Recently, I began a presentation to a room full of financial advisors by asking how many had heard the statistic that a financial advisor's time is worth between $500 and $1,000 an hour when they are face-to-face with a qualified prospect. A few raised their hands.
I then went on to explain that if you were to achieve that kind of hourly return on a consistent basis, you would make between $1 million and $2 million a year. I asked for a show of hands from those who were making $1 million or more. Though there were at least 50 people in the room, only two hands went up. My next question to everyone was, "Why don't we all make that kind of money?"
Currently, my business brings me roughly $3 million in annual commissions. And let me say right here that it isn't any particular skill or abundance of charisma that enables me to achieve that kind of success. In fact, one of my friends likes to tell me that I have all the charisma of a small soap dish.
The growth of my business is due solely to some discoveries I've made over the course of two decades of not-always-successful practice. And I'm absolutely convinced the business model I employ can be used by anyone to achieve similar results.
If you're skeptical, I understand. But let me tell you my story, because I believe my professional journey might connect with your experience.
Finding my passion
When people find out I'm in the financial business, they ask for specifics. I tell them I specialize in everything other than the stock market -- in other words, the universe of conservative interest and dividend-generating strategies. (And, as an aside, those interest and dividend payments do a nice job of paying for life insurance premiums in tough economic times). That's my niche. But it wasn't always so.
I graduated from college in 1987 and began working for a large mutual insurance firm selling insurance and mutual funds. I struggled for the first 10 years of my career. Though I finally hit $100,000 of income, I couldn't maintain that level. In fact, about halfway through my career I considered leaving the profession altogether and going to medical school.
Fortunately, three things turned my career around. First, in seeking to improve my clients' returns, I became a student of market history. Second, as a result of what I learned, I discovered a passion I would use to create a very profitable market niche for myself. Third, I discovered there were three things I needed to stay consistently focused on to get to the next level -- lead generation, practice management and a turnkey approach to sales.
Right place, right time
My turnaround year was 1998. As you know, the stock market was really roaring at that point. However, what I had learned about the major underlying market cycles -- in particular, the secular bull and bear market trends -- led me to understand that the market would likely cool soon. I also knew that when the party was over, the hangover would likely last for 15-20 years.
I also understood that when the market dropped and people experienced a shrinking net worth, they would be more reluctant to spend their cash on life insurance. By the same token, as their estate became smaller, estate tax problems they might have addressed by purchasing life insurance could disappear.
Until that time, in addition to life insurance, I had specialized in mutual funds and variable annuities -- products tied directly to the stock market. I realized that when the market turned, those investments would no longer be in the best interest of my clients.
So here I was, just trying to do the right thing for my clients, when I found myself surrounded by an incredible opportunity. I came to realize that no financial advisor in my geographic region was specializing in the universe of conservative, income-generating options. There was a market niche ready for me to claim.
So, rather than trying to carve out a profit in a very crowded market, I staked out my territory as the specialist in that niche. At that point, I eliminated any competitors and became my own competition. I transformed my practice to specialize in brokerage CDs, fixed and indexed annuities, government and municipal bonds, corporate bonds, preferreds, and, in some instances REITs. The rest is history.
I know what you might be thinking. "I wish I had made the move 10 years ago. Now it's too late." I want to assure you that it isn't. Market cycles indicate the market will likely stay flat for several more years. And, the fact is, to this day I'm still the only advisor in my geographic area with this specialty.
How does it work?
Being in the right place at the right time had created an opportunity for me to move in a new direction. That direction is still wide open to you. Now, all you need is the courage to change your business model in light of what you see the markets doing, and the commitment to do the research necessary to figure out exactly which direction to take.
What is involved in moving into this niche in your area and setting up a business model that can generate the kind of income for your practice we talked about at the beginning of this article? To sum it up in one word: Focus. Focus on mastering this aspect of the financial business. Then, to build your practice, focus on the three specific areas I mentioned earlier.
The first is lead generation. If your time is really worth $500 to $1,000 when you're with qualified prospects, then you need to do everything possible to keep them in front of you eight hours a day, five days a week.
Let's imagine for a minute that you had a machine in your basement that could legally print $100 dollar bills at the rate of 10 an hour. Great machine. But one day you wake up and find that the machine is broken. What's the first thing on your agenda for the day? Fix the machine.
Once you get your arms, your gut and your heart around the fact that every hour spent with clients is truly worth $500 to $1,000, you'll put the same intensity of focus on lead generation that you would if you had to fix that money machine. There's no excuse not to have qualified people in front of you all the time because there are numerous ways to develop high-quality leads.
The next focus is practice management. Obviously, if you're in front of prospects eight hours a day, you're not going to have much time for anything else. You want to set up your practice to run like a doctor's office, where everyone else answers the phone and keeps the rooms full, and the doctor spends all his or her time seeing patients.
Cast off your limiting beliefs that there are certain things -- other than seeing clients -- that you need to do in your office. Everybody knows you can hire someone to do paperwork. Where most struggle is in accepting the fact that you can have a licensed incoming call specialist taking all your incoming client service calls -- without upsetting your clients. Once you've made that leap, you'll also realize you can have someone making the outgoing clients service calls as well as the prospecting/appointment setting calls.
Generally, I work 40 hours a week. I don't work nights and I don't work weekends. I can do that because I spend all the time that I'm working face-to-face with qualified prospects. That happens because I use several methods to generate good leads, and I let others handle all the tasks that don't bring in $500 to $1,000 an hour. The point is, stay focused and don't lose sight of your primary role.
Finally, you'll need a turnkey approach to selling. When I say "turnkey," I'm not talking about a script that makes you sound like a robot. What I recommend is a method that gives you flexibility to move and do the right thing for each specific client, but in a structured way.
For example, I close for a written commitment on the first appointment, and I won't grant a second appointment until I get that commitment. While I want them to commit to me at that first appointment, I may not sell a commissionable product until the third or fourth meeting. Because I get the written commitment up front, I'm not wasting my time. But I also don't have to push them into a product. Rather, I've structured an approach that is low-key, non-confrontational, and educational so that, ultimately, they make the decisions.
David J. Scranton, CLU, CFP, CFA, received a bachelor's degree in mathematics at Trinity College and went on to receive a Masters degree in the science of financial services. He is president of Scranton Financial Group and The Advisors' Academy.
