Top 10

The financial services industry has both a huge problem and a huge opportunity over the same exact issue; increasing demand with decreasing supply. With more assets in motion than ever before and an increasing demand for financial advice, there has never been a better time to get into this business. Industry expert Mark Tibergien was recently quoted as saying that the RIA business alone needs to quickly add about 10,000 advisors to meet this increasing demand.  But here’s the other side of that coin; it has never been more difficult to enter the business than right now. The vast majority of seasoned financial advisors I know cut their teeth in the business with a large wirehouse, mutual fund firm or insurance company who recruited and trained them to sell their proprietary products. With a 4 year average retention rate of a little less than 15%, only 1 in 7 of these trainees became survivors. Since independent B/D’s and RIA’s lack the resources and know-how to recruit, train and induct advisors new to the business, these lucky survivors have been the primary recruiting targets for them. Unfortunately for the industry, these proprietary models are quickly fading away and devoting fewer resources to trainees. Add to this the demographics with the average age of current advisors pushing 60 years old, it’s obvious why we’re seeing rapid consolidation in the industry. It’s a real problem that the industry hasn’t figured out yet.

There are a number of reasons new advisors fail in the business. Having recruited and trained thousands myself, I’ve observed first hand some great successes and as many miserable failures. Some people simply don’t have the aptitude for being in business for themselves while others place their success or failure on the wrong thing. Individuals who lack self-confidence or a certain ego drive tend to focus on the plan, process or product they offer. They fail to realize that in the financial services business, the product you are offering is trust. Whether you’re a fee only RIA or a commission based broker, you are basically selling yourself.

I like to develop top 10 lists and dug up one on this topic from a few years back. It was directed at advisors trying to enter the business and giving some pointers. I called it, “Lefferts Top Ten Overlooked Truths in Our Business”

1. If you commit first, it commits back to you. You must make a leap of faith and close the back door once you enter this or any entrepreneurial business. If you wait for good things to happen before you mentally, emotionally, and physically commit, it’ll be a long wait. The happiest people are those who commit to the situation they are in and make the best of it while unhappy people are continually looking to external factors for their success or to blame for their failure. Take 100% responsibility, commit and enjoy the results, but you have to make the first and continuing move. Don’t be in the backyard looking for four leafed clovers while opportunity is knocking on the front door.

2. Simply showing up is half the formula to success. Exercising self -discipline in your time management is vital. You cannot maintain bankers hours and expect entrepreneurial pay. Show up whether you have something to do or not. You will create your own opportunities by simply being “in play”.

3. Be your first and best client. The power you have by owning the products and services you offer is beyond description. Not only will it be one of the best financial moves you can make, but you will have the power of belief in what you do working in your favor.

4. Effort, at times, defeats itself. If you maintain a consistent, steady pace of doing first things first and last things not at all, then you are on a path to success. By forcing everything, you can come across as desperate. Keep the pace, let it flow, be patient, and success will follow. And demonstrate what is perhaps core to one’s success; self-discipline. A definition I picked up from Brian Tracy a while ago states that self-discipline is “The ability to do what you’re supposed to do, when you’re supposed to do it, whether you want to or not”

5. It really is a numbers game. As much as we want to believe that there is such a thing as “working smart”, the fact remains that successful advisors simply make more calls and see more people. Don’t let your mind trick you into believing it’s otherwise. There is no substitute for hard work.

6. “Fatigue makes cowards of us all”. This quote says it all. If you are not well rested, are ill or lack energy due to little or no exercise, take care of it. Prospects buy strength and push away weakness. You need to be in top shape and good health to convey a positive and impacting impression. Get adequate rest and put yourself on a routinized exercise schedule.

7. You are being judged by first impressions. The saying “You can’t judge a book by its cover” does not apply to us. Prospective clients are judging us the moment we meet them. Dress impeccably, drive a clean, well maintained car and be sure your props (pens, presentations, etc.) are first class. A common theme I have is, “Do it first class or don’t do it at all”

8. Believe, even when you don’t want to. Much of your success in anything will be predicated on your ability to maintain a positive mental attitude. Believe in your industry, believe in your firm, believe in your services and believe in yourself. You can choose to believe or not to believe (being indifferent is not believing). Believing, even when it’s difficult, will open doors and attract the opportunities you want where not believing closes the doors. A paranoid is someone who believes the world is conspiring against them. Be the opposite. Believe that the world is conspiring for you. You’ll be amazed what this simple change in perspective will do for your results. Besides, given the choice, it’s a lot more fun.

9. it’s not what you say, but how you say it. Many of us spend agonizing time trying to figure out the catch phrase or line that will wow the client. Worse yet, many write letters and e-mails thinking that they’re selling. It’s not entirely what you write or what you say, but the confidence in how you present yourself that will win over the prospective client. This is a proven fact that is counter-intuitive and must be worked on by all of us.

10. You become and get what you consistently think about. Any thought you carry repetitively, will become your reality. This phenomenon was written about by Napoleon Hill in his 1937 book “Think and grow rich” and has been the secret of every motivational speaker/writer ever since. The picture in your mind’s eye of how you look, your level of success and your lifestyle, will eventually become reality if it isn’t already. If you want to make $500,000 per year, then wipe out any thoughts in your mind with other figures. Think the unthinkable, dwell on it daily and your belief will create its own talents to get you there. Only you control this. Is your mind disciplined enough to hold the pictures of what you want to become rather than what you don’t want to be? All successful people know this universal key to success and practice it daily through prayer, meditation and visualization.

Though I wrote this close to 20 years ago, the basic themes still hold true today. For the new advisor entering the business with the right mentoring and proper mind-set, there has never been a greater opportunity.

First Gen Silos and Next Gen Integration

There was a recent study released by Schwab about advisors turning independent. We all know the facts about RIA’s being the only financial services channel experiencing growth. But what struck me most about this study was the difference in perceptions between those advisors under age 40 and those over age 40. In this Investment Advisor article on the study, it says, “Younger advisors, in particular, show even more proclivity for independence, with 65% of those surveyed under the age of 40 finding the idea of becoming an RIA appealing, compared to 43% of those aged 40 and over”

Those older advisors grew up in a silo’d business. Elite Life producers over 55 years old generally sell life insurance only and don’t want to clutter their practice with securities or investment management. Investment advisors of all stripes (wirehouse, IBD, etc.) over age 55 are the same with their practices not wanting to get involved with insurance. And fee-only RIA’s want nothing to do with anything that generates a commission which basically cuts them out of the commission based world altogether. Why is this?; regulatory silo’s. It has frankly been too difficult to integrate these practices onto a single consolidated architecture due to FINRA, SEC and State Insurance Departments forcing each into their respective corners. So what has emerged is a fragmented set of models where one advisor has his/her BGA with “Brand X”, his/her B/D with “Brand Y” and his/her RIA clearing through “Brand Z”. None of them integrated or on the same platform.

Having recently completed reading the Steve Jobs book, it struck me how similar this fragmented financial services model resembled the open architecture of Microsoft and the PC where the software, hardware and internet services are not integrated. The user can choose from multiple suppliers which at first glance seems like an advantage. This as opposed to the Apple model of a closed and fully integrated architecture.  

For the longest time, I was a dedicated Microsoft user over the years buying Gateway, Dell, IBM and SONY hardware along the way. I disregarded the Apple products as foreign and different for a sub-culture user. But when I bought i-Pods for my now 15 year old triplets a few years back, I thought they were pretty cool and got one myself. Then came the i-Phone. At first I was suspect about it because I thought my blackberry keyboard was easier to use. But at the urging of my kids, I made the switch a couple years ago to the i-Phone and never looked back. Then as I was rewiring my home AV system, my tech guy suggested using Apple TV, so now I have my i-Tunes libraries, movies, pictures, home videos all integrated with the ability to play anything on any TV or speaker with a controls through an app on my i-Phone. And on business trips, I used to haul around a heavy laptop. Not anymore. Now I carry my trusty i-Pad which does all that I need on a trip. And I can get to all of my stuff anywhere, anytime through i-Cloud. Bottom line, I’m hooked on the closed Apple ecosystem and will not leave.  

Apple as a closed architecture could be perceptively at a disadvantage, but it allows for a consistently higher quality product and seamless user experience. I had thought the younger generation would object to closed systems, but apparently not. It appears that the early adopters of the current Apple architecture are the younger generation and the holdouts are generally more mature still holding onto their blackberry, PC and flip phones.  Could it be that the next generation of financial services platform is on a closed architecture where the RIA, B/D and BGA are seamlessly integrated? One client account form, one application, one place for client and advisor to see a consolidated view of the entire portfolio through front end single entry.

Just as the under 40 set is more open to a different practice model than their more mature peers, I also believe they will gravitate  away from the silo’s towards a fully integrated architecture enabled with high quality and state of the art technology.  And by fully integrated it is a given that proprietary products will be a thing of the past and I’m talking about open access to all products and services within this closed and integrated model. Those with retirement on the horizon won’t want to risk changing platforms just as I was resistant to get off the Microsoft Windows system and onto the Apple architecture. But I believe those who are still growing their practices will demand a better more fully integrated experience. With the likelihood that a new "harmonized" fiduciary standard gets enacted breaking down the barriers prior set by regulatory silos, true convergence and integration of the models may finally happen. It may not be here yet, but trust me, it’s coming soon.