Love the Book

Stopping all forms of active marketing and subdividing my book of clients with other home grown advisors in my practice was the best move I made since starting the firm 10 years ago.  Now that each year every client in our firm is getting 2-3 financial planning meetings and at least an annual review (if not quarterly), 2 risk review visits, 2 tax planning and tax return preparation consultations, and at least 1 conference with our estate attorney, they are feeling the love. They are no longer in the dark and alone. They are reminded of how much they value their relationship with our firm. From their new understanding of the reasonable investment returns they earn on their portfolios, and from the comprehensive, personal, and hands-on guidance they now receive from us, they can’t help sending us new clients. It is important to produce good returns through well diversified portfolios, but if clients don’t see the gains, they won’t be happy. It is important to design a system of regular and meaningful client contact, but if you don’t execute well, they will leave.

Money on the Table

Everyone knows that the number one reason clients change advisors is lack of communication. Don’t fall into the trap of believing that once a client brings their portfolio to you, and you reallocate it, there isn’t any more business to be done with that client. During the period of their neglect, we found that these “ignored” clients had amassed significant new wealth through inheritances, early retirement packages, divorces, life insurance proceeds, accumulated savings, business buyouts, and numerous other sources. Moreover, many of these clients and/or their spouses had retired, opening up their pensions, and their 401k, 403b, and 457 plans, as well as their stock options and stock purchase plans, to rollover and reinvestment. In some cases, other advisors had moved in on us and taken business. We had no one to blame but ourselves.

If you are a low-hanging fruit kind of advisor, shame on you. Stop selling and start loving. Why not take better care of your clients and get their entire portfolios? Or, maybe you think you have all the money already, so you ignore them. But, time and again we are told by industry experts that investors typically use more than one advisor and often withhold their full financial picture from their advisors. Stop ignoring and start loving. The best way to position yourself to manage the client’s complete financial life is to love them with time and energy. Remember those Easter egg hunts each spring when the grown ups would place all those beautifully-colored eggs out in plain view? That’s what new assets look like to an advisor who finally understands how important it is to love the book. Remember how nice it felt on the playground to be introduced to a new friend by an old one, or to be invited into a private group or circle of friends at college by one of the group’s members, or to be recommended for a promotion or a great job? That’s what a new referral looks like to an advisor who remembers how important it is to love the book. Get off the marketing treadmill, bring up a junior advisor, divide your book, and reap the rewards. Love the book because the book produces.

Dividing the Book

Passing two-thirds of my clients over to other advisors in my office was a good thing for everyone involved, but it only partially helped. Dustin and Larry started making more money, but each of them already had their own areas of responsibility in the firm. Dustin ran operations, and Larry ran tax and accounting. Sure, I relieved myself of the guilt of neglecting a significant number of my clients, and certainly they started getting some needed attention. Yes, I was able to lavish a lot more love on the clients I retained. But, Dustin and Larry quickly became overwhelmed. We needed another plan to  ensure we made good on the original promise we made to our clients when they hired us: to guide and manage their financial affairs for the rest of their lives. Dividing the book was only the first step. The next step was to expand our advisory staff. Our clients deserved not only a good advisor-client relationship and experience, they deserved great ones. Without more advisors, our clients were going to languish.

Enter the Paraplanner

I decided that I needed to bring on an advisor trainee who would act as a personal financial planning assistant and gain experience at my right hand. I had been the route of hiring advisors with licenses and experience, but this never seemed to work out. Either they were unsuccessful in their former positions and brought their unsuccess to my practice, or else they left their former positions unwillingly and brought those causes to my firm. In every single case (4 of them in a row), the hired guns ended up as liabilities and were let go. The only ones that have succeeded and remained have been the ones who were home grown. We worked out a process of paying recruits a modest base salary, sponsoring and paying for their licenses, giving them a year to learn the basic ins and outs of the business, and introducing them into our existing client relationships. We called the position Paraplanner.

The paraplanner works as my personal assistant, running research reports for client accounts, keeping prospectuses and sales kits in stock, tracking investment product performance, training clients to use our online account access system, executing securities trades, maintaining blotters, and performing due diligence on new investment offerings.  Once they get their sea legs, they are given clients from my personal book to manage on their own. Eventually, each paraplanner becomes a home grown, full-fledged financial advisor and goes full-time on straight-commission, giving up the salary and responsibilities when they feel they are personally ready. It takes about 18-24 months to complete the training, licensing, and conversion. Each paraplanner hires and trains his or her own replacement before being relieved of the position’s daily duties. None of them have ever looked back. Since I bring on about 40-50 new clients a year through referrals, a new advisor book of business is created within the firm about every two years.  The recruiting, training, and licensing process takes about as long to complete as it does to amass enough new clients to support the new advisor making the transition. It is a very effective system.

Stay tuned for more…

Don’t be a Hoarder

You probably have too many clients. I recently attended an industry conference at the Broadmoor Hotel in Colorado Springs. At dinner one evening, my wife and I sat at a table with a couple of other financial advisors and their wives. After a delightful political discussion (we were all cut from the same conservative cloth), the conversation finally came around to business. One advisor asked me how I marketed my practice. “I don’t,” I said. “Just referrals, that’s it.” Then, I asked him a question, “How many client families do you have?” He said “800.” I asked, “How many advisors help you manage your book?” He said, “None.” I said, “You have too many clients. You can’t possibly love that many families. You are mistreating a lot of people.” He agreed and sighed, “But, I just can’t stop marketing.”

The Mega Church Syndrome

I am always fascinated by, and not a little irritated with, large churches. (Some of this comes from my own injured pride, I’m sure, since I planted and bi-vocationally pastored  for 12 years a very small church, which never grew to more than about 50 families.) Studies indicate that the average full-time pastor can effectively minister to a maximum of about 150 families. If he visits with each family four times a year for just an hour, that works out to 600 hours, not counting any drive times. Add in sermon preparation for 2-3 weekly messages (another 500 hours), 2-3 weekly worship services (another 300 hours), evangelizing new prospects, weddings, funerals, hospital visits, business and committee meetings, speaking engagements, and community events, and the pastor is spent.

With some churches reaching weekly attendance levels of over 25,000, someone is getting lost in the shuffle. No one can pastor 25,000 people. Mega churches argue that they have additional pastoral staff members, deacons, lay church leaders, and volunteer servants who help with the work load. But, I say again, no one can pastor 25,000 people. In churches that large, it’s likely that the pastor isn’t pastoring anyone, or if he is, it is only a small select group of key leaders and perhaps his own family. But, there is little doubt that many, and maybe most, people are getting a superficial experience without any real spiritual growth. Mega churches are known for hemorrhaging church members.  Financial advisors do this all the time in their investment practices. They keep promoting, marketing, running seminars, advertising, and so on, until they burn out, retire, or die. Ultimately, a lot of their clients suffer from little or no contact, a poor advisor relationship, and a neglected investment portfolio. Sure, the money keeps rolling in as new clients are brought on board, but the older clients who are getting neglected eventually look for other homes for their portfolios where they will get the attention and nurture that they need.

Overmarketing

If you have more than 150 client families, you have too many. Get off the marketing treadmill. I didn’t recognize my problem until I was informed by my staff that clients were complaining about waiting weeks to get in to see me. Clients would complain to my face, “You’re a hard man to see.” I was embarrassed and ashamed. It occurred to me that I had overmarketed. In my zeal and determination to build a successful, thriving practice, I overlooked the fact that I had reached my goal two years earlier than I realized. In other words, I had overmarketed by two years. I sat down with the staff and divided my client book up into 3 categories: 1). the ones I would keep; 2). the ones I would pass along, but who needed a high level of sophistication and service; and 3). the ones I would pass along, but who were smaller, low maintenance clients. My right hand man and operations manager, Dustin Martin, got group two, and my tax manager, Larry Metivier, got group three.

Stay Tuned for More…