Over the past few years, I’ve noticed that many owner advisors (and more than a few business consultants) are adopting a “Field of Dreams” strategy, mistakenly believing that “if you build it, they will come.”
In the independent advisory industry, the “it” in “if you build it” is the firm of your dreams. And the “they” in “they will come” are the clients. The hope is that if you build a great firm, clients will be flocking to your ballpark.
Some of you may recognize the flaws in this “wishful” thinking.
But unless you’re in the 1% or so of owner advisors who went to business school rather than studying financial planning or other subjects, you don’t have a particularly clear idea of what a successful independent advisory firm should look like — let alone how to build one.
I’m not meaning to being critical, just realistic.
The takeaway is that building your firm around your imaginary model isn’t the best recipe for success.
To make matters worse, you have another major problem to cope with: Your business, more likely than not, is based on asset management fees.
Managing client assets can be the goose that lays the golden eggs for independent advisors (despite what the “flat earth,” I mean the “flat-fee,” folks will tell you). Without AUM fees, it’s possible that we’d all be selling variable annuities, like many advisors did back in the 1980s.
The problem with AUM fees isn’t market fluctuations. It’s that, in most firms, they generate such high, steady cash flows that many firm owners stop monitoring their cash flows. In layman’s terms, they waste money — often lots of money.
Put differently, rather than running their businesses like professional businessmen or businesswomen, they tend to run them like trust-fund babies. (My apologies to any inheritors out there). And that approach can be problematic.
Now, on the one hand, firm owners are being told to “go ahead” and start building whatever imaginary vision they have in their heads for their businesses. And other, more likely than not, they are already spending money like the Kardashians.
What could go wrong?
Here’s What to Do
The good news is that these really aren’t hard problems to fix, once you recognize that they are problems.
The first step is to quit spending like a drunken sailor.
I know it looks like you have more than enough money to do what you want. But trust me, you don’t.
It looks this way because, at this point, you don’t know what exactly what you most want or need to run a successful advisory firm.
In business, hiring people or otherwise spending money when you don’t have to is a mistake. (I’d suggest you write that down and place these words somewhere you’re sure to see them on a regular basis.)
Next, forget about what you think you “need” to do in your business. You may think you know what you “need” to do, but 99 owners out of 100 don’t, so I’d recommend that you stop wasting time and resources on those fantasies.
Instead, start thinking about what you “want” to do with your business. (This advice may—ironically—resemble what you’ve probably told your some, if not all, of your clients.)
For advisors and clients alike, once you have a clear vision of what business you want to build, the steps that you’ll “need” to take become a much, much clearer.
Plus, when you have a clear idea of what you want your business to look like, you’ll also have a better idea of the people you’ll need to help you build it. To get there, there’s one more key element: patience.
It’s one thing to know where you want to go, but quite another to get there. And remember, chances are you don’t really know how to get there.
Here’s a secret: No one else does either. Yes, we consultants can tell you what we’ve seen work—and not work—at other firms. But the truth is that no one really knows what will work perfectly for you, your staff and your clients.
Treat your business plan as a learning process. Take what seems to be the best next step and see how it works out.
When you find something that works in moving you and your plan along, stick with it —and then take the next step.
Things won’t work out the way you planned all the time. Sometimes they won’t work at all, of course. However, at other times, they’ll exceed your expectations.
And this is why you simply can’t start building the firm you want.
We discover the business we really want by trying to build the firm we think we want. They are almost never the same business. And ignoring this fact will lead you to waste a lot of time—and money.