How Advisors Get Left Behind (hint: it’s only by choice)

Target Readers:

  1. Advisors seeking growth and direction.
  2. Advisors struggling to adapt and change as the industry evolves.
  3. Advisors looking to increase profits and/or the value of their practice.

Talking Points:

  1. How has your business changed over the last 10 years?
  2. Do you wish to retire or transition, but your practice valuation is stifled?
  3. Are you continuing to nurture your business successfully?

Here’s the Skinny,

We’ve all heard before the statement, “the only constant is change”…

Take a moment to reflect upon your business 5 years ago, even 10 years ago. Was it exactly as it is today? Or is it dramatically different?

Many in our industry started out as agents in the insurance/annuity business or as registered reps in the securities business. Yet today, a primary focus is more often directed toward assets under management. But even that segment has evolved.

Years ago, many advisors were managing their own portfolios for investors, Rep as PM (portfolio manager) is the common terminology today. Yet, now, the Rep as PM model is dwindling as advisors embrace the scalability of using third-party asset managers and TAMP programs like USA Financial Exchange. Indirectly, this new model has solved two crucial problems for advisors…

  1. Asset gathering (not asset managing) is the revenue lifeblood of a retail practice.  The more time an advisor spends managing money, the less time they spend growing the practice and attracting new assets. Therefore, profits often go up in direct proportion to reduction in directly managing assets.
  2. Rep as PM and/or advisor managed portfolios, stifle the value of an advisor’s practice. They choke out scalability, which can crush the valuation of a practice (no buyer wants to buy “a job,” they want to buy “a business,” and it’s impossible to climb inside the head of the advisor managing the money), but the advisor focused on gathering assets can turnover their systems and processes along with the scalability of third-part asset management. Therefore increasing the valuation of the practice.

The point is, to use another true cliché, “if you aren’t growing you are dying.”

If you do not adapt and remain agile, eventually the marketplace may diminish your worth to the point of disaster. I am not a close follower of Sears, but it did not surprise me to see hundreds of stores closing. (Sears previously announced 166 stores to close this year. Now they’ve added 68 more to the list. There are less than half the Sears stores today as there were just 5 years ago.)

Strictly from my own consumer perspective, they do not appear to have kept pace with digital or online sales, their storefronts have fallen out of favor and seem out of touch with today’s shopper, and the few times I’ve wandered into a Sears store they struck me as being almost vacant on product and in a state of disrepair. At some point simple math will grind such a business to a halt.

Similarly, in our industry, think of the advisors who have not evolved. Conducting their business as if it’s from the 1980’s or 1990’s. Trying to live on commissionable products alone. It’s an uphill battle and we’ve all seen their decline. Business models need to adapt and evolve as the business changes… Or you end up feeling like Sears in an Amazon world.

So how do you stay ahead? Keeping your business on the cutting edge?

  1. You continually enhance your offerings and services, making yourself indispensable to the investor/client.
  2. You continually strengthen the relationship you maintain with the top 50% of your clients, targeting replication of the top 20% (not the bottom 80%).
  3. You automate and utilize technology to reduce the mundane and increase the culture, value, and experience of your staff.
  4. You monitor trends for the future valuation of your practice, which almost always will parallel the future appeal to new investors and clients.
  5. You run an “experience-based” business model that delivers an elite client experience. Not a discounted fee, or diminishing returns model.
  6. You affiliate with institutions that help you accomplish everything listed above.

Things are not the same…  Thank God…  Are you ready?

Everything can (and will) always get better and better with time, as long as you continue to nurture your business as if it is a loved family member. It’s a mindset. And the beautiful option is that you get to choose… Adapt and grow rather than decay and decline.

That’s the Skinny, 

 

 

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