Past drivers of success are now table stakes

This blog is about understanding the drivers of success for financial advisors.

Drawing on new research, the ideas of thought leaders in the industry and a healthy dose of personal perspective, I’m hoping to get closer to understanding what makes a great advisor great (and what the rest of us can do to achieve our own personal vision for success).

With that as a backdrop, I was mildly amused when I recently stumbled across an article I wrote in 2001, not long after I started Advisor Impact and before I had any right to speak out on the topic. It was rather ambitiously entitled “Future Practice” and I felt the familiar power of déjà vu as I read the following:

Looking into the future, Advisor Impact has identified 10 key themes for financial advisors who are seeking to build a future ready practice.

1. Embrace technology. Accept the inevitable automation of most client activity. Success lies in positioning yourself between the available tools and the ultimate goals of the client.

2. Stake out a position. We cannot be all things to all people, so decide if you are a specialist or a generalist.

3. Do the math. The cost of a client is increasing and average revenue is decreasing. Efficiency is your best protection against declining profit margins.

4. Create a scalable practice. Based on modest predictions, your book will be two to three times the size it is today in five years. Are you prepared to handle the volume?

5. Play nicely with others. Professional networks or teams that include other senior advisors will become increasingly important in order to deliver a comprehensive solution.

6. Know your target. Rising client and practice costs means that you will need to strike a minimum account size. Find your niche within a shrinking pool of prospective clients.

7. Focus on profitable clients. Understand your drivers of profitability and break those down by segment. Focus on servicing profitable clients, growing high potential clients and eliminating unprofitable clients.

8. Run your business like a business. As the complexity of your business grows someone will need to take responsibility for day-to-day management and planning. If that isn’t you, then you’ll need to hire a business manager.

9. Build your team consciously. We cannot continue to build functions around team members. Instead, we will need to consciously identify the gaps and hire based on specific skill sets.

10. Invest in infrastructure. The underlying cost structure of the practice has and will continue to shift to a high fixed, low variable cost environment. Prepare for that shift both in terms of cash flow and expertise.

So are we in the same place as we were 13 years ago? It’s unlikely, although the themes sound eerily similar. I suppose what has changed is that in 2001 we talked about these activities as drivers of a great business and now they’re table stakes.

2 ways to differentiate yourself as an advisor

The battle for greatness, in my mind, is focused on two glaring omissions from my ‘top 10’ list – the extent to which advisors can differentiate themselves through engaged client relationships and the extent to which advisors understand why they are doing all of this in the first place. So while I don’t disagree with ‘2001 Julie’, I would add the following:

  1. Understand, measure and drive client engagement. Acknowledge that ‘mere satisfaction’ is not enough to set you apart from the crowd and get very focused on understanding what is driving your most engaged client relationships (the ones that provide you with all your referrals).
  2. Know your ‘why’. Great advisors know why they are growing great businesses and recognize (consciously or otherwise) that mediocrity feeds off ill-defined personal goals. Understanding the end-game infuses the business with focus and passion.

More to come on both of these topics.

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