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Moneyball for Advisors

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How do you, as a financial advisor, compete in an unfair world? How do you become a playoff contender in your city, or even win your own World Series? 

If you haven’t read the book Moneyball, you’ve probably seen the movie. You may have even heard the man the movie and book are about—Billy Beane, general manager of the Oakland A’s—speak at a conference. He’ll tell you: use information to make better decisions, as he did by applying player statistics to building a league-beating baseball team on a low budget. 

Like many people, when I hear a great speech, or read a good business book, i always have one question:  how can I apply its advice to me in my industry? How can I take a good movie and good book and apply it? And certainly, if any title holds out the prospect of success for financial professionals, it’s Moneyball.

Just as a refresher, in Moneyball and in baseball, most people try to find the perfect player. Someone who can hit for power, hit for average, catch, run and throw. But people like Johnny Damon, Jason Giambi and Roberto Clemente are hard to find. And when you do, those people cost a lot. That’s why the subtitle of the book is The Art of Winning an Unfair Game. 

It occurred to me that most advisory firms, especially ensembles, are made up of five-skill players, and they seek to add other five-skill players to grow their lineup, and thus their business. The leaders of most financial firms are five-skill players, often because they had to be. They can:

(1) Market

(2) Sell

(3) Do financial planning

(4) Manage money and

(5) Deliver great customer service. 

Much of the industry spends its time looking for someone with two or three of these skills and, like the Mets scout says in the movie, “develop the rest.”

Consider a typical firm. First, it hires a planner, hoping that he or she can bring in clients and close them. Then the planner becomes that client’s advisor, allocating their investments, answering their calls and helping with financial circumstances as they arise.

One day the planner has “maxed out” the number of hours he or she has in the day to work with their book, and now the firm is back in the free agent market, so to speak, trying to find another Billy Beane, Johnny Damon—take your pick. 

Wash, rinse, repeat. The only problem is, the industry is shrinking and the last thing new planners want to do straight out of school is prospect. And the industry wonders why it’s so hard to attract people to our industry? Well, duh, it doesn’t seem like much fun when you look at it this way. 

How do you compete with your biggest, best-funded competitors, whether banks, wirehouses or mega-RIAS, when you’re an independent advisor? When you look at technology, the 24/7 demands of a complicated marketplace, the giant marketing teams at places like Merrill Lynch, Morgan Stanley, Edward Jones, Charles Schwab, Vanguard and even your local money center bank? How do you win that unfair game? 

Here’s the Simply Money solution: you play a financial advisor’s version of Moneyball.

Building the Team

You have formidable competition. What you have to do is take a look at your business and break it down. You need people to take on five essential activities: marketing (in our case that includes media), sales, financial planning, investment management and client servicing. If you’re a sole proprietor, you’re doing them all, so I hope you’re a Jason Giambi.

When it’s time to grow, though, are you going to be able to replicate yourself? Probably not.

Instead of looking for one person with all those skills, find and develop the four or five people who can give you what you need, à la Billy Beane.  Of course that means the firm has to grow fast enough to support six people (including you) so you can divide the tasks. That means someone who does the marketing, the sales, (those two could combined until you grow), a CFP for planning, an investment manager—ideally, a CFA—and a service specialist. By the way, no planner should touch client service; his or her time is too valuable. Planners, like marketers, should touch people, not paper. 

How does this play out? First, grow the core team, and then start to specialize within the five skill areas. At my firm, Simply Money, the sales staff now has one person who just takes inbound inquiries and makes appointments.  A second staffer only produces financial plans for prospects while a third just follows up with clients to make sure they’re doing their “homework” after an initial interview so we can complete the plan. 

People often talk about investing in their businesses. In this case, that means building your team. Your staff are the people who will build your business and carry it into the future. So help them expand their skills. If you’re not developing these players, and making them expert in specific skill areas, you’re not investing. 

In careers, in corporate life, people take a step back to take two steps forward. Your income may decrease when you first try Moneyball. But you don’t really have a choice. You have to stay relevant and restructure if you want to thrive for the long haul. And I think Moneyball is how you do it. 

With a Moneyball firm, every person is important, and everyone must learn new skills.  A CFP should be able to enter a meeting fully prepared, engage with a client, develop tasks or solutions that need to be accomplished, and then walk out of the meeting, hand off the tasks and recommendation to the support staff—and then move to the next meeting.

Much like a dentist does after following up on the hygienist’s work. CFPs can continue to grow professionally, add to their compensation and their books, mostly through referrals—but not lose stature at the firm because they can’t keep up with the marketers and sales types. Remember, they’re doing what they do best. 

At Simply Money, our chief investment officer is both a CFP and a CFA. Our director of planning is a CFP, of course, and so is everyone who gives personal financial advice.

Our business development guys are not CFPs, but have decades of industry experience. Deanna Purvis, who is head of planning, used to feel bad that she couldn’t bring in new clients at the same pace as the sales guys. But why should she feel bad about something she doesn’t want to do or enjoy? 

Making the Switch

If you make the switch from a traditional firm to a Moneyball firm you may find that you lose some players along the way. That may seem terrifying. During our transition the COO, CCO and head of sales left the firm. We never missed a beat. What we really learned was that we didn’t need executives who managed “from the rear.” We needed field officers who lead from the front. And we needed skill players.

In a Moneyball organization, the first thing you do is flatten the organization. You need players, not a front office. The question we ask every day is—What are you doing to make the growth go faster?—because growth is not optional.

If you think you can grow to a certain point and stay there, you’re still playing baseball in the “dead ball” era. We are in the “live ball” era, and the players are  aiming to hit home runs. You have to continue to grow, and that means being structured for growth. 

As you grow, at some point you will say, “We need to hire somebody!” But the question you should ask then is, “What does that person need to be good at?” It’s hard to keep finding Hall of Famers when all you really need is someone that can DO. 

A League of Your Own 

Winning the World Series, or the final game of the season, is about winning for you and your family. Every town in America has a firm that looks like the  New York Yankees when compared to you. In our league, though, the definition of victory is personal. Judge yourself by your net worth—how is your business working for you? Are the members of your team becoming financially secure? Are your clients benefiting from your services? You got into this business to help people, to help your family, and to make a difference in the lives of all you touch. 

The money business will continue to change, so you have to set yourself up to survive and thrive. If you build a Moneyball practice, you won’t have to move your book every five years for a payday. You’ll have a firm that’s valuable to your clients, yourself, your family and eventually, yes, to a buyer.

When the time comes, you will be able to be replaced, too, because you have your one skill, which is managing a Moneyball team. If you’ve built your business right, you will get a better price for your firm. The reason? Because you’re worth it. 

You will have maximized your effectiveness to your clients and your efficiency as a business. You’ll get the offer like Billy Beane got, and you won’t even have to leave town.


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