The Practice Doctor is IN

Al Depman, CLU, ChFC, CMFC, BH

Five Practice Pitfalls in the Middle Years

Recently I had the opportunity to address a group of advisors who were graduating from their company’s support program. This would put them roughly in their fourth year, a time where they were officially “survivors” and embarking on a more independent practice model.

One of the advisors popped his hand up and asked, “What are some of the things we ought to be on the lookout for over the next few years that might negatively impact our practices?” Forewarned is forearmed––a thoughtful question.

A few came to mind immediately and after some further consideration, five stood out (in no particular order):

1)  Failure to integrate the referral process into all aspects of your practice.

2)  Developing shortcuts in your Core Four business systems.

3)  Looking for greener grass.

4)  Getting “married” too soon.

5)  Postponing hiring an assistant.

1)  Failure to integrate the referral process into all aspects of your practice.

My practice management consultations almost always include a discussion about referrals. Many advisors have let their referral process atrophy over time and are seeking to reestablish it. The problem with this is that a strong referral process is organic––it needs to permeate all aspects of your client’s experience and requires time and patience.

Just adding a referral track to your meetings could essentially be viewed as a “bait-and-switch” event. You are reviewing your client’s portfolio when suddenly you graft on a “by the way, who do you know…” The effect is stunningly uncomfortable for all involved. 

Referral expectations and language need to be integrated into initial meetings, the fact-finding discovery process, presentations, closes, deliveries, and reviews. Throughout all of these client interactions, you are gauging the potential for name generation and introductions. The reality is 20 percent of your clients will be happy to help, 20 percent will never provide a name, and the other 60 percent can be influenced by you using a thorough referral process.

2)  Developing shortcuts in your Core Four business systems.

As a reminder, the Core Four include Client Acquisition, Client Management, Sales Process, and Case Development business systems. Shortcuts that harm your practice are different than efficiencies. Being more efficient is desirable; shortchanging your client’s experience is not.

Common shortcuts involve:

• Using the yellow pad instead of a fact-finder. Yellow padding will not necessarily prompt you to gather names of people fiscally important to the client or record your client’s feelings. In fact, it could cause you to leave “money on the table.”
• Presentations and closes might become focused on the product sale, to the exclusion of thoroughly selling the purpose and concept behind the product.
• Settling for standard cookie-cutter solutions instead of considering alternatives when preparing the case.
• Doing more talking than listening during initial meetings.

Remember, the reason you have become successful is probably a function of your thoroughness and dedication to your clients’ needs. The further you stray from that strength, the less likely referrals will become. 

3)  Looking for greener grass.

Once you have succeeded and survived in this business, you become fair game for the competition. You will probably be contacted with offers of greater payouts, better working conditions, cooler products, more support, better bonus opportunities, and the like. The caveat here arrests in the cliché, “Is the grass really greener on the other side of the fence?”

Unless you are in a really oppressive environment, the answer is usually “no.” Even the strongest organizations have warts. Prospecting will always be your number one issue. Higher payouts demand a high level of consistent production. 

There is no harm in knowing the competitive landscape. There is always room for negotiating. I’ve always said that changing companies is fine if the situation is not tolerable––the company may be severely dysfunctional. However, serial company-jumping is a dysfunction of the advisor because it’s clients who suffer the most. 

4)  Getting “married” too soon.

Going into a joint venture with another advisor is a risky proposition. In fact, the success rate is roughly the same as marriages: 50 percent fail. Why? Here are a few of the usual reasons:

• No clearly defined roles and responsibilities
• Compensation splits become unfair
• The prospecting suffers­­––“the other person will do it”
• Both advisors are more relational than analytic
• Both advisors are more analytic than relational
• Disagreements about staffing

The solution? A strong prenuptial agreement and defined trial timeline prior to a formal partnership agreement taking effect.

5)  Postponing hiring an assistant.

When you are in over your head, this realization will hit. By then, the clutter has gotten so deep around your desk that you might first need an excavator, then an organizer, and finally an assistant.

Of course, it’s better to be ahead of that curve. Your genius in this business is building and maintaining relationships, inspiring people to take action, and creating the solution to their problems. Everything else should be outsourced to a good assistant. Now that you have survived the initial years, treat yourself like a businessperson and get an administrative assistant. Eventually, your assistant can develop into marketing functions as well. Invest in your business––the sooner the better!

For additional input on any of these practice management topics, feel free to contact me. 

Until next month…

The Practice Doctor is OUT.

Al Depman, CLU, ChFC, CMFC, BH, a.k.a. “The Practice Doctor”, is MitchAnthony.com’s Business Practice Consultant. He is the creator of “The Practice Management Assessment” tool and materials and has authored numerous articles in professional publications on practice management, and author of the book, How to Build Your Financial Advisory Business and Sell It at a Profit, now available from McGraw Hill. Al combined his Liberal Arts studies with 10 years of management experience with McDonald’s Corporation to enter the financial services world 25 years ago. Since then, Al has evolved from an MDRT-level sales rep into a full-time consultant specializing in helping others engineer their business practices to the next level. Contact him at al@mitchanthony.com.

© 2009 Al Depman