Less is more (Part 1 of 2): Making the case for right sizing

(September 2005) There is an old saying that suggests that there is a fine line between being in a groove and being in a rut. Nowhere do I see that to be more evident than among high-level financial advisors. A common concern I hear from many high achieving advisors is that they feel they have hit a plateau and are having difficulties taking their respective businesses to the next level.

For many advisors, the key issue that has caused them to stall is that they still subscribe to the alleged precept that you must continually “Grow or perish.” To me, that is a fallacy. The maxim I suggest you live by is “Profit and progress or perish.” Growth means “bigger”, profit and progress means better. Don’t get me wrong, I want the assets you manage to grow year after year, but that does not mean that the number of relationships you manage must increase too. In fact, when it comes to relationships, the goal is not to see how big you can get but rather how small you can stay.

When you apply a perpetual growth approach, your ability to deploy a service matrix and stay true to it diminishes — short of hiring and managing a large staff. If 20% of your clients generate 80% of your business, do you invest 80% of your time on those 20%? If not, you probably end up getting more referrals from the 80% of your clients who generate just 20% of your revenue. And chances are the types of people they refer are often about the same caliber as themselves.

Shrink your way to success

Many advisors we’ve seen need to take a proverbial step back in order to take a quantum leap forward. For example an advisor was enquiring about our coaching process — within 10 minutes I learned that he had over 900 clients, was making a ton of money and had no life. He was stressed-out, out of shape and was facing a whole host of personal issues. The advisor said, “I’ve heard good things about you. I’m thinking about hiring you to help me grow my business.”

My reply to him was simple. “I think the best thing I can help you do is dismantle this thing.” After some initial resistance, this advisor went from close to 900 clients down to approximately 200. His productivity increased while his stress and overhead went down. Liberation and order were restored to his business and personal life.

Getting started

The first step in right sizing your practice is to create an Ideal Client Profile. We urge advisors to look beyond just assets and take a panoramic view by using our Triple A approach outlined below:

Assets: What asset level and range of needs must clients have to be considered a good fit for your areas of expertise? This is where most advisors stop — but you’re just getting started.

Attitude: This aspect is more important over the lifetime of the relationship. Assets change but attitudes rarely do. Answer the following questions to determine if a potential or existing client’s attitude fits with that of your ideal client:

• What is their attitude towards you?
• Do they focus on what you cost or what you are worth?
• What is their attitude about empowerment?
• Do they treat you like a personal CFO or do they insist on having investments with other advisors?
• Do they have an informed attitude about the way the markets work?
• Do they micromanage you?
• Are they disrespectful to your staff?

Advocacy: The ideal client appreciates the merit of “buying into” a relationship with a professional consultant rather than simply “buying” things from a salesperson. They are extremely loyal and they feel they are doing a likeminded friend a disservice by not introducing them to you.

Evaluating your clients using the Triple A process will reveal there are actually three types of clients: customers, clients and advocates. A customer is someone who has some business with you but they have business placed with another advisor as well. A client is someone who empowers you fully but they never refer you. An advocate is someone who is an absolute joy to work with and will endorse you to anyone who’ll listen.

The value of your business has virtually nothing to do with how many clients you have and everything to do with how many advocates you have. In fact, the ideal financial services practice consists of about 150 advocates, not a collection of 500 customers and clients.

Now that you have evaluated your clients using the Triple A process, the next step is to determine which clients you will keep in your practice — and which ones you need to let go. Look for Part 2 of this article appearing in two weeks which outlines how to do just that.

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Duncan MacPherson is co-founder of Pareto Systems, an industry leading practice management and business development consulting firm. Duncan has played an integral role in the development of the Pareto Platform, a turn-key web-based CRM (Client Relationship Manager) designed to help financial advisors create and stick with a customized professional code-of-conduct. Duncan is also one of the most respected speakers in the financial services industry and over the last 10 years, he has presented keynote addresses to tens of thousands of financial advisors throughout North America. Duncan wrote the best-selling book The Promise of the Future: A Financial Advisor’s Guide to Effective Marketing and he often contributes articles and commentary to industry publications.

(09/01/05)