This case study is based on the situation of a client of the Covenant Group. Names and details have been changed to preserve privacy.

So, where do we start, Master?” Henry asked with his usual cheekiness.

“At the beginning, of course!” I answered.

I knew Henry was serious and anxious to get to work following our previous conversation. At that time, we had concluded that while Henry had a successful practice from many perspectives, he had reached one of those plateaus that most entrepreneurs experience at least once.

Although everything looked good from the outside, Henry felt something was missing. He knew his practice had more potential and he wanted a new sense of excitement in his work.

He had experienced similar feelings before. About two years into his career, he reacted by hiring his first assistant. That allowed him to take his business to a new level. About three years ago, the sense that he needed to do something different prompted him to move to a fee-based model, which accelerated his business’s growth and rekindled his enthusiasm.

It was time for Henry to reinvent himself again.

“Let’s start with the obvious,” I suggested, a bit more serious now, “and acknowledge that your practice isn’t falling apart or broken. You have reached your current level of success because you do most things right. In fact, many other advisors looking at your business from the outside would be envious of what you have accomplished. However, people define success in their own ways, and what others deem as having ‘made it’ may only be partway for you. So, my first question to you is: ‘What do you want to be when you grow up?’”

“I thought I was grown up,” Henry responded. “What do mean?”

“I am talking about the big picture for your business,” I said. “What do you want it to look like, say, 10 years down the road?

“It is very tempting for both of us to jump right in and try to come up with a new strategy to take your business to the next level,” I continued. “The truth, however, is that any strategy we develop is simply an articulation of what has to be done to realize your long-term vision. Quite frankly, once we know what it is you are trying to accomplish, the rest is relatively straightforward. I am not saying that it will be easy to set out the strategy, design the structure and implement all the systems that are required, but all of those things can be effective only if they are aligned with your vision of what your world should look like at some point in the future.”

“Well, I love my work. So, in 10 years’ time, I still want to be doing what I am doing today,” Henry said, “only, bigger and better.”

“Not good enough, Henry,” I shot back. “You have to be more specific. Are you are familiar with the Google Earth software?”

“Of course,” Henry answered, “my kids and I have had a lot of fun with it — picking out places we know from outer space and then zooming down to street level.”

“Then, imagine for a minute that we have that capability, and a bit more,” I explained. “So, 10 years from now, we are looking down on your business from space. Gradually, we bring our view closer and closer, until, finally, we are able to lift the roof off your office to look right inside your business. Tell me what we are going to see. Who is there? What are they doing? What does it feel like being in your office? What type of clients do you have? How do you interact with them? How do they regard you? What is your value proposition and service promise? How do you deliver on those? These are the types of things you need to capture in your vision.”

“OK,” Henry conceded, “I can see the value in having a mental image of my business in the future. But how do I decide what I want that picture to look like?”

“By answering two important questions,” I replied. “The first is: ‘How big do I want to become?’ And, second: ‘What role do I want to play?’ Those may seem fairly simple questions, yet there will be many implications arising from your answers.

@page_break@“Let’s look at the first question: ‘How big?’ There are several ways to measure the size of a financial advisory practice — assets under management, revenue, insurance in force, number of clients, number of advisors and staff, rank in the company, etc. So, tell me: what measures will be important to you and what you think are the right numbers for you in 10 years?”

Henry thought for a minute, then said, “$100 million in AUM and 200 clients.”

“Great,” I said. “Now let’s look at some of the implications of those numbers. What is your AUM today?”

“Approximately $40 million,” Henry replied.

“So,” I continued, “to get from $40 million to $100 million in 10 years is roughly a compound growth rate of 10% a year. Is that doable for you? Have you been growing at 10% a year over the past few years?”

Henry answered: “I was until last year, when I actually lost some assets due to the markets. In addition, a couple of significant clients died, leaving their portfolios to their children in other parts of the country who had their own advisors.”

“Both of those events are a fact of life in your business,” I said, “and they sometimes work the other way around, in that you can also gain assets due to the markets and inheritances.

“To be safe, however, your plan should probably call for at least a 10% increase in AUM outside of what the markets return and what any windfalls might bring. Can you see that happening? What might have to change in order for you to meet that rate of growth?”

Henry quickly answered, “I’d have to add new clients with fairly substantial portfolios or gain more assets from my existing ones.”

“Or both,” I offered. “This discussion highlights some of the implications of your decision around ‘how big.’ Will your current marketing program attract the right type of people? Is your present discovery process sufficient to uncover additional asset-gathering opportunities among your existing clients? Can you offer the appropriate product mix to meet those additional needs? Do you have the required expertise?

“Furthermore,” I added, “you said you want only 200 clients. With $100 million in AUM, that averages $500,000 per client. How does that fit with your current average account size? Do you need to look for new markets with greater economic potential?”

“I am beginning to see there is a lot more to this than simply setting a target,” Henry admitted.

“It gets even a little more confusing,” I suggested. “Let’s look at the second question: ‘what role do you want to play?’ In a successful practice, there are many hats for the lead advisor to wear. They include CEO, rainmaker, product specialist, planning expert, marketing guru, office manager and a host of others. So, what do you want your job to be?”

“In an ideal world,” Henry said, “I would be the rainmaker. I’d be out and about finding the big prospects and bringing them in. Someone else would then do the planning, research and product recommendations. I would come back in for the presentation and then leave the paperwork to a team member.”

“Excellent, that is a role that is critical to your success,” I commented. “What are the implications of that decision?”

Henry replied quickly: “I’d have to have someone else to do all those other things.”

“If you wanted to be a rainmaker exclusively, that’s correct,” I observed, “which also means building and managing a larger team of people. Is that what you want or would you prefer to keep your operation smaller?

“Again, these are questions to be answered before you commit to a longer-term strategy.”

“I am going to have to give this vision thing a lot more thought,” Henry said. “If it is going to be my guiding light for the next 10 years, I want to make sure it truly describes what I want to be ‘when I grow up,’ as you put it. Can I come back to you once I have settled on this?”

“Of course,” I said. “I can’t think of anything more important for you to do than define your business in the way you want. Everything else will fall into place from there.” IE



NEXT MONTH: HOW TO TRANSLATE VISION INTO STRATEGY



George Hartman is a coach and facilitator with the Covenant Group in Toronto. He can be reached at george@covenantgroup.com.