We love our work. We became financial advisors because we were fascinated and challenged by the work and because we loved the idea of helping others plan their future and manage their finances. Being an independent financial advisor is who we are. But lest we forget, we are also small business owners, and, like our clients, we have our own financial and lifestyle goals that will only be met if our business is a success. In this capacity, the most important decisions we make are about where we will invest our time and money because, like the old adage reminds us, “you reap what you sow”.
With that in mind, by all accounts, advisors are a great success and should be very pleased with their performance. A quick glance at the table below tells us that advisors have chosen to invest 80 – 85% of their time on client retention (30%) and product manufacturing (50%). Accordingly, advisors experience very high client retention rates and are rated highly on client satisfaction. Bravo! They reaped exactly what they sowed! They own a slow growing practice with very happy clients.
Yet our conversations with more than 100 emerging independent advisors around the country suggest otherwise. They expressed frustration that their businesses were not growing and they were not meeting their own financial and lifestyle goals. In a recent survey conducted by one of the largest providers of investment management for this group, growth was cited as the #1 objective.
Well the reason should be no great surprise. You reap what you sow! And according to the table, advisors are only spending 15-20% of their time on business development — an estimate, by the way, that our own experience suggests is high given the reluctance of many advisors to even ask for a referral from their very happy clients.
The firms that grow find a way to investment more time in business development. Some advisors find a partner and divide their labor and others relieve themselves of the product manufacturing role by investing in a staff or outsourcing. At Pinnacle, we invested considerable time and money in building client services teams and a centralized investment management function. That was hard work and requires a continuing effort to train, manage and incent our staff. Over the last five years, more turnkey outsourcing solutions have become available that will prove an equally effective strategy. But the decision remains the same: time and money must be allocated to business development. If you make the investment, you will reap what you sow and you will own a growing firm.
So we must remind ourselves, that we are small business owners and that managing a small business requires that we manufacture and deliver high quality financial planning and investment management services, but that we also sell those services. We are in the business of gathering clients and their assets. And that is the only way we get a raise. That is the only way that we will achieve our own financial and lifestyle goals.
Peter McGratty CFA, VP Business Development, Pinnacle Advisor Solutions