. They therefore focus on and dedicate themselves to achieving such regular growth, beginning with business plans that spell out diversified yet specific growth strategies and tactics, including: referrals from existing clients; referrals from other professionals; joint ventures and strategic alliances with other professionals
One thing that immediately separates out the most successful advisors is their rigorous use of a formal referral program that focuses on asking existing clients for referrals on a regular, routine and real-time basis. The most important thing to understand about implementing a client referral program is that your entire organization needs to be involved. Advisors who individually take on full responsibility for implementing such programs usually fail because they are busy and get caught up in too many other things.
Instead, make sure that your entire organization understands the importance of the referral program, and that there is someone in your organization whose job it is to take care of all follow-up, including sending thank you notes and setting up appointments. It’s also this person’s job to remind you — hound you if necessary — to ask each existing client, at the end of each physical meeting, if they have anyone appropriate to refer to you. A key here is to look into your client’s eyes and ask for the referral before the client leaves the meeting. Having a placard in your office or tagline on your business card that “the greatest compliment you can pay us is a referral of a friend or family member” is not enough. Elite advisors who have a formal referral program receive, on average, three times as many qualified referrals from existing clients as do advisors with no formal program.
Interestingly, elite advisors know that such referrals are not enough to grow their businesses and achieve the goal of having fewer but wealthier clients. Our research shows that while 82 percent of less successful advisors name referrals from existing clients as among their top three sources of new clients, for elite advisors this is true only 66.5 percent of the time. Instead, elite advisors have a greater focus both on receiving referrals from other professionals, and on explicit joint ventures and strategic alliances with them.
Compared to less successful advisors, elite advisors are three times more likely, at 53.9 percent of those surveyed, to name referrals from other professionals as one of their top three sources of new clients. Similarly, elite advisors are twice as likely to enter into joint ventures and strategic alliances with other professionals.