Industry Leaders on Practice Management: Differentiation and Coaching

As part of AdvisorOne-ActiFi’s Pursuing Practice Excellence research on advisor practice management, on June 13 we gathered four industry leaders to explore the findings of the research. The August 2012 Investment Advisor cover story provided highlights of that conversation, and our three-part series of articles addressed the specific findings from 1) a survey of 954 advisors; 2) an online survey and telephone interviews with 52 executives and consultants from across the industry who run practice management programs, and 3) an analysis of the gaps between the advisor portion of the survey and the industry leaders.

To extend that conversation to advisors’ benefit, on AdvisorOne we are providing transcripts of the roundtable, which was moderated by Jamie Green and John Sullivan of Investment Advisor and AdvisorOne, and Spenser Segal and Brian Stimpfl of ActiFi.

The four panelists at the in-person discussion in Chicago were David Patchen of Raymond James, Kim Dellarocca of Pershing, Kirk Hulett of Securities America and Jim Komoszewski of Investment Centers of America.

The focus of this article is on what the panelists believe actually works in practice management programs, specifically on how advisors can differentiate themselves, and the role of coaches in practice management success. 

Jamie Green, Investment Advisor: One of the findings [from the industry leader part of the study] that I think is interesting is that these industry leaders say their firms are actually going to increase their budgets when it comes to practice management. Maybe customization is a better term for how you’re delivering the services. Is it not so much that the solutions aren’t there, but how do you get the advisors to buy into it?

David Patchen, Raymond James Financial Services: I’m surprised that [Jim Komoszewski] would think that people are leading with solutions. That’s foreign to everything we know as salespeople, marketers, promoters. You want to ask and understand; seek first to understand and then be understood. When we started building these things, [we were] corporate guys and gals trying to give solutions to talented advisors. Who was signing up for that? Our top advisors weren’t signing up nine years ago. So step one is you have to do some one-on-one work, which we do extensively similar to what you described, Jim. There are 41 offices that I coach one-on-one right now. It’s been as high as 50.

I really like Jim’s theme about how the corporate higher-ups struggle with coaching. Where we started was smaller advisors who said, “I need help. I don’t want to pay for an outside coach. Would you help me?” And we have, all of us that do one-on-one work, we have a remarkable contingent of advisors [for whom] we’ve changed their lives.

Jamie attended our national conference in Orlando a couple of weeks ago, which is a pretty big production, much like Schwab’s and TD Waterhouse’s. We have top advisor sessions. These folks go into a room and they talk. A young man, John Vance in Valencia, California, is our first real early success story. [He went] from $100,000 to almost $1.2 million now, $10 million in assets to $120 million in assets. He is a machine. The beauty of coaching, where this all comes together, is there’s a culture of sharing. They don’t want the same stuff. The partner firms—we all love them, they’re our partners, they’re helpful—but that stuff is available to everybody. That’s not unique. It doesn’t differentiate your offering from other firms’. What differentiates your offering from other firms’ from a tools and tactics standpoint is what your specific talented top advisors are doing that’s working and that they are willing to share it. That’s where we’ve seen the [Zen Advisor Program] blossom and spread.

Some people want the one-on-one, and some people do want just solutions. I argue with Dave Lee [director of practice management for RJFS] about this all the time: I’m such a believer that absent the one-on-one work, they’re doing malpractice to themselves in some cases. But you know independence means, in some cases, “Leave me the heck alone!” If I can leave that person the heck alone knowing they have access to a repository of great tools, I’d rather give them the access and let them do what they want with it. Do I think it’s less than what they could do in working with you or me? Yes, but nonetheless, I want to give them their freedom to choose.

Kim Dellarocca, Pershing: I wear two hats: the strategic marketing part of our organization and the practice management piece. It goes to the basics of giving people what they want and how they want it. I think the next generation actually are in favor of things like webinars. I hosted one recently on the topic of women in investing and felt for the first time like Oprah. I was taking questions all afternoon and it really rewarding. The point is that the information was spread. I asked every advisor on that call—there were about 300—to do one thing: to go back to their books and take a look and say, “If something happens to him, would she call you?” I guarantee you most of the 300 did that. That is good for their business, and it was an outcome that we achieved.

At Pershing, we shifted the whole organization of the firm to be a leader in practice management so it’s not just the group that I manage that does this. The way we’ve achieved scale is, if the relationship managers at Pershing’s Advisors Solutions do it, we focus their role. Relationship managers, day-in, day-out, are serving advisors in this kind of coaching capacity. Our technology people don’t just deliver technology or mobile [applications] without thinking, “How can I make this actionable? How can I make this useful?” Prospective advisors are really good at sleuthing out when it’s [a practice management program] about the custodian or the clearing firm, when it’s about your wallet or there’s some big check being waved around. The classic “you grow, we grow,” that language makes my stomach curl because I’ve been serving advisors for 15 years and no firm looked the same to me. No broker-dealer looks the same to me, and we take every client seriously.

It alarms me the amount of people who want a seat at the table with the advisor who are all coming forth with the same types of programs. Similar to some of the remarks that David just made, there is no such thing as a commodity business because you always have the chance to differentiate based on the experience that is created and how people feel afterwards and the emotional connection that they have. Where there may be just so many ways of talking about good PR strategies, there are unlimited ways [of talking] about helping an advisor execute that in the fashion that’s appropriate for their demographics, that’s appropriate for their lifestyle, for their practice. We see that it’s really important to have a seat at the table of our clients’ businesses. If not, we’re just one of the trades, and where’s the value in that?

Patchen: Amen to that! This is job security for all of us. There are really two types of practice management people: There are people that are very conceptual and there are people that can sit down and talk some serious shop. Part of the reason I do the group work is the group work is designed to cause discomfort. I always have a smaller faction that is deeper into the material and sharing their successes. Then the newbies to the workshop are saying, “There might be something to this. Maybe I should engage Dave or other members of his team in one-on-one relationships.” You do create the discomfort, create the need and that’s how you continue to build the one-on-one stable moving forward.

Brian Stimpfl, ActiFi: You’re in a unique vantage point in that so many broker-dealer clients will come to you and say “You know, Kim, we really don’t have much in the way of practice management. We want to get something going.” What advice do you give to the broker-dealer that maybe hasn’t developed any sort of significant practice management capabilities as to how to approach it? How do you support them?

Dellarocca: That’s a great question. We’re really proud of the support that we offer our advisors. We deliver it for all of our clients so a large broker-dealer can white-label our offering. They can use it as a great starting point. We’re not trying to be all things to all people, so we’re focused on growth, organic and inorganic sources of growth, operational efficiency, human capital, [being a] great place to work and managing risk. That’s kind of where we hang our hat. Many of our broker-dealers also have advisors who are struggling with those challenges, and they are able to white-label and use our offering. They are able to put their brand on it.

Stimpfl: What’s your advice to them?

Patchen: And if I could layer a question on top of that, from your experience, which of those do you find the most challenging of the areas of expertise that you mentioned? Which are you finding advisors are having the most difficulty executing? There’s one that you said that stands out in my mind as challenging, and I’d love to hear from Jim and Kirk as well.

Dellarocca: So I’m going to say it’s around human capital.

Patchen: Thank you. Exactly.

Dellarocca: It’s really the shift of getting advisors to think of themselves; to rebrand practice management as business management. We at Pershing believe this: We need to help advisors move from being great practitioners. The mentoring aspect isn’t just to help more people in Raymond James or in your organization thrive, it would be to also give these folks some personal legacy. I think that the reason succession planning is still such an issue is that nobody wants to think about these things. Who wants to think about death and dying? We all carry around a certain amount of hubris. What people might want to think about instead is not retiring but rewiring. How can they rewire as a leader, as a mentor, as somebody who just doesn’t close their laptop someday and walk out, or cut the cake and leave their clients and associates and a lot of other people in some pretty vulnerable situations? [How can they rewire] as somebody who can transition themselves to leadership? If when we talk about the future, we saw a [theme] emerge for us, it would be around management and leadership, which is an off-shoot of human capital. Advisors can’t go it alone. They need great teams.

What stands out for me in the [Pursuing Practice Excellence] research is if you look at the gap analysis. What struck me here is that the gap for when the advisors have rated somebody at a higher level of importance than the industry leaders, it’s usually around something that’s a quick fix. It’s something that’s going to drive immediate revenue of the short term. What I think we all have an obligation to do is to help them see the longer term in becoming a good business person. These things aren’t fun to do—client segmentation, efficiency, understanding benchmarks, succession planning—not fun at all and very long-term in nature, but it’s our job as an industry to blow on the nerves of the advisors because these are things that are going to help their team and ultimately going to help the investors. The investor doesn’t need another ding in confidence and in trust; and without advisors having these things baked and focusing on business continuity—not sales planning, not succession planning, but business continuity and growth planning—the investors ultimately are at risk.

The things that the advisors wanted to focus on were very short-term, had a higher revenue appeal, where what we want to do at Pershing is, we want that seat at the table. That seat at the table is our eyes and ears in what brokers-dealers need, what advisors needs and what investors need. We also think it’s our obligation [to do these] kinds of things because we think supporting the industry is really important.

This is an important industry. Investors need help managing their finances. There’s a little bit of a trend toward do-it-yourself [in investing] as you know some people were outdoing advisors in the recent market. But what we want to see is the succession, is the continuity of this profession. How do we attract great people…great young people into it? It’s got to be more appealing than the eye-rolling that goes on around Wall Street and financial services right now. We’ve got to do something about that.

We’re advocates for great business in America and around the globe. We’re doing quite a bit of work globally, but supporting businesses, supporting job creation, it’s all part of this. We try to take out that co-serving element. We don’t wave big checks around; we just try to focus on what’s good for the investor, what’s good for the advisors and what good for our broker-dealers.

Green: Kirk, we have to have you weigh in.

Kirk Hulett, Securities America: There are a lot of threads to pick up on here. One, we do total diagnostics and I believe you have to customize it; you have to do the diagnostic. The reason to throw out the solutions is it’s a hook. It’s a hook to get the advisors interested, to have that conversation that leads to the diagnostic. That has some value [in] building credibility, especially with advisors. Throwing out those solutions builds up credibility, opens up the opportunity for conversation.

We try to get to a little bit of scalability by straddling both the customized and the programmatic. We have a very successful program that gets as good results as our customized one-on-one by saying, “Here’s 30 tactics. Most of them are business management tactics.” And they’re standard business management tactics that a dentist office, a manufacturing plant and an advisor would find beneficial. And then we pair that with one-on-one coaching. So we go through the 30 tactics over a couple of workshops, but every two weeks they’re working with their coach one-on-one. They can decide how to assemble those 30 tactics in cooperation with their coach that best fit the needs of their practice. They don’t have to do every one of them. They don’t have to do them in the order we prescribe because we don’t prescribe an order. They can decide how to assemble those themselves. We found that as a way to scale.

We found that as a way to also get advisors in the room and hearing each other because the best advocates for practice management from the institution are the advisors who participated in the programs. When one advisor hears another advisor talking about it, versus me standing on the stage at our national conference last week talking about it, they’re going to listen to that advisor before they listen to me.

Green: One of the gaps we saw was in how advisors and their partners see particularly the wholesalers. Advisors report that they have a very good and deep relationship with their wholesalers. Some of the rest of you, including third-party coaches, are seen as less valuable. Any thoughts on why this might be?

Jim Komoszewski, Investment Centers of America: I’m going to make a disparaging remark about [this finding]; just know that I was [a wholesaler] for 10 years, so it gives me license. This was disturbing to me, but I think it speaks volumes to my comment about leading with solutions. I don’t think any of us are. I think generally the industry is and we get diluted in that system. When people hear “practice management,” they don’t think of the four of us who are doing things diagnostically, assessment evaluations, etc. They instead think I’m saying, “I’ve got a toolkit. Here’s a link. Good luck.”

Product wholesalers can only go in and say, “I have a 5% guaranteed income stream for life if you pick one of these six models,” so many times before the rep says, “Come back when you have something interesting.”

When it comes to the product wholesaler, I think it comes back to them delivering it because it’s free—because the wholesaler is around consistently and it’s not threatening. The wholesaler is not telling them, “You have to get your sales to this [level].”

Dellarocca: At Pershing, the fund partners are some of our most important clients and partners. [They are] great resources for advisors who are looking to go independent. Those leads, those tips come from those relationships that they have with the wholesaler. We see them as really important, and you saw the partnership that we provide with them at conferences and so on. We wouldn’t be able to do it without them. We’re building relationships with that influencer as another angle in terms of recruiting advisors and helping our broker-dealers do the same.

Patchen: And they are key. When we create our Practice Intelligence workshops, they [partners like wholesalers] are intimately involved in helping us with content, obviously providing talented, capable speakers, so I would agree they’re invaluable in the process.

There are inconsistencies across the stable of wholesalers. There are some people that are really talented and are great at practice management—the people who grow up to be Jims {Komoszewski]. And then there are people who really just want to sell product. That inconsistency is challenging when they visit with us and we love something that they’ve developed; but in one marketplace there’s really great penetration and results, and in the next marketplace they’re not even talking about it.