What business are you really in

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

A few months ago, William Trent came to us to help him take his business to the next level.

William had been an advisor for over seven years, serving 314 clients and averaging over $1 million in life insurance premium a year.

When we met for the first time, William explained that growth in his business would come from improved service. To meet the challenge of servicing his large client base he was planning to invest heavily in an extensive Client Portal, where clients could access up-to-the minute statements on their accounts, check cash values in their policies, review the latest financial news, products and services. His Portal service would be a competitive advantage protecting his clients from other advisors. 

To me, William’s plan was misdirected. I advised him to analyze his current client base, find out where his revenue came from, poll some of his clients on what they thought of his idea, and ask them how they’d like him to improve service.

At our next meeting, William divulged the results of his research. Much to his chagrin, his clients unanimously shot down his Portal idea. They couldn’t see themselves using his Portal service. Instead, they asked for more of his time. William also revealed that 21 key relationships accounted directly or indirectly for 87% of his revenue. While many advisors are familiar with the 80-20 rule, they often ignore the implications. To help William to see the implications, I asked him, “What business are you in?”

“Financial Service.”

When I asked William to expand on his answer, he explained that he was in the business of providing financial solutions to financial problems. He saw himself as a resource for financial expertise. The value he brought to his clients was his extensive knowledge of business matters and state-of-the-art financial solutions.

“Your growth strategy,” I said, “fits with your view of your business. The Portal service you envisioned – where clients can easily access information for free anytime they wish – is tailored for a service industry where the levers are low cost and state-of-the-art technology. But your clients have told you they don’t want that. That’s the first clue that you’re looking at your business the wrong way.

“I can empathize with your concern about competition. But we all have to be careful about jumping on a bandwagon. A number of recent surveys have shown that consumers value their relationship with their financial advisor far above other sources. Your clients want your time. MDRT published a revealing study that showed, on average, top producers spent 53% of their time face-to-face with their clients. Less successful producers spent only 19% of their time with clients. The 34% difference in time spent in front of clients generated an eight times multiple in earnings.

“The message is clear, you make your money when you’re face-to-face with clients. In light of this fact, let’s revisit the question of what business you are in. To answer this question, it helps to think of other businesses that are similar. What other businesses depend on face-to-face interaction?”
He pondered for a moment, then offered, “head shrinking.” He laughed, but that was the answer I was looking for.

“Exactly. Seeing your business as analogous to psychotherapy is much more informative than seeing it in terms of financial service. One thing that’s certainly true is that a psychotherapist charges for time. They make money only when they’re face-to-face. The psychotherapist’s goal is to fill as many hours of her day as possible seeing patients. When the couch is empty, they’re not generating money. As the MDRT study shows, this is virtually the same for advisors. And it doesn’t matter how you get paid: commissions, renewals, fee for service, fee-based on assets managed. If you’re not seeing people, you’re not making money.

“There are other, more telling similarities. Let’s look at the role of a psychotherapist. The therapist’s job is to help patients overcome problems. While the problem may have a label, such as a particular phobia, the process of overcoming the problem involves identifying it at a deeper level, getting to the root cause. This is often a challenge, because the real problem, the root, is often buried deep in the patient’s memory, part of an experience from early childhood. The psychotherapist must peel back the layers and probe for the truth, often a truth the patient is not consciously aware of.

“Trust and confidence are essential to this process. If the patient doesn’t believe the therapist can help them, if they don’t have confidence in their abilities, then they’re not going to cooperate. The same is true if they don’t trust that the therapist will treat everything they reveal confidentially.

“The more accurate the therapist’s understanding of the true problem, the better chance they’ll have of prescribing the right therapy."

It’s essential that you have this same approach. Top advisors are successful because they have the deepest understanding of their client’s problems. Many untrained advisors are rebuffed by big clients because the client feels the proposed solution isn’t appropriate. The problem isn’t with the solution, the ‘therapy’, but with the advisor’s understanding of the problem, which stems from the lack of depth in the relationship. To really understand a business client’s problem, you have to know their goals, their dreams, their fears. Do they plan to sell their business? When? Why? Who’s going to take it over? Their daughter? Their current VP? How do they feel about these people? What do they think they’ll do with the business? As an advisor, you need to know the deeply personal answers to these questions. Your client won’t give you those answers, or at least not the right ones unless they trust and have confidence in you.

“The right therapy, just like the right financial solution, is a major benefit; but psychotherapy hints at another important benefit – the undivided attention of a professional. Patients often cite the restorative experience of being the center of their therapist’s attention. For one hour a week, someone is focused 100% on them. In itself, this is a powerful benefit. Look at it from your client’s point of view. If your client runs a business, they spend most of their day dealing with other people’s problems – who is paying attention to them? That’s what you do. No wonder they’re asking for more of your time.

“Psychotherapists spend more time with patients who have big problems. As an advisor, your most valuable clients are the ones with the biggest problems, the ones with large estates, large families, vast, complex businesses, and you need to spend more time with them.

“Because of the parallels between what a therapist does and what you, as an advisor do, it makes sense to look at your business as a therapist would. You need to increase the time you spend with your clients, and you need to use that time building trust and confidence and striving to go deeper, probing for truth.”

William was eager to begin applying the lessons from psychotherapy. Within a couple of weeks, he’d developed a plan to increase the time he spent with his top clients by a minimum of 200%, and to use that time to deepen relationships. He abandoned the Portal concept and planned to hire two sub-producers to concentrate on clients he didn’t have time for. The impact on William’s business was soon evident. Within a couple of months, he’d uncovered a number of issues with key clients, leading to significant business -- issues that might not have surfaced had he not made the effort to probe for them.

Lessons Learned

The key to taking your business to the next level might lie in answering the question of what business are you in. For an advisor, the model of a psychotherapist’s business is enlightening. It highlights the fact that you make your money when you’re face-to-face. The more you can get face-to-face, the more successful you’ll be. And the more you can model your face-to-face meetings on the approach of a psychotherapist, the more valuable each client relationship will be. You need to follow the therapist’s model of earning trust and confidence, probing for root causes, and prescribing remedies only when those root causes are fully explored and tested. Loyalty in both cases is measured by the depth of the relationship.

As for William’s concern about competition: a trusting relationship is a lot of work, and its value so great that no patient, no client, would easily give up their therapist or advisor -- certainly not for a Web service. By applying the psychotherapy model, William developed a deeper sense of who his clients were than ever before and was able to provide solutions perfectly tailored to their goals. He’d found the next level in his business.

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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.