Ignoring Business Development: The Greatest Planning Disaster of the Next Generation

Journal of Financial Planning: April 2018



Evan T. Beach, CFP®, AWMA®, is a wealth manager with Campbell Wealth Management in Alexandria, Va., and a Kiplinger and Credit.com columnist who has also been published on Yahoo Finance, CNBC, TheStreet.com, Bloomberg, and U.S. News and World Report. He earned his CFP® designation at age 26, becoming one of only 3.3 percent of CFP® practitioners in their 20s at that time.

We are all in sales. In 2014, I tore my ACL and meniscus in an adult, co-ed soccer game. Embarrassing, I know. The knee reconstruction was a big investment, not only financially, but also physically, to get back to where I started.

I define “selling” as the exchange of time, energy, or financial resources for a product, service, or better outcome. When I consulted with my orthopedic surgeon, he offered me two options: (1) do nothing; the muscles in my knee would regenerate but sports were off the table indefinitely; or (2) get the surgery, spend four weeks on crutches, three months in physical therapy, and be back to sports in about a year. The cost: just over $30,000 (before insurance)! His proposition was, “You give me your, time, energy, and financial resources and I will make your knee stronger than it was before you hurt it.” He sold me.

As a profession, I would argue that we have made a positive shift from a product sale to a service sale, but that four-letter “S word” has become so evil that we have forgotten to teach an entire generation that it’s necessary in business. All the financial planning knowledge in the world is meaningless without clients to impart it to. As Daniel Pink says in To Sell Is Human, “The ability to move others to exchange what they have for what we have is crucial to our survival and our happiness.”

Where Are We Now?

I spend a lot of time networking with financial professionals both inside and outside our profession. When I ask the higher-ups in RIA firms what they are doing to generate new business, almost all smile and proudly state, “We grow exclusively from client referrals.” But are client referrals an actual growth strategy? They could be, but only if they are driven through referral campaigns that are systematically and consistently tracked against goals.

The annual Rydex|SGI AdvisorBenchmarking survey has confirmed that is not the case, by stating that the most common source of referrals is passive. Passive referrals are generated by the fact that at least one client likes your services enough to send their friends or family your way, without you having to ask. They are not a result of your marketing efforts and certainly shouldn’t replace a real marketing plan.

The real kicker is how many of these same people are actually telling the NexGen planners that they don’t need them to develop new business because they view it as a responsibility of the firm’s principals. Here’s a reality check: According to Cerulli, 38 percent of financial advisers will retire within the next 10 years.

You, as an owner, are more than likely your team’s forward, responsible for putting points on the board. You are the rainmaker. When you get injured or decide to hang up your boots, how will you feel if the person who replaces you has never even played the game before? We need to teach the next generation how to sell.

What’s Next?

We have all heard about the “Great Wealth Transfer,” where assets flow from baby boomers to Gen X and millennials. That is, if that money is not wiped out by seniors’ increasing longevity and long-term-care expenses. Kudos to the firms that have built models ahead of this trend to better serve younger clients. But why aren’t we talking about the workload that will result from retaining those assets? A 2015 InvestmentNews survey of financial advisers found that 66 percent of assets that pass down will walk out the door, either to another advisory firm, a robo platform, or to the consumer economy courtesy of notorious spendthrifts. That number, believe it or not, is down from about 90 percent in 2010.

Here’s a question for the 34 percent who are good enough to retain the assets: Are you also good enough to have three times as many clients at the same revenue level? Let’s say Linda and Jim Smith have $1.5 million in assets with the firm. Their three kids are named as equal beneficiaries on the accounts. They receive good advice and are able to pass that amount to the next generation. Your firm is now doing everything in its power to retain those assets. The catch: You are doing three times as much work for the same amount of income. We need to teach the NexGen planners not only how to serve NexGen clients but also how to find the clients who are actually profitable today.

What Can I Do?

If you’re feeling overwhelmed and underprepared, good news! You are a financial planner. You help people get from point A to point B every day. A marketing plan really is not much different than a financial plan. We all know where we are today and, ideally, we know where we want to get over the next one, three, and 10 years. Now it’s time to get deep into the numbers.

You need to scrutinize every activity and every dollar necessary to acquire new clients. What’s been effective in your business in the past? What hasn’t? Look at your business through the lens of someone who is about to acquire it. Create a marketing plan that is thorough enough that an outsider would feel confident that it would lead to your projections.

The engine of that plan will be your marketing pillars. A pillar may be client/COI referrals, seminars, digital or direct mail campaigns, targeted marketing, etc. I recently taught a business development course that is part of a large university’s financial planning program. I gave the students six marketing pillars and had them get up and move their seats based on the pillar they would use to grow their business. Ninety-five percent of the students ended up in the referral seats. When I asked why, not a single person was willing to respond.

Your pillars should be based on your strengths, not what you think is easiest. Our firm brings on about $60 million in new client assets per year from seminars because we are good public speakers and have built systems around that pillar. The person who is good at delivering seminars may not be the best at blogging or using digital media to advertise. Programs like StrengthsFinder, StandOut, and Kolbe are helpful in identifying which pillars may be the best fit. If you are starting from scratch, I recommend three pillars with equal focus. After a year, you should have enough data to start drilling down on what’s most effective for you.

In my first leadership role, I led a team of 12 financial advisers who were new to the profession. Probably the best advice I ever received was to “never do anything alone.” That meant that if I was out prospecting, I should have a new adviser with me. If I was in the office closing new business or servicing an existing relationship, I should have a new adviser with me. Even if I was doing paperwork, a new adviser should be looking over my shoulder or vice versa. This is a less formalized version of a rotational program. The most forward-thinking firms in our profession are implementing these programs. I have yet to find a single one that has a business development rotation. If we are going to teach the next generation, we need to formalize the process.

We burn calories by thinking. One benefit to coming into the profession the “old fashioned” way is that there were scripts. No thinking required. If new advisers have to focus all of their energy on thinking of ways to sell new clients, they won’t focus on the more important activity: listening. Scripts, while they may seem outdated, offer structure to advisers who are craving it. These scripts should be worked into broader systems of how we turn prospects into clients.

Even after almost a decade in business development roles, I still follow my namesake acronym: B.E.A.C.H. Background, expectation, apprehension, close, and handling objections. I know that if I follow this structure, I will get all relevant information, answer the prospect’s questions, present solutions to his problems, and create a clear path forward. Every new adviser who comes into the profession wants a clear career path. It is our duty to provide a clear path to find new clients, which will inevitably accelerate career growth.

Certain things in life we are just not good at. For me, leaking pipes, squeaky brakes, and IKEA instruction manuals induce panic. I am good at generating new business but am not so hot on many detail-oriented, operational tasks. I focus on my strengths and outsource the rest. If you are the opposite of me and run a seamless operation but can’t figure out how to ramp up your marketing, hire a coach.

The Takeaway

If you want your business to live beyond your retirement, you’d better snap to it. The days of the hybrid salesman-CEO-financial planner are dying. The fastest-growing firms have the most specialized roles. Identify individuals you think you can develop into good sales people. They may not know it yet, but you should. Hint: They are not the loud, annoying extraverts. Generally, they are the emotionally intelligent, persistent competitors who, up to this point, have been denied a clear path to what they could be best at.

Professional role
Marketing & Communications