The Practice Doctor is IN

Al Depman, CLU, ChFC, CMFC, BH

Practice Management Consultant

The Pitfalls of Being a Charismatic Advisor: Independence Versus Interdependence

Are you what I term a “charismatic advisor?” In order to help you answer the question, let me provide a definition.

Charismatic Advisor. A charismatic advisor is someone who:

• has clients that will do whatever he tells them to do, with few questions asked.
• knows a great deal of personal, business, and financial information about top tier clients­­––and keeps it locked up.
• has a great deal of leverage with his broker/dealer, agency, firm, or company.
• is making good money.
• has a support team who will leave when she does.
• can’t seem to find the right successor to take over the business when he decides to slow down (but not necessarily quit).

Have you met this person at a conference? In a study group? In the mirror? There are lots of advisors on charismatic autopilot. Are you one of them?

One of the problems in the financial services industry is that recruiters use this definition when recruiting. Were you promised “an entrepreneurial opportunity” where “you could work as many or as few hours as you want, and determine your own income” for which the “sky was the limit”?  In other words, were you told you could develop into a highly independent businessperson?

The charismatic advisor is the personification of this independent mindset gone wild—shiny on the outside, but lacking substance on the inside.

My practice management work has led me to see that the reality is that an advisor needs to grow through independence and interdependence. Becoming stuck in the seductive charismatic phase of too much independence has a number of pitfalls.

Let’s take a look:

Your clients will do whatever you tell them to do, with few questions asked.

This feeds your ego nicely, of course, and not having to persuade someone to buy is a real time-saver. We know from our research that when a charismatic advisor leaves a practice (whether retiring, selling, becoming disabled, dying, or changing companies), about 60% of that advisor’s top tier clients will eventually move on. Once you are gone, clients are generally not prepared to continue the program of investing or insurance you established for them, primarily because they don’t understand it.  Whether embarrassed or frustrated by this lack of understanding, these clients will seek out another advisor to pick up the pieces. This is a lose/lose/lose scenario—for the client, the financial services organization, and for you.

You know a great deal of personal, business, and financial information about top tier clients––and keep it locked up.

There’s a lot of good will trapped inside the charismatic advisor’s head. If you have not made this good will transferable, you’re doing your clients a huge disservice. That information––relationships, hobbies, health history, favorite sports team, vacation spots––can’t be replicated by anyone else if it’s not recorded somewhere. 

You have a great deal of leverage with your broker/dealer, agency, firm, or company.

Amen! As a charismatic advisor, you’re a rainmaker for your parent organization and as such may be tempted to tiptoe into blackmail territory and extract concessions, higher payouts, and other support in exchange for your sales success. Insisting on ever-increasing payouts, bonuses, and allowances for the continuation of selling your products can strain relationships with the home office, burn important relationship bridges, and taint your reputation with the company’s other producers. Ultimately, for the reasons listed in point one above, that same company will suffer the loss of about 60% of your top tier clients if you leave. The dollars roll over and then out. The result may be a morass of lawsuits around non-complete clauses dragging your clients through some major discomfort. Only the lawyers benefit from these proceedings. The charismatic advisor is highly independent and refuses to grow into interdependence.  From my practice management consultant perspective, that’s a sorry state for a practice to collapse into. 

You’re making good money.

Hallelujah­­––good news at last!  Yes, with all the concessions, payouts, fees, and commissions, this is the benchmark for the charismatic advisor. It’s all about the money.  Hopefully, you’re socking it away for your end-game, be it retirement, “slowing down,” or for your family and heirs to enjoy after you die, become disabled, or simply become frail in old age. Before it’s too late, you better read some of Mitch’s Return on Life material.

Your support team will leave when you do.

The support team you’ve assembled is also highly dependent on you. All of their collective wisdom and experience will vanish when you do. Good help is hard enough to find, let alone train and develop. Did I mention your supporting team has a treasure trove of good will built up over the years? That, too, will be for naught.

You can’t seem to find the right successor advisor to take over the business when you decide to slow down (but not necessarily quit).

“Alright, already!” you’re shouting. “I get it!  Have a succession plan. Point made. But you know there’s just no-one I trust to take over. There’s atrocious turnover within the new ranks, no-one in my family is interested, and my style doesn’t jibe with other advisors who have expressed an interest.”

And so it goes––one excuse after another. There are legitimate concerns here, for sure. It takes a village to address this problem: the company should be a major player in succession planning because it’s their future dollars that will vanish as your top clients go into Diaspora. Your clients should be prompting you to find a successor, someone to carry through on the plan you developed for them, a plan whose machinations may be somewhat mysterious to them. And finally, there’s you––the charismatic advisor who spent years building a practice that has both monetary and emotional value. There’s a duty to pass that value along, much like a corporation that keeps morphing as it finds new board of directors, members, and stockholders.

Have you stumbled into being a charismatic advisor?  It may not be too late.  Seek the path to interdependence––make that first call. We can help!

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