Six months in a leaky boat
The following is based on one of The Covenant Group’s clients. All of the names and telling details have been changed.
By Norm Trainor
I once saw a cartoon picturing a man in a leaky boat tossing out buckets of water. He managed to stay afloat, only because he was able to remove the water as fast as it came in. That’s an unpleasant proposition, and not one most of us would willingly tackle. But many advisors and entrepreneurs I know are exactly like that man in the boat. When Matt Silva, a veteran advisor of twenty years, sat down in my office and asked, “Why can’t I keep any of the money I make in this business?” I had trouble getting the image of the cartoon out of my head.
After Matt described his practice to me, the problem was obvious. “Matt,” I said, “like most advisors, you’re only making money on your top 50 or so client relationships; you’re losing money on the rest of them.”
“So, I should dump the rest of my clientele and keep only my top 50?”
“That would take the depth and growth potential out of your business. The better solution is to make each of your client relationships profitable. A typical advisor has 500 clients and has a relationship with each at one of four levels. The first is product, where the relationship is transactional. The next level is planning, where the focus is the completion of a plan, such as an investment plan or retirement plan. The next level is ongoing implementation where you work with your clients over time to help them achieve financial security and independence. At the fourth level, you become your client’s trusted advisor and take the relationship beyond a financial focus.
“Matt, how many clients would consider you to be their trusted advisor?”
“Honestly, about ten.”
“You’ve got company. Most advisors have only between five (on the low end) and forty (on the high end) level three and four relationships. These numbers are not even close to the potential an advisor has. An advisor running an efficient and profitable practice should be able to manage 20 trusted advisor relationships and 80 ongoing implementation relationships. The gap between 5 to 40 and 100 is where the productivity and profitability opportunity for your practice lies. Close that gap and you’ll make money in this business.”
“How?”
“The answer involves integrating a number of key strategies, but let’s take one simple idea that can help you begin to make your client relationships more profitable – the Service Level Agreement. The Service Level Agreement is a written agreement between the advisor and the client that clearly delineates the terms of the relationship, including the goals and objectives you are going to help your client meet and exactly how you will do that. It specifically details the type and frequency of contact between you and the client.
“For a trusted advisor-client, you might outline the touchpoints for the next year, such as two semi-annual reviews, quarterly calls, invitations to two client appreciation events, a semi-annual cultural or sporting event, etc. As you review the agreement with your client, you clarify the expectations they have of you and obtain your client’s written permission to market to and service them. You will find as you deliver on your Service Level Agreement that you are able to obtain more share of your client’s wallet as well as more introductions, recommendations and referrals. For other levels of clients, you can use the Service Level Agreement as a way of obtaining your client’s consent to, and support of, a plan to graduate them to a higher value relationship.
“In a world where value is amorphous, the Service Level Agreement makes the value of the client relationship tangible. It’s something both you and your client can see and touch. It’s easier to protect something you can touch, and it’s easier to increase its value.”
Matt not only loved the Service Level Agreement concept, he used it to plug the cash leak in his business and grow his practice by 30% last year.
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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.