When the brokerage business was simpler, it was common for us to find that a key problem for poorly performing brokers was their inability to stay focused. However, the complexities of the fee-based advisory brokerage model can make even top producers lose focus, too, we have recently discovered. Take Michael, for example. After using our benchmarking tool to evaluate his work habits, he identified several gaps between his ideal and his real performance.
“I'm having real problems staying focused,” he concluded. Michael isn't some burned-out advisor. He's the senior member of a team with $970,000 in annual production that, when he used our tool, was evaluating and rededicating its efforts to attract, service and retain affluent clients. “Our firm is overloading us with new initiatives, the markets are unpredictable and clients keep raising their expectations,” he said. “It was a lot easier when all you had to think about was production.”
Michael isn't the only one worried about losing perspective. We surveyed 200 wealth management teams late last year, only 5 percent said they were highly goal oriented. Only 13 percent claimed to be self-disciplined on a daily basis and only 19 percent ventured outside their comfort zones to pursue new business.
Staying focused has always been a problem for low- to middle-performing financial advisors. But we were surprised to learn that it's also an issue with successful financial advisors and teams. Further conversations with Michael and others provided valuable insight.
Although most of the high-level teams we work with have long-range business plans, few are adhering to any type of metrics system that measures future indicators of success. They still think production.
Staying focused on a long-range business plan requires disciplined day-to-day effort coupled with the confidence that you are progressing toward your goals. If you're not convinced that those daily efforts are linked to a long-range payoff, it's difficult to focus.
One way to assure a payoff is through forecasting. By manipulating a select group of success indicators, you can project the future they will have on your business. If you make adjustments to any combination of these input variables, you can gauge the impact on a variety of revenue and asset outputs. Knowing the future output of what you do today can dramatically strengthen your focus.
The following is a forecasting example, with the input variables used by Michael's team in parentheses.
First, you need to establish current values for two important business development variables:
- Ideal account size ($1 million).
- Minimum account size ($250,000).
Next, conduct a quick business inventory and add the following variables:
Number of clients (420).
Number of ideal clients (42, or 10 percent).
Number of potential ideal clients (84, or 20 percent).
Size of average non-potential client ($50,000). ROA on new fee-based assets (1.25 percent).
ROA on new transactional assets (0.75 percent).
For valid forecasting, you need three additional input variables.
New ideal accounts you will open per month (1.5).
Minimum accounts you will open per month (4).
Non-ideal accounts you will jettison each month (5).
Forecasting your results requires using the right formulas to crunch the numbers. We have developed a Microsoft Excel template that lets you enter combinations of input variables and then do the forecasting over a 24-month period. Here's what we discovered about Michael's team:
Revenue should increase from $970,000 to $1.27 million the first year, and hit $1.59 million in two years.
Assets should grow from $154 million to $205.75 million in the same period.
Annual recurring revenue should increase from $557,634 to $1.12 million.
Be forewarned. Unless you use the forecaster in concert with your five-year business plan, it will be of no value. The forecaster will work for you only if:
The five-year business plan “pulls” you toward your goal.
Your Metrics Scorecard System defines and measures your indicators of success.
Your fixed daily activities keep you focused on what you need to do.
The forecaster can help you project what the results will be on a monthly basis over the next 24 months.
These four key elements will keep you focused. That's why Michael has made them part of his weekly team meeting. You need to do the same.
Matt Oechsli is an author and president of the consulting firm Oechsli Institute. oechsli.com