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:
(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.