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August 07, 2012 at 11:51 PM
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, from the beginning of the roundtable, is on what the panelists believe are the key roles of sales and marketing in driving an advisory firm’s growth, regardless of whether that firm is an RIA or an independent broker-dealer practice.
Jamie Green, Investment Advisor: You’re here today as far as a culmination really of the nearly year-long partnership between ActiFi and the Investment Advisor Group. Our intent was to devise a practice management survey, to field it, to analyze it and report on the study that we’re calling “Pursuing Practice Excellence,” which we humbly believe is a groundbreaking study that goes beyond what many already helpful benchmarking studies provide to the industry.
But we also think practice management is in many ways vaguely understood by all the industry participants. It’s often eschewed in favor of one company or one business model. The ways that you measure practice management success varies from company to company and from business model to business model as well. So part of what we wanted to do was have an objective, comprehensive study that looked at advisors, what they say they need, they want and what they’re doing; but also survey the key partners of advisors to see what you’re working on, what you’re providing and to figure out what the gaps are.
Certainly you could be advocates for your own companies and what you’re doing, but we determined that you also had the big picture for the industry, and that’s part of what we’re trying to do here.
Spencer Segal, ActiFi: This is something that we’ve been thinking about for a couple of years now. We obviously spend all of our time talking about practice management to people, whether they be advisors or institutions, and noticed that there really was no definitive definition of practice management and that this was an area that was moving very quickly. I’ve been at this about eight years now and have seen the level of commitment that firms have [to practice management] evolve dramatically. I was looking for some data myself as to, first of all, is there definitive data on what practice management is? Is there any information as to what people are offering? There’s really nothing.
I still would say we’re maybe in the second inning of a nine-inning game. The practice management needs of a purely independent RIA are very different than the practice management needs of a W-2 employee in a bank branch. We wanted to make the study comprehensive so that we could look at the different advisor types similarly; from a financial institution leader to a pure custodian, all the way over to a firm that only has employee advisors. As we extend this to coaches, consultants, people who are on the front lines delivering practice management, there are a lot of lights where we can take this further.
There will be much evolution and if we don’t take a snapshot and have objective, hard data to benchmark, we can’t measure where it goes. In subsequent studies, we’ll be able to reference this data and actually be able to measure how advisors’ perceptions have changed.
Brian Stimpfl, ActiFi: Everyone talks about practice management, but so many folks are focused on having programs on practice management. Coming from a background where many of you are now and spending so many years in that environment, I can tell you that I focused on how you show the value proposition of what you’re actually spending dollars on and how that translates into success of your clients, of their clients and, of course, success in the enterprise that you’re working for. What are those key metrics, those key questions that we want to ask over and over again? I think we don’t really know what those are yet.
There’s a lot of competition in the industry, but it’s just going to make all of us and all of our advisors better if we can find out how to bring them forward, being better practice managers, better business people.
Green: While advisors believe that, yes, practice management is important to the relationship, the definition is broad. One thing we noticed in particular was that the idea of including sales and marketing in a practice management definition made sense. Advisors want practice management advice that’s tailored to their needs, but they also want somebody to help them, to whom they are responsible for following through [see separate transcript from the roundtable on coaching]. What are their plans for whether to spend their money and time on sales and marketing or client service? Anything here that was surprising to you? Anything that didn’t ring true?
Kirk Hulett, Securities America: If the topic is, “How do you define practice management?” my clarifying question would be, “How do you define sales and marketing?”
When I read that I was of two minds. One, if you define sales and marketing as referral systems, the strategy around marketing for a practice, segmenting clients, branding and what you’re objective is, I’ve always thought that was part of the definition of practice management. {Second] the one area I think that has fallen outside, at least the way we do practice management at our firm, is sales skills. Those skills needed to take on a client, or a prospect I should say, from introduction to close. We don’t support that because in the independent broker-dealer world, we’re sort of assuming those are the table stakes. We’re dealing with veteran advisors, mature practices. We assume they come to the table with those skills. Maybe that’s the wrong assumption. Maybe that is actually an area that we can actually deliver more value. What do you mean by sales and marketing?
Segal: We literally put it out there as and let the advisors define it however they chose.
John Sullivan, Investment Advisor: Have you gotten any request from advisors for that kind of help?
Hulett: Sparingly. But when we go in and do our diagnostics in working with advisors or groups of advisors, we certainly will come across the fact that asking for referrals is a challenge. Being proactive at building a network is a challenge. It isn’t the structure behind it as much as their interpersonal skills or their competence in being able to do it.
Segal: One of the things we consistently see in more experienced advisors is, relative to sales and marketing, the lack of definition of the sales process. If there are multiple advisors in the practice and they want to use sales pipeline management, they don’t have common and clear definitions as to the stages a prospect goes through. There’s not much rigor around that and, as to whether those terms exist, they’re not commonly shared. So that’s a big gap that we tend to see with experienced advisors. It’s just not having a clearly defined sales pipeline.
David Patchen, Raymond James Financial Services: One of the great things about practice management, and I think I can speak for the group here, is some of our top advisors really help us drive content, tools and tactics.
In this specific space, two years ago, Carter Financial, which is a very large independent RIA that still has broker-dealer relationships with RJFS in Dallas, asked if we would put together a sales training program for their younger advisors. My initial response was “No”. I met with David Lee, who really owns our Practice Intelligence [practice management program] website, and then grabbed a couple of my colleagues, my fellow regional director counterparts. The more we brainstormed around the request, the more we realized that we may be onto something.
So we put together a two-day program that covered many of the things you were mentioning, Kirk: referral strategies, much of the typical or traditional tools and tactics around customary practices, but also a very core component on the actual sales training mindset, tactics and tools. What happened was the senior advisors who participated realized that they had what we later termed prospecting atrophy.
If you look back at what happened in our industry for 20 or 30 years, you ask the question, “How do you grow your business? I grow by referrals, and I don’t even ask, because we had a raging bull market that worked.” What’s happened, as we all know, is we’ve had 10, 11 challenging years now and there are two categories: There are people who really never had good selling skills, and there are people who had them, but they’ve atrophied due to lack of practice.
This program eventually morphed into what we call the Zen Advisor Program, and we have done that all over the country. The challenge about sales education is it’s not a one-stop endeavor. You’ve got to have ongoing, continuous, perpetual follow-up in order for it to really have legs.
Kim Dellarocca, Pershing: I would agree with a lot of what you’re saying. I think the point that you hit on, Kirk, is that the mature advisors tend to be the ones you’re working with but the opportunity around the next generation is really important.
The way that business development was done in the past is changing dramatically. It’s much less expensive to develop a training program and to bring advisors through those programs and help them develop those skills than it is to continue to play the recruiting game. So how do you even shift the whole business development process and paradigm? It needs to change as you talk to and relate to a whole new type of investor.
So you’ve got the [Generations] X and Ys, and the demographic changes that are happening and you also have where wealth is shifting to women, to their heirs, to totally new demographics in terms of Indian Americans, Chinese Americans, money that is coming from abroad, moving it here.
The pool you’re selling to is changing, so the process has to change—not just because we have to make sure people follow a process and are systematic in their business development efforts because that’s really good for just doing good business; but also who they’re talking to is changing. The demographics are changing at a pace that’s incredible.
Hulett: Young people don’t like the word “sales.” They don’t want to be salespeople. The Gen Xers, the Millenials or Gen Yers, they don’t want to be salespeople. So that’s why a big part of what we taught was questioning techniques and tactics: teaching people how to ask better questions rather than teaching them to close someone. That’s a concept that young folks just don’t have a lot of interest in. They don’t want to close anyone; they want to commence something. They want to educate, they want to build relationships.
Dellarocca: And that’s in synch with what the investor wants. It’s no longer a business of finding the need and filling it. It’s not sell, it’s listen.
Jim Komoszewski, Investment Centers of America: Practice management has become a buzzword in our industry. It’s become cliché. The terminology that we use has become cliché to the point where we’ve watered and saturated everything down.