The Practice Doctor is IN

Al Depman, CLU, ChFC, CMFC, BH

Practice Management Consultant

The 10,000 Hour Rule

In the past few years, my practice management consultations have tended to focus on succession planning. More often than not, the succession is from a parent to a child or an experienced advisor to a less experienced advisor. Naturally, there are many aspects of the transition to consider. When I meet with the succession team (which generally consists of the senior advisor, the junior advisor, and me) the meetings are constructive and practical.

At one point during this process, the senior advisor will pull me aside with a concerned expression on his face. “Al,” he says, “I’m worried whether or not my successor has paid his dues…y’know…gotten beat up…bloodied his nose.”

Ah, yes, the “bloody nose.” To appreciate this critical succession factor, I turn to a recent bestseller, Malcolm Gladwell’s Outliers. He’s written two other excellent books, The Tipping Point and Blink. The Tipping Point is valuable for its insight into what it takes for a concept to take hold in a target market; Blink gives us an examination of first impressions and how they often make or break the sale.

Outliers focuses on what it takes to be truly great in one’s profession. One of the critical elements in the book is the "10,000-Hour Rule", based on a study by Anders Ericsson, psychology professor at Florida State and author of The Road to Excellence: The Acquisition of Expert Performance in the Arts and Sciences, Sports and Game. Gladwell reiterates over and over that greatness requires enormous “dues paying” time, using The Beatles' musical talents and Gates' computer brilliance as examples (among many others).   

The Beatles performed live in Germany over 1,200 times from 1960 to 1964, amassing more than 10,000 hours of playing time, thereby meeting the 10,000-Hour Rule. The time The Beatles spent performing shaped their personas, honed their technical skills and songwriting ability (by necessity in order to create new material to fill all those stage hours), so by the time they returned to England from Hamburg, they sounded like no other contemporary band. That was the unique sound that eventually went global.

Gates met the 10,000-Hour Rule when he gained access to a high school computer in 1968 at the age of 13, and spent 10,000 hours programming on it, continuing through his early college years to find ways to program nearly 24/7 on begged, borrowed, and idled hardware.

After reading Outliers, I went back to my practice management files, research, and copious advisor interviews conducted over the past 20 years. Specifically, I was looking for evidence to build a case that financial services advisors also have a 10,000 Hour Rule. 

And I found it.

The pool I have contains over 1,000 advisors who survived past their fifth year, across multiple platforms including producers whose primary practice focus include:

• Investments
• Financial planning
• Insurance
• Generalist
• Captive
• Independent

In asking questions about time management, I was recording anecdotally “how many hours did you spend early in your career before ‘making it’?” I also asked how many hours they worked in their mature practice years. It broke down as follows:

In years 1-3––the emerging and developing years of establishing a practice–– advisors averaged 63 hour per week for 50 weeks per year. That totals 9,450 hours which, if you include the licensing and recruiting/selection time prior to the official start date, comes close to a financial services 10,000 Hours Rule.

After the third year, the hours worked per week begins a slow decline and levels out at 50 hours in year 10 and varies widely after that.

Our 10,000 Hour Rule for new advisors is when an advisor gets that “bloody nose.” Among the pain, joy, and suffering that is needed to experience viscerally are the following:

• Riding out the emotional rollercoaster
• Approaching and meeting contract validation points
• Being rejected
• Losing a case to a technicality
• Winning a case by sheer persistence
• Being severely underpaid
• Dealing with one’s inexperience
• Learning paperwork and support systems
• The yo-yo of generating new prospects, spending weeks closing the cases, and then finding yourself with no prospects and repeating the cycle

It is for this intense 10,000 Hours we must appreciate the companies who are willing to finance and supervise new advisors. If you are an independent RIA, the job of developing new producers falls on your shoulders. For most of you, this is a daunting task and will stretch your infrastructure, possibly to the breaking point.

One solution to this problem might be to bring on experienced people. Be sure that they have experienced their 10,000 Hours in a related field, be it sales, marketing, or another financial discipline. That will help them adapt to our world more quickly. 

If an experienced advisor would like to join you, be sure you assess their skills before committing. We have this assessment tool available (go to PracticeTools.net for more info).

Are you contemplating a succession arrangement? If so, finding the successor who has battled through the 10,000 Hour Rule for financial services is imperative. Otherwise, be prepared to mentor them through at least three years of “bloody noses!”

The 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.

© 2011 Al Depman