A supernova is an exploding star. As such, it seems like a strange analogy for a book on building your financial advisory business to use. But what makes the analogy more appropriate is comparing your practice to what remains after a stellar explosion.

In a real supernova, the explosion creates shock waves that can trigger the formation of new stars. This also holds true for advisory practices, says Rob Knapp, a former stockbroker and author of The Supernova Advisor. In effect, his message is: if you blow up your business, what will be left is a brighter, hotter and more enduring enterprise.

I can go along with that, because creative destruction is often the best solution for an ailing practice. Where I have some difficulty with this book, however, is in its assertion that such a transformation is akin to an astronomical event such as the supernovae that occur in our Milky Way every 50 years or so. The strategies and processes that Knapp suggests will take your business to the next galaxy are, in fact, right out of Practice Management 101.

Having said that, the five “stars” in Knapp’s supernova system — segmentation, organization, planning, acquisition and leadership — are worthy of review. But before we get to them, we need to accept two underlying assumptions.

The first is the Pareto Principle, or the 80/20 rule, which posits that 80% of your business comes from 20% of your clients. Knapp’s Supernova process calls for most advisors to reduce the size of their books substantially. It is only with the confidence that comes from validating that the 80/20 rule applies in your real-world practice that you will be willing to do so.

Typically, there is also a link between the size of your practice and the level of client service you can provide, which leads to the second foundational concept: disciplined and persistent client contact.

The magic formula for client contact, according to Knapp, is “12/4/2”: 12 scheduled contacts (one a month), with four of the 12 to include quarterly reviews and two of those four being face-to-face meetings around a broad agenda.

With these two assumptions in place, the first building block of Knapp’s Supernova process is segmenting your client base. Knapp suggests having a maximum of 100 clients, based on the assumption that the 12/4/2 contact model probably limits how many people you can serve at a high level. The next step is to decide the criteria by which your clients are segmented.

For example, what characteristics does a client need to be considered an “A” client? Traditionally, advisors have used revenue or assets under management as the determining factor. But in addition to quantitative measures, we now know there should be qualitative ones, such as a belief in your process, a willingness to introduce others and likeability — to name a few.

Moving on to organization, Knapp writes: “If segmentation is Supernova’s Big Bang, then organization is the next moment when the vast material of the universe is released and begins to take shape as galaxies, stars and planets. And if each of those celestial bodies were clients … they’d all be organized into folders … A real physical folder is the central piece of documentation.”

Translation: throw out your electronic client relationship management system and implement paper-based systems for efficiency. Other, similarly earth-shaking suggestions include having your assistant manage your calendar.

Next up on your journey to Supernova heaven is the transition of your practice from a focus on transactions to a focus on planning, wherein you become your client’s “family chief financial officer.” In your new role, you’ll design and monitor comprehensive plans for your clients through your 12/4/2 contact program.

Despite its insistence on limiting your client base to 100, the Supernova strategy does have growth as its foremost objective. This is accomplished by steadily raising your minimum client asset threshold, utilizing such time-honoured strategies as becoming an expert, obtaining client referrals and networking. Strangely, cold-calling is also included.

Overall, if you require the most basic primer on practice development framed around an analogy that is a quick and easy read, The Supernova Advisor might do the trick. It apparently has done so at at least one firm, in which, as Knapp describes it: “It was part church revival and part Woodstock. People were testifying. People were saved. There were tears and bear hugs and smiles so big we could see them through the stage lights.”

@page_break@Let’s hope you have passed through this galaxy long ago. IE