From startup to well established

This statement brought to mind a conversation I had with a colleague who runs a tech incubator. He talked about the number of startups that attract an initial client base, but then stall, unable to make the transition to a more substantial enterprise: “What [is needed] to build an initial business, which is driven by the founders’ skills and energy, is very different from what [is needed] to run a bigger business, in which you need to leverage the skills of employees.”

A similar principle applies to financial advisors. There’s no question that building an initial base of clients and AUM is a huge challenge, one that leads many rookies to leave the business in the first few years. But once you have built that initial client base, you face some very different challenges in taking your book to the next level. Recently, I hosted two roundtable lunches with advisors who have AUM of more than $250 million. The focus of those lunches: what is necessary to make the transition from practices primarily driven by the founding advisor’s energy – practices that wouldn’t exist if that advisor was not around – to larger, sustainable businesses that are not solely dependent on an individual advisor’s efforts.

The advisors at those lunches identified several discrete elements to building and running the high-performance teams that are integral to their businesses. While not every advisor initially talked about all seven steps – at first, many talked about only two or three items from this list – once others had raised them, there was broad consensus regarding the others. These steps are: mission and culture; “onboarding”; defining roles; team selection; coaching and development; incentives; and team communication.

Herein, I will discuss the first three.

1. Mission and culture: start with the end in mind

The first essential step to building a high-performance team is being clear about what you want your business to look like – as the late Stephen Covey put it in The Seven Habits of Highly Effective People: start with the end in mind. This exercise starts with the question of what kind of business you want to run. In large measure, the answer will be driven by your own personality, philosophy and mindset.

Here’s how Susan, a roundtable participant, put it: “I’m a big-picture person. I hate minutiae and want to get into only as much detail as I need to. I’m a driver, impatient with people who hem and haw and who are hesitant to make decisions because they only have 99% of the information. I’m a risk-taker, willing to take prudent risks. And while I like dealing with clients, what I really like is the chase for new clients. Nothing gets me more pumped up than landing a big account.”

Susan’s mindset has a big impact on her clients. She’s great with business owners, professionals and senior businesspeople; not so good with seniors. And Susan’s mindset also drives her decisions about the team she’s built. She needs team members who share her sense of urgency and entrepreneurial impulse, while being comfortable with attention to detail to shore up her weakness in that regard.

Contrast Susan’s outlook with that of Michael, who ran a restaurant before becoming a financial advisor. “I’m a people person,” he says. “I love interacting with people and, especially, helping people. Nothing makes me happier than having clients thank me because they can take the trip they’ve been dreaming about or because they’re able to help their granddaughter with her university tuition. The part of the business that I’ve never liked and that I’m not really good at is prospecting. But I offset that by the number of clients who introduce me to their family members and friends – this is despite the fact that I can’t bring myself to ask for referrals. My book might not be as big as it would be if I was more focused on bringing new clients on board, but I’m happier by focusing on existing clients.”

Michael surrounds himself with people who share his client-first mindset. Given the large numbers of seniors that Michael works with, he needs team members who score high on listening skills and, especially, on patience. Michael also talked about having brought an associate on board who had a stronger sales orientation, to offset Michael’s reluctance in this area.

2. Bringing new clients on board

There were different views at the lunches regarding who should be responsible for attracting new clients. Given its importance, some teams require every advisor to focus on client development. In other cases, client development is the principal responsibility of a few advisors, typically those who are the most senior and the best connected.

Mark is a partner on a team whose advisors all have client-development responsibilities. “I’ve seen other teams on which some advisors are comfortable being client minders and get complacent as a result,” he says. “We take the view that if we want to grow, even the most junior advisor has to make a serious commitment to bringing new clients on board.”

Jason’s team has the opposite approach: “While we want everyone to look for chances to attract new clients, the opportunities for junior advisors aren’t in the ballpark with a senior partner who’s been in the business for 20 years. At the beginning of each year, we agree on the weekly hours that every advisor will spend on client development. This year, it varies from three hours at the low end to 20 at the high end. The hours that junior advisors spend with clients free up time for our senior advisors to get out in the community. This strategy ends up being a better use of time for both the junior and senior members of our team. As advisors get more experience, they are expected to spend more time networking and to put more focus on client development.”

3. Assigning clear responsibility

There was universal agreement among roundtable participants regarding the assigning of clear responsibilities for tasks.

“If it’s everyone’s job, it’s no one’s job,” said Patricia. “A few years ago, I had two assistants who shared responsibility for dealing with all of my clients. When something went wrong in getting paperwork out or when a followup call hadn’t been made, there was always a certain amount of finger pointing. That ended when I split my client base in two and gave each assistant primary responsibility for one half of my clients. From the moment I did that, both my assistants began taking much more ownership and I saw a significant improvement in productivity. Not only that, but I began getting more compliments from clients about the assistant they were dealing with for being responsive and how proactive she was.”

Assigning clear responsibility for key tasks is something that resonated with many of the advisors at the lunches. One typical statement came from Brian: “Our goal is to have a kick-ass team that is going to outperform every other team in our market. We make someone responsible for every meaningful task, whether it’s getting our newsletter out, organizing our quarterly outlook lunches or ensuring that we are following up with prospects. If a job is important enough – new-business development, for example – we’ll share responsibility for overall management of it between a couple of people.”

Susan describes how her firm had addressed one problematic issue: “We were having difficulty getting people to enter data on client conversations into our system. We put together a three-person committee – two advisors and one senior admin person. We agreed on several initiatives to address this problem, including giving the admin person responsibility for monitoring the extent to which everyone records client conversations. She sends a report around every month that shows the percentage of conversations recorded for every individual in our firm. Since that reporting began, we have seen a meaningful change in behaviour.”

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

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