3 Deadly Sins that Will Kill Financial Advisors’ Business Growth

“Clients aren’t hiring advisors so they can make 1% less per year.”

— Ron Carson, CEO, Carson Group

This is one of my favorite quotes of the year and a terrific behavioral nudge for advisors to keep looking for ways to increase the value they provide to clients. They should be shown how they are actually investing in their own future.

This quote and a slew of other recommendations and guidance was offered up at the Riskalyze Fearless Investing Summit 2018, held recently in San Antonio, TX.

Moderated by Riskalyze CIO Mike McDaniel, this panel was a mixed grill discussion consisting of an RIA and two broker-dealers. Ron Carson, CEO of Carson GroupBrad Shepherd, President and CEO of Founders Financial and Tony Bacarella, Director at Sigma Financial made up the team.  (See 99 Takeaways from the Riskalyze Fearless Investing Summit 2018)

Here are three “deadly sins” that advisors must avoid if they want to keep growing their business.

1. Not Investing in Your Business

A question that many advisors are asking themselves is, “Can I get to a billion?” Ron Carson says “Yes you can!” One useful tip he learned from building his firm, Carson Wealth, into a $10 billion RIA is to “grow your own” advisors by hiring college interns.  With more advisors being over age 80 then under 30, it’s important to bring more young people into the industry, he stated.  Also, mentoring college students and building them into advisors is the best way to develop a team that is more in tune with your firm’s culture.  (See Future Shock: Ric Edelman Predicts The End of the World As We Know It)

RIAs often underinvest in their staff, according to Bacarella. It’s easier to quickly plug holes instead of spending the time needed to find the right people, he said.

Carson added that it’s better to have nobody in a position than the wrong person.

A common theme is that advisors need to learn more about running their business. Owning a business is about preparing instead of reacting, noted Shepherd, but many advisors are too reactive and subsequently make poor decisions.  When it comes to recruiting, they often hire the wrong person for the right role, which results in less effective training, which leads to client dissatisfaction.

There a famous saying that you should be working on your business, not just in your business.

To take a break from the daily grind, every 90 days Shepherd goes off the grid for a week to perform a detailed internal assessment of the company’s people, process & outcomes.  This helps him and his management team to better prepare for the next quarter and to focus on what the firm needs to continue their growth, he said.

2. That Doctor’s Office Feeling

Some clients think that meeting with their advisor is like going to the doctor’s office.  It’s stressful and not a fun experience.  Thinking about how your clients feel when they are in your office can improve their satisfaction with your service. (See What Exactly is Riskalyze Building?)

Carson showed a demo of his firm’s RIA platform that includes gamification features that he believes can help make prospective clients feel more comfortable and not be on the defensive when discussing their finances.  An article from Mint.com provides a few examples of gamification elements: graphic illustrations of progress, stair-stepping levels of achievement, recognition in the form of badges and ranks, and social involvement with peers.

Besides making technology more fun to interact with, advisors should also look to connect more on a human level, not just a professional level, Shepherd suggested.  We sometimes allow the craft of our profession to overtake the humanity, he added.  (See Why Technology Cannot Replace Likability for Advisors: Josh Brown Ritholtz)

How can advisors differentiate themselves?  Be resolute on who you are, your standards of care, your mission and values, Shepherd stated.  Make sure prospective clients understand who you are and what your values are, he said.

This may be difficult for some advisors because they lack confidence when expressing their value proposition and explaining how they get paid, Bacarella proposed.

Michael Kitces expounded on this topic on his blog:

“The path forward is to look at what successful advisors charge, especially if they do command an above average price, and try to learn what they’re doing that works so well. And I think what you’ll find is that the advisors who are succeeding in this area are the ones who specialize, go into niches, or find some way to differentiate themselves based on value beyond just trying to be the cheapest advisor or having a different pricing model than everyone else.”

Expanding on Kitces’ comments about price, advisors should avoid trying to compete on price since there will always be a cheaper solution, Shepherd emphasized.  People will pay for what they value and price won’t matter. But you should be prepared to walk away from prospective clients who aren’t a good fit for your firm, he stressed.

You can’t be a good fit for everyone, Shepherd argued.

Carson agreed that you need to know who your target audience is and who it is not.  Be a provider of premium services at a premium price.  He suggested putting the following statement onto all marketing materials, “For the benefit of our existing clients, we only accept a limited number of new clients every year.”

Be exclusive!

Another one of the biggest “sins” many advisors commit is acting as their own portfolio manager, Carson warned.  It forces them to sell their performance instead of their purpose, which is always a losing proposition. (See Advisor-Managed Portfolios Knocked Out by Home Office Performance)

3. Not Maintaining Your Technology Edge

I’ve been hearing a lot of conference speakers talking about how clients are being mesmerized by Amazon and other online experiences and how their expectations have changed dramatically.  This is true to some extent and as Carson pointed out, we’ve passed through the industrial age and the information age and have entered the “experience age.” (See Financial Advisor Technology: 9 Apps to Improve Your Practice)

You don’t want to be one of those “rich and tired” advisors that avoid introducing innovative technology change, Carson declared.  A recent survey showed that today’s financial advisor must challenge conventions and adopt new technology that can better support their key business processes, or risk falling behind. (See RBC Tries to Jumpstart RIA Custody Business with New Platform)

Advisors that embrace new technology report growth in new clients of 5% more than other advisors and AUM growth of 9-10% more, according to the same survey.

Advisors got a lot of great recommendations for growing their business out of this panel discussion. From discovering your true value as an advisor to making your clients feel more comfortable and finally staying on the cutting edge of technology, this valuable coaching and practice management was offered free of charge from these three industry experts.  (See 7 Game-Changers from the T3 Advisor Conference)

The question remains, how many advisors will take this advice and how many will stick with the status quo?



The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at craig@ezragroupllc.com