Paradigm Shift: the entrepreneurial advisor
The following is based on one of The Covenant Group’s clients. All of the names and telling details have been changed.
Ben Hamlin worked hard at improving his selling skills, but the success he’d always dreamed of continued to elude him. He had no idea that, even if he mastered the art of selling, he’d never reach his goals.
At the time, Ben had been a financial advisor for eight years. He struggled for the first three years but eventually managed to find his way into the middle of the pack in his firm. A couple of years ago, he decided he wanted to be a top producer and make half a million dollars a year. He knew it would take a greater commitment than he’d so far put into his business, but he was determined. He sought out Walter, one of the leading advisors in his firm, to be his mentor. He and Walter would go for lunch on a regular basis and discuss sales strategy and closing techniques for the cases Ben was working on. Ben’s business did improve; his revenue went from 110K the year before to 140K. While he was happy with the results, he felt in his heart that even with Walter’s great insights he’d still never reach Walter’s level. He knew something was missing. When he was introduced to The Covenant Group, we asked him why he felt he couldn’t be a top producer like Walter?
“It’s hard to admit it to myself, but I think Walter’s just got something I don’t have. I’m great with people, but not the way Walter is.”
“So,” we said, “you think that’s what makes Walter the success he is - his relationship skills?”
“I know so,” Ben replied. “The first time we took Walter to lunch, we asked him what made him so successful. He told us he was one of the best closers around. If he got in front of a client, his close ratio was 90%. He can make people fall in love with him. They trust him instantly.”
“Ben,” we said, “after spending the last forty years researching the reasons why top advisors are successful, we’ve discovered that high performers all do the same things. We’ve also discovered that if I ask a top performer why they’re successful, they’ll readily tell you. But whenever we observe their behaviour we discover that the things they attribute their success to aren’t the real reasons or the complete story. So, unfortunately, asking Walter himself why he’s successful isn’t going to help you much. In fact, we knew Walter well. We had worked with him many times over the years, and we can tell you that his closing ability has little to do with the success he enjoys today.”
“Then what is it?” Ben asked.
“The world’s top advisors are not the world’s best salespeople; they are the world’s best entrepreneurs. Over the past thirty years, the financial services industry has witnessed three paradigm shifts. Thirty years ago, our industry was in the sales paradigm. Back then, you could be a high performer by being a great salesperson. But that’s no longer true. Today, you could be the best face-to-face salesperson and be in the bottom third at your firm.
“Walter is a great example of someone who started during the sales paradigm and evolved as the industry evolved. In the ’70s, Walter was a great prospector who excelled at face-to-face selling, but when the paradigm changed in the late ’80s from one of sales to one of marketing, Walter transformed himself into an expert marketer.
“Ben” we said, “you weren’t in the business in the ’80s, but it was a time of great change for financial services organizations. The barriers that separated all the financial services players - the trust companies, banks, securities firms, insurance companies - blurred. The key challenge that advisors faced was no longer “how do I sell?” but “what do I sell and where do I make my next sale?” The focus moved from selling a product to marketing a service, i.e. ‘planning,’ whether that was financial planning, retirement planning, estate planning or investment planning.
“Walter became a leader at his firm because he began developing marketing plans and implementing six to eight robust marketing activities that created separation in the marketplace and established his brand. Even today Walter might still use the language of the sales paradigm because that’s where he started, but his approach in the ’80s proved that he knew the endgame in the marketing paradigm wasn’t a ‘close’, but a long-term relationship. By talking about closing techniques, Walter misled you, Ben. Walter’s closing ratio is so high, not because of some unique persuasive power he has during his appointments, but because the close is the natural result of everything Walter has done up to that point. It’s what Walter does before his appointments that make the difference. All of his marketing activities establish confidence and trust which Walter builds on during his meetings.”
Ben nodded. “You’re right. I don’t do half of what Walter does in terms of marketing.”
“Yes, but remember, we’ve moved from the marketing paradigm into the business paradigm. In the business paradigm, the key challenge isn’t establishing a brand, it’s ‘How do I build a sustainable practice with growing revenues and increasing profitability?’ The focus is on utilizing systems to maximize profit. It’s important to point out that selling and marketing aren’t any less important today; the difference is that the keys to success have changed. You could be an expert marketer and not have a profitable business. Each new paradigm recontextualizes the older paradigm. Marketing changed the sales meeting from one where the advisor focused on selling a product (making a transaction) to one where the advisor focused on establishing a long-term relationship. The business paradigm changed the focus of marketing from establishing a brand in the marketplace to supporting a profitable clientele.
“Walter isn’t just a salesperson, nor a marketer; he’s an entrepreneur. His business is profitable because he runs a well-oiled machine. He has a top- flight admin assistant, a full-time marketing person who implements his six to eight robust promotional strategies. He has a para-planner who prepares all of his casework and financial plans. He runs his practice as a business and measures his success based on the profitability of his practice. He is fully attuned to his balance sheet, his income statement, his proforma analysis. And he’s mastered the five financial levers of his business - average case size; number of cases; product mix; seasonality; and cyclicality. He’s aware of the impact of these levers on profitability and he’s built a business that works with those levers. For example, as you know, one of his primary target markets is seniors; he does a lot of work with them during the spring and summer. But in the fall and winter, while many of them are down south, he focuses on his other major market - ageing boomers, who are receptive to financial advice at this time because it's retirement planning season.”
By now Ben was convinced that Walter’s success was due to much more than his ability to close. Ben spent the next few months focusing on building his business rather than on sales techniques. He developed a marketing plan and began implementing a series of promotional strategies. He redesigned his wholesales and service approach, emphasizing pre- and post- appointment activities to help him build relationships. He no longer thought of himself as a salesperson trying to close a sale on a product or service. He also focused on the financial management of his business, something he never paid much attention to before. The shift in his approach paid off. By the end of the year, his business was up 40%. But more than this, he could now see clearly how to grow his business over the next few years by continuing to build systems and hiring resources to execute those systems.
Lessons Learned
Ben learned four important lessons about success in the financial services industry:
- Getting advice from top performers can be misleading because many of them don’t accurately express the reasons for their success.
- The financial services industry has undergone three paradigm shifts over the past thirty years: from sales to marketing to business.
- Being a great salesperson or a great marketer isn’t enough today. To build a profitable practice you need to master the art of building a business.
- Mastery of business largely depends on your ability to develop plans and implement complex systems for the various aspects of your business - from marketing to sales and service to resource and financial management.
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The Covenant Group is referred to by many as where entrepreneurs go to become Business Builders. They are considered to be thought leaders and authors of the best-selling books, The 8 Best Practices of High-Performing Salespeople, The Entrepreneurial Journey, and The Business Builder.