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As I click the button to pay my annual dues to the CFA Institute, I wonder if being a CFA ® charterholder has made any difference in my career. I actually think that holding this designation held me back as an advisor because I was pigeonholed as a “mathematics person” who should be managing the money, not as someone who can help clients with all aspects of their financial lives.
Reasons not to outsource – The Half-truth and whole-truth
It’s very common for advisors to put sales and marketing last after all investment and operational aspects of the practice are met. I’m going to suggest something radically shocking.
An advisor is a salesperson.
Now before you all beat me up on APViewpoint, my statement is provably true by the nature of the business. All client relationships will eventually face one of these outcomes:
- The client dies and hands down assets to heir who chooses to stay with you;
- The client dies and hands down assets to heir who chooses to leave you;
- The client leaves you for another advisor or to DIY; or
- The client runs down his or her portfolio in retirement and has no assets left to manage.
The only favorable outcome for your business is #1.
Everyone hates to sell, but without the ability to fill your pipeline your business will always be vulnerable. No matter how big your practice, you are at risk of a financially devastating lawsuit, massive client exodus in a bear market, decline of AUM in a bear market, rogue employee leaving and taking half your clients, etc. The risks are endless.
This is true no matter how big your AUM or AUA. A bigger book of clients means more resources are required. I’ve seen the income statements; the margins don’t get richer the more assets you manage.
The only thing that can allow you to improve the profitability of your business and protect it from risk is your ability to consistently get in front of new affluent prospects.
But here are the things that advisors tell themselves to rationalize staying behind the desk glued to CNBC:
- I’m a “math person”
- I have analytical designations
- I need to justify my fees to my clients
- I need to distinguish my brand
- Outsourcing won’t offer as much customization as I can
- Outsourcing won’t offer as much flexibility as I can offer in terms of product offerings
- A third party won’t be available to my clients like I can be
- Actively calling on people is so desperate
- I’m great once I get in front of the person, I always close the deal. I’m a closer, not a prospector. (which I highly doubt. I’ve never seen an advisor business who closes 100% of prospects. We all have highly selective memories).
There is obviously a grain of truth in these beliefs; they’re what I call “half truths.” Here’s the whole truth: The real reason advisor are saying this is even bigger than any of these.
Ready? This one is also a shocker.
Sales is no fun.
If you do it right, the sales process hurts. This is coming from someone who creates clients out of thin air for a living. The rejection, the pressure, the disrespect, the blown off meetings and phone calls, the waste of time and money you suffer through. At points it’s outright humiliating.
But I’ll tell you what is fun…
Investment management is fun!
It’s way better to sit there in front of a Bloomberg terminal and check CNBC every 20 minutes as you analyze the next stock in your model portfolio. To talk shop at the gym or the golf club or at a cocktail party and to be the most intelligent person in the room brandishing your brilliant economic theory or thesis on the stock you just sold at a 68% gain. It’s a lot safer…it seems.
But what is the risk to your practice?
What lack of sales focus does to your practice
A strain on your financial resources is the best thing for the clients of your firm – true or false?
False.
Being underpaid is the best thing for your staff and hence for the clients they serve – true or false?
False.
Being distracted from money management by create workarounds to reduce cost and compensate for the money you don’t have is the best thing for your clients – true or false?
False.
Failing to attend to the full responsibilities of the notoriously clichéd “comprehensive financial planning” (see my blog on why that is a cliché) because you have stocks to research is the best thing for your clients? True or false?
False.
Being half salesperson and half investment manager amounts to doing neither one to the best possible performance level and is not the best thing for your practice. Now I ask you advisors, aren’t you the ones who say that you always act in the clients’ best interest? Isn’t that plastered to all your websites? “We always do the right thing for the clients” – it’s embedded in the advisor ftp code it’s so common.
How about really doing the right for them and upping the profitability of your firm so you have more resources to offer them?
Focus and commitment
Being a salesperson is a full time job if you do it correctly. The activities that require attention on a daily basis and should be where the advisor’s time is committed are:
- Creating new content either in the form of blog articles, press interviews, social media, podcasts, YouTube videos, and newsletters.
-
Following up with unsold customers. This is the biggest loss of sales. People are astounded when I follow up three times after an initial meeting. That’s because nobody follows up more than once. In reality you should keep following up until they put you on the federal Do Not Call list.
- Calling new prospects. “Oh, that’s below me! What do you think I am, desperate?” Like I said, yes, you are desperate because people in your client base inevitably die. Don’t make the fatal mistake of hubris; humble yourself and get on the phone daily. There’s no machine owned by human beings in higher numbers on planet Earth than the telephone. Use it. Call 10 people a day and try to get them to meet with you or at least follow your blog. If you don’t know how to make a convincing sales pitch then let me know and I can send you something.
- Recording your sales performance. If you talk to three new people a day, a lot can happen and you’ll never be eating Alpo. There’s no magic here, folks, it comes down how hard you can grind. But being human we tend to exaggerate the amount of effort we make. I have a spreadsheet I use and I’ll send it to you if you want to start seeing what your numbers truly look like.
Some advisors are so skeptical that marketing, and especially social media, does little else than waste their money. To them it is an expensive waste of money. Not all the time, though.
Marketing is cheap when it works and expensive when it doesn’t work.
Without full commitment of time and mental energy, your ideas are half thought out and not worth of people’s attention. Shallowness doesn’t appeal to people. To create a truly compelling brand, you have to focus on it. Hit them with something deep and you’ll get the results you want.
Sara’s upshot
The size of your practice will be limited if you try to be responsible for both investment selection and sales and marketing. Find a good external manager, take the cut on fees, and outsource the management of the investments. Then turn around and be obsessively thorough with your marketing efforts. In the long run your practice will be better for it. If you want to hear about how to do this, check out my financial advisor marketing podcast which you can download here.
Sara Grillo, CFA, is a top financial writer with a focus on marketing and branding for investment management, financial planning, and RIA firms. Prior to launching her own firm, she was a financial advisor and worked at Lehman Brothers. Sara graduated from Harvard with a degree in English literature and has an MBA from NYU Stern in Quantitative Finance.
Read more articles by Sara Grillo
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives
