Earn them Instead

Virtually every practice growth guru I have ever come across utterly demands that you ask your clients for referrals. They say you should ask, ask often, offer incentives, and throw parties. But, I say you should view asking for referrals like you view marketing: its goal is to eliminate its need. You should only ask for referrals if you are not already getting them. If you are getting them, then better to improve their frequency and quality by earning them instead of asking for them. Not asking for referrals is itself a strategy. Asking for referrals is distasteful for advisor and client alike. Not asking gives you some mystique. Clients will think, “Maybe he already has all the clients he needs? I hope he will accept my referral.”

I am ashamed to say that I have said to clients, “Send me some business.” I have tried the “I get paid in two ways, commissions and referrals.” I have even tried the, “Who do you know that could benefit from my services?” I even know one trainer who claims he tells his clients that he will not work with people who don’t respect him enough to send him referrals. Makes me want to puke. I prefer the high road. Rather than asking for referrals, I want to earn them, and earn them I do. About 50 a year, which is about all my advisors and I can handle. I earn referrals regularly, and I teach my advisors to do the same. Here’s how.

Grow Organically

“Healthy sheep reproduce naturally.” – Chuck Smith. What he meant was that healthy Christians will win new Christians to the faith all on their own. Pastor, evangelist, church planter, and author Chuck Smith was the founder of Calvary Chapel, the newest major evangelical Christian association of churches (domination) in the United States. The Calvary Chapel Movement, as it was once known, was born during the mid 1960s in southern California when Smith began evangelizing the youth of his generation and teaching them the Bible, verse by verse, chapter by chapter, book by book.

He believed that once a person was successfully evangelized (that is, once they had accepted the good news of the Christian faith), the best way to reach others was to a). disciple his new converts in the basic doctrines of the faith by teaching them the Bible; b). love them like his own children by spending lots of time with them; and c). meet their spiritual needs with effective counsel and guidance. Once he began to raise and nurture his sheep, they became a large, healthy flock. And, as he so aptly put it, ” Healthy sheep reproduce naturally.”

Build Your Congregation

Chuck Smith founded what many consider the healthiest and most effective American church growth movement in a century. As financial advisors, we are in a similar dynamic. Our parishioners are our clients. Our pulpits are our seminar lecterns and  conference room dry boards. Our doctrines are the principles of financial planning.  Our ministry is loving and caring for the financial needs of our clients. Our counsel and guidance is the advice we give. In a sense, every investment planning practice is a financial church, so to speak, with a congregation of hundreds of families to watch over and care for. This is the key to earning referrals.

Treat your book of clients like a pastor treats his congregation. He tends his flock with love and care, patience and gentleness, generosity and kindness. He empowers them by stretching them and teaching them the deep doctrines of the faith, so that they can be resourceful and effective decision makers in their own right. He creates a vibrant atmosphere of continual personal growth that compels his members to want to share their experience with those they love and care about. He makes his church a safe haven for the lost and broken who want to come in from the cold.

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…

What is a Statement of Strategy?

The strategy is the bridge between your mission and your vision. It’s how you are going to get there. It takes you from where you are and what you are doing to where you want to go and what you want to become. You know what you ought to be doing (mission). You know what you want to become (vision). Now, write out a brief plan for getting there. Something pithy, that’s easy to remember. It should only be long enough to convey the key thoughts. Think about the how of getting there. My firm’s strategy is:

What is a Vision Statement?

A vision statement is a pithy description of what you want your business, organization, or life to look like, if you actually achieve your goals. It is a snapshot of the future. Many people work at making their businesses successful, but, at best, have only a fuzzy idea about the future. Sure, they want more clients and more income, that’s success, right? But, too many people never really sit down and map it out. As they say, ‘If you don’t know where you’re going, any road will get you there.’ Where are you going? What do you want your business future to look like? It’s time to dream a little. What realistic, satisfying future can you conceive of that will get your juices flowing? That is your vision statement. The vision of my practice is to:

Or, what are you doing, where are you going, and how do you plan to get there?  Many well-intended folks have made the honest errors of forming committees, conducting focus groups, haggling over minutiae, and taking months to write elaborate mission, vision, and strategy statements, only to set them aside as unrealistic, too complicated, or out of touch with the real world.  Conversely, others have written excellent statements and then erred in their implementation by allowing the statements to become trite platitudes with no real force or meaning.  There is a better way!

What is a Mission Statement?

Before you can write one, you must understand exactly what a mission statement is, and what it does.  A mission statement is a pithy summary of what your business ought to be doing.  When a NASA space shuttle blasts into space on a new mission, there are always several mission specialists on board who have lists of objectives they intend to accomplish on their journey.  Their missions are what they are supposed to be doing.  The mission of my practice, Senior Partners, LLC, is to:

Provide the Finest Relationship Experience in Our Market

We know that we are in competition with Merrill Lynch, Fidelity Investments, Edward Jones, and a host of other big name wire houses and investment firms.  They have thousands of employees; I have twelve.  They have research departments; I have a paraplanner.  They have advertising budgets; I rely on word of mouth.  They have fancy downtown offices; I am in the neighborhood. They are household names; I can provide a superior relationship experience.  Neither can Merrill nor Fidelity match the experience I can deliver to their clients, and we win them away, everyday.  We don’t do this by dropping their entire $1 million 401k rollover into a mix of our own proprietary mutual funds or one of our cookie-cutter managed stock portfolios (we have neither). We do this by spending a minimum of an hour and a half in every client meeting to make sure we understand the client’s needs and deliver value to their portfolios.  We do this by serving them freshly ground Starbucks coffee with steaming baked pastries in the morning, and piping hot homemade cookies with herbal tea or an icy cold glass of milk in the afternoons, all delivered on our finest china.  We do this by finding them unique investment alternatives to traditional stocks and bonds so that their portfolios are well diversified.  We do this by sending a car to pick up elderly clients or drive them home when the sun sets before their appointment ends.  And, we do this by taking a slow, step-by-step, rather than a quick, wham-bam-thank-you-ma’am, approach to bringing on new accounts to ensure that both the client and the firm are a good fit for each other. In short, we make our clients feel special (and they love us for it), and we deliver real value to their financial lives (and they thank us for it).

Why a mission statement?

It is a rallying point and a decision screener.  First, a rallying point.  People have trouble getting excited and committed to vague notions of purpose.  They want to know what they are supposed to be doing, so that they can accomplish their tasks, find satisfaction in their work, and enjoy the fruits of their labors.  Without a mission, the people become listless, robotic, time card punchers, longing for quitting time, and daydreaming about the weekend.  Give people a mission they can sink their teeth into, and watch them take pride in their work.  Watch them keep their coworkers on track.  Watch them self-start, continuously improve, and set their own goals.  A mission statement is a framework for self-fulfillment.  Every organization needs one.

Second, a mission statement is a decision screener.  Every decision gets screened by the mission statement.  If it doesn’t serve the mission, we don’t do it.  Everything we do must be consistent with our mission.  As I have coached my team on the mission of our practice, they now bring far fewer decisions to me.  They know we’re in the relationship business.  They can now make many decisions on their own because they have the tool to do so.  It’s the mission statement.  They are empowered.  The practice is empowered.  The client reaps the rewards of an efficient, focused, savvy investment advisor, who knocks the ball out of the park every time he meets with them, because his staff has his back.  If you don’t have a good mission statement, you won’t make the best decisions.

Stay tuned for Vision and Strategy, which will be addressed in subsequent posts.