Six steps to a big book

– Step 1: deliver differentiated value to a defined audience

If there’s one unassailable truth about highly successful financial advisors of the future, it’s that they will be specialists. Specialists across a variety of professions earn twice as much as generalists due to the specialists’ higher level of expertise, both perceived and real. But specialists excel because of more than expertise; they excel by focusing their efforts on providing clearly superior value.

Michael Porter, professor at Harvard Business School, who is generally acknowledged as today’s leading thinker on strategy, believes that the big trap that most businesses fall into is trying to be better than their competitors rather than focusing on being different.

When I talk to advisors who’ve come into the business in the past 10 or 15 years and are excelling, they almost always focus on being different by concentrating their efforts on a defined niche.

One star advisor who entered the business six years ago markets to affluent women who have become widowed or are getting divorced after long marriages. Another advisor who has seen her business get off to a fast start targets the lesbian and gay communities in her city. Other advisors focus on boomers who are grappling with succession planning and health issues regarding their parents, especially in the context of dementia. A good number of advisors have early success by focusing on entrepreneurs who are either looking to sell their business or to transfer it to family members.

– Step 2: define your business

Once you’ve settled on the group that you want to serve, the next step is to shape the way you work so that it is aligned with your target group’s needs. For many years, Ted Levitt, professor at the Harvard Business School, stood alone when it came to leading-edge thinking on marketing strategy. In an article entitled “Marketing Myopia,” published in the Harvard Business Review in 1960, Levitt identified the key issue for successful marketers: defining the business you’re in.

Historically, most advisors were in the business of providing investment advice and better returns. But in an article in Barron’s magazine, John Thiel, head of U.S. wealth management with Merrill Lynch, made the case that the future of financial advice lies in solutions beyond investment management alone; it lies in incorporating processes regarding cash management, lending and liability management, and wealth structuring and transfer.

– Step 3: become a safe choice for your target audience

Once you have established what you want to deliver and to whom you want to deliver it to, the critical next step is to begin marketing yourself to your target group.

To accomplish this step, you first need to build credibility and position yourself as a specialist within your target group and become a “safe choice.” Advisors who have done this have consistently had spent four to six hours a week (sometimes more) getting involved in their niche’s industry associations, attending meetings of their target group, writing articles, talking to centres of influence, and exploring opportunities to speak at meetings and get quoted in the trade press that serves their niche.

But just building a profile isn’t enough. You have to turn that profile into a pipeline of qualified prospects who give you permission to stay in touch. For every meeting you attend, your goal should be to emerge with at least one new prospect who has agreed to receive information from you.

– Step 4: focus on your pipeline

One of the fundamental changes in the advisory business in the past 20 years is how remarkably long a time it takes to go from the initial conversation with a prospect to that prospect making a decision to move. That is in part because most prospects with whom you’re talking already have an advisor you have to displace.

The result is that converting prospects has gone from being a single event in which the main focus is a meeting to being a process. And at the core of building a pipeline of prospects is sending valuable information on a regular basis – quarterly, at least; sometimes, more often. When I talk to advisors who have won over new clients through this approach, I’m struck by how often clients tell these advisors that one of the reasons the clients moved was that they heard from the advisor who was courting them more often than from their existing advisor.

Finally, the key to turning prospects in your pipeline into clients is followup – without harassment. You can’t wait for prospects to call you; you have to reach out to them.

– Step 5: generate early revenue

So far, I’ve focused on activities that have a mid- and long-term payoff, raising the question of what you, as a rookie advisor, are going to do to pay the bills in the meantime. Even for new advisors who enter the business with a bit of a financial buffer, there’s still the need to start seeing cash flow.

That’s where most new advisors seek to tap into their existing network. Every rookie advisor has compiled a list of contacts, but many struggle with the initial approach, concerned about coming off as a “salesperson.” Historically, many rookie advisors sent low-key letters inviting prospects to get in touch should they have any questions or be interested in a meeting.

Responses to these letters typically are dismal. To get results, you have to be more creative and proactive.

For example, one advisor invited members of his network to a short sandwich luncheon in his firm’s boardroom that featured a well-known economist whom this advisor had studied under at the local university. The presentation was about a historical perspective on economic growth.

Another advisor used the pipeline principle and sent his network the following email: “Given turbulent markets of the past few years, once a quarter I invite clients to a breakfast to discuss recent events. As well, I send clients a monthly email in which I forward one or two articles from my ongoing research. With your permission, I’d like to add you to the distribution list for the articles and the invitation list for the breakfasts. A sample article is attached; please let me know if I can add you to the list of people who receive these.”

– Step 6: get the right raw materials

The final ingredient in building a big practice from scratch is having the right raw ingredients. That starts with health and energy. When I talk to top performers, I’m always surprised by how many start their days with early-morning workouts.

This energy extends to the mindset for investing in your business. Advisors with rapid growth trajectories almost always spend heavily on their businesses, even if their personal lifestyles suffer at first. Instead of asking, “How little can I spend on staff?” or “How little can I get away with spending on marketing?”, successful rookies ask: “How much can I afford to invest?”

To excel, you need to maintain a marketing mindset in which reaching out to prospects is baked into your weekly routine, even as assets grow. Support staff are key in making this happen.

Recently, I moderated a panel with three top advisors. One of the questions from the floor was about the biggest mistakes they had made. All three advisors pointed to mistakes in hiring staff. The first talked about waiting too long to hire staff, doing so only when small things started falling through cracks. The second advisor said he had made mistakes in hiring the wrong people, by not spending enough time in the interview process and checking references. And the third advisor described a situation in which he wasn’t willing to pay an extra $5,000 to hire an outstanding candidate and ended up settling for an “OK” candidate instead.

Finally, there is the discipline needed to be patient. That doesn’t mean you don’t want to see results quickly; but serious prospects make decisions in their time frame, not yours. Patience is the final critical ingredient that helps new advisors with ambitious growth plans turn their dreams into reality.

Dan Richards is CEO of Clientinsights (www.clientinsights.ca) in Toronto. For more of Dan’s columns and videos, visit www.investmentexecutive.com.

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