Putting your own house in order

The following is based on one of The Covenant Group’s clients. All of the names and telling details have been changed.

Peter Devon is a 30-year-old client of ours. In just a few short years he has managed to build a successful practice as a financial advisor by successfully selling to his natural market - people within five years of either side of his age. Although Peter makes over $100,000 a year in commissions, he isn’t satisfied. Since his first day in the business Peter’s vision had been to migrate his business upmarket. He told us that, within five years he wanted to be working with high net worth clients. He dreamed of landing clients who had personal incomes of several million dollars a year and a net worth of at least ten million dollars.

Unfortunately, a few months ago Peter came to us with a real problem. When he walked into our office he looked terrible. He was pale and there were black rings under his eyes. When we asked him what was wrong he told us that he had started trying to migrate his business up-market and he was very frustrated. As he slumped in the chair across from the desk he told us that he had failed to implement the marketing plan we had worked on together.

He explained that he had been approaching his current clients and asking them for introductions to high net worth prospects. Unfortunately, once Peter began to talk to these prospects, things began to fall apart. Peter said, he had tried to book meetings with 20 prospects to discuss their financial situation, but only 5 of them had said yes. Even worse, none of those 5 had taken him up on his offer to provide them with the financial advice it was obvious they needed.

Peter confessed he was beginning to panic. He knew that to increase his income, he needed to close bigger accounts than his natural market provided. But these larger accounts are more complex and take longer to close than the small ones he’d been working on in his first few years. This meant that his cash flow had become more irregular. Even worse, Peter was spending time chasing prospects who were not becoming clients and his income stream was drying up.

Peter sadly admitted that he was worried about falling into dire financial straits. Surprised, we asked him why. He explained he had just bought a new house and was finding the mortgage hard to handle. Because he had less disposable income he found himself using his credit cards more and was now faced with large interest payments. As if that wasn’t enough, the monthly lease payments on the Acura he was driving were killing him. He didn’t think he could afford to continue with this new strategy if it didn’t start working soon. He looked forlorn as he contemplated giving up on his five-year dream of working in the large case market.

Personal financial trouble is a problem we come across a lot amongst our clients - especially those who are financial advisors. For some reason, although they are very good at managing the finances of their clients, they fall down when it comes to managing their own funds. We suspected that this was why Peter was having so much trouble with his new prospects. To confirm our suspicions, we asked Peter to tell us about the last prospect he had met with.

Peter told us that he had been to see Mr. Moto, owner of a household appliance manufacturing company. Peter was excited about his chances because he had been referred to Mr. Moto by one of his current clients. Through his client Peter knew that Mr. Moto needed his services and had a net worth that was well over $50 million.

Unfortunately, the night before his big meeting, Peter hardly got any sleep at all. He was excited about Mr. Moto, but terribly nervous because he thought that the appliance magnate was so much more successful than he was. To make things even worse, right after his meeting with Mr. Moto, Peter was scheduled to meet with his bank manager to try and renegotiate his mortgage payments. He tossed and turned worrying about his house payments and how to close Mr. Moto.

As Peter described his encounter with Mr. Moto to me, it quickly became clear that the meeting was over before it even began. Peter stumbled and fumbled with his words. He had trouble trying to clearly explain concepts that he usually understood thoroughly. Mr. Moto listened to him politely for fifteen minutes, before explaining to Peter that he didn’t need his services. When Peter walked out of Mr. Moto’s office building, he felt frustrated and depressed.

After hearing that story we knew exactly what Peter had to do. We knew that as soon as Peter began speaking to his high net worth prospects he lost confidence and then lost their business. When he met with people he perceived to be wealthy and successful, he showed his own problems. Peter was unable to relate confidently to his prospects because of his own financial mess.

We told Peter that the solution to his confidence problem was two-fold. First, he had to get his own financial house in order before he could be confident that he had something to offer his high net worth prospects. Second, Peter needed to realize that a lot of his high net worth prospects have their own financial troubles. That was exactly why they needed his services.

Over the next few meetings, we worked with Peter to control his expenses, increase revenue, and understand how to manage his cash flow. As his finances were brought into line, he began to lose the haunted look he had suffered from for the past six months. He now had the confidence, as well as the experience, to help his high net worth prospects with their financial issues.

A few weeks later Peter met with Felix Sutter, the father of one of his existing clients. Mr. Sutter owned a homemade soup company that had grown from a small family operation to a multi-million dollar corporation over the last couple of years. This time Peter strode confidently into his meeting with his high net worth prospect. He wasn’t worried about losing his house or his car. His credit cards were under control. His business was running smoothly and profitably.

What Peter quickly found out was that Mr. Sutter couldn’t say the same about his finances. Although Mr. Sutter’s business was flourishing, his personal investments were in disarray. He was overextended on a line of credit, the new home he was constructing was soaking up a lot of his income and he was not investing his profits. Because Peter had been in a similar position only a few months earlier he felt he had a special understanding of Mr. Sutter’s problems. They established an instant rapport. Before the meeting was over, Peter had outlined to Mr. Sutter a plan for correcting his financial problems and diversifying his investments. Mr. Sutter was happy to accept Peter’s offer, because he just didn’t have the time to do it himself and he was confident in Peter’s abilities. Peter had turned his first high net worth prospect into a client - the first of many to come.

Lessons Learned

Peter’s case shows that if you don’t have your financial house in order, you can’t be a financial advisor. When you aren’t confident in your ability to manage your own funds, you can’t have any confidence in your ability to manage your prospect’s money.

As we saw in Peter’s example, confidence is a by-product of taking your own advice. But for Peter to succeed he also had to learn to look at his high net worth prospects in a different way. Originally, Peter had been nervous because he felt intimidated by his successful prospects. He didn’t feel he could relate to them on their level. But what I helped Peter realize was that successful people are not necessarily financially successful. They may appear wealthy. They may drive expensive cars and own large homes. But you don’t know what their financial house looks like until you get inside. The truth is you may find that they are mortgaged to the hilt or suffering from serious cash flow problems.

The keys to finding the confidence to deal effectively with high net worth prospects are to put your own financial house in order and to remember that your prospects need your financial advice.

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The Covenant Group is referred to by many as the place entrepreneurs go to become Business Builders. They are considered to be thought leaders and have authored the best-selling books, The 8 Best Practices of High- Performing Salespeople, The Entrepreneurial Journey, and The Business Builder.