Moving on from routine programs to a new kind of support.
As financial advisors cement their role as a primary provider to wealthy investors, asset management organizations and other financial institutions are forced to create alliances with advisors in order to maintain and build individual client relationships. But gone are the days of preferred lists, sales contests and pay-to-play schemes, and product providers must rely on other things to gain access to advisors and their clients. Product superiority is important but simply not sustainable through all market conditions. And given the sheer number and variety of packaged products available, outperformance is not enough to achieve distinction or the conversion of a loyal advisor from one provider to another. In this sober state of affairs, many financial institutions have begun to develop an ancillary set of services that will complement their products and provide much needed guidance and professional development to advisors.
In the mid-'90s, we wrote regularly about the emergence of value-added services that included presentations and introductory training on selling skills, time management and prospecting desired target markets. In the past decade, however, these services have become increasingly sophisticated and differentiated. Perhaps most importantly, some of these services are extremely effective in helping advisors gain new skills, build and manage their business and cultivate loyalty to the companies that provide them. And often this loyalty can help break a tie when similar products are offered from competing providers.
These services, while not yet ubiquitous, are more popular than they have ever been but our recent survey of more than 800 advisors tells us that despite the many changes of the past decade, most value-added programs have not kept pace with the sophistication and needs of advisors.
Our survey, conducted recently with 816 financial advisors, defined the next generation of value-added services from product providers using the following four criteria:
Delivered by wholesaler and/or representative
More than a single presentation
Not exclusively product related
Intended to enable financial advisors to be more successful
Transformational changes in advice and guidance, regulations and compliance, and market conditions have prompted advisors to seek outside assistance in managing their practices. And in response, many vendors have launched value-added programs for their advisory clientele. In fact, in the past five years advisors have been approached with an average of 13.1 programs and have tried half of them (Exhibit 1).
If these programs are high quality and have a positive impact on the advisor's business, it can be time well spent, but if the programs are ineffective the advisor has lost precious time that could have been devoted to other business activities. When asked, advisors were forthright in their criticism of the value-added programs available to them, rating only 1.6 of them as "extremely worthwhile" or "very worthwhile" (Exhibit 2). Like most professionals, advisors demand quality over quantity. Far and away, the programs that were rated most favorably by advisors were those with the ability to help practitioners achieve greater financial success.
We also wanted to understand how and why so many value-added programs seemed inadequate, and asked advisors for their primary reasons in discontinuing a program they had started (Exhibit 3). First and foremost, 84.6% of advisors found that value-added wholesaling programs are not "actionable." This rationale is highly correlated with the reasons advisors use when evaluating a program's worth or effectiveness. Most advisors want clear next steps and a results-oriented curriculum.
Another failing of value-added programs is that they are promoted to all advisors, rather than those that have a specific need or interest in the course material. Just as one product is not appropriate for all clients, one program is not right for all advisors: 44.1% of advisors claimed the programs were not relevant to their practice, which means nearly half of advisors have other needs that are not being met. Another disadvantage is the preparation and effectiveness of the individual delivering the program. Many firms rely on their wholesalers or sales force to deliver value-added materials under the premise that a single point-of-contact is easier for advisors. But many wholesalers don't have the bandwidth to manage a territory, stay abreast of the features and benefits of their product range and effectively deliver business development. Many wholesalers were not prepared to provide the program, as noted by 40.9% of the financial advisors. A similar number of advisors, 39.2%, found the programs to be thinly veiled product promotions. Most advisors have sufficient access to product and are seeking the rare commodities of practice development and business enhancement solutions.
Most of today's programs have been developed around a handful of topics-prospecting the high-net-worth market, developing alliances with accountants and attorneys, and asking for referrals.This is reflected in the final three reasons advisors gave for dropping out of a program-for one, 14.7% of advisors observed that many programs were merely modified versions of programs they had seen before without new or updated information and techniques. Many competing firms offer similar programs, and 30.4% of advisors left one program because they felt another firm delivered the same content more effectively. And finally, 36.8% of advisors had experience with enough programs to feel that poor organization of the materials was hampering its effectiveness. Overall, there is a dearth of new, viable ideas coming from product vendors, and those that can introduce compelling programs will have an eager base of advisors with which to engage.
So, what constitutes a compelling program from an advisor's standpoint? As mentioned previously, advisors want actionable, relevant programs that are delivered effectively and help them generate strong financial results. Few of today's programs can deliver on this promise and, as a result, we predict the next generation of value-added programs will include elements of success coaching. Success coaching is a process of education, focus and accountability that enhances the economic achievement of financial advisors. Whereas value-added wholesaling provided insight and information, success coaching does a significantly better job of tying that information to tools, techniques and processes that translate into bottom-line improvements for financial advisors.
With the evolution from value-added wholesaling to success coaching, advisors become broad-based providers of wealth management solutions and two important benefits emerge: clients are better served and advisors are more productive. In a controlled study, we've analyzed the activities and results of advisors who are transitioning from an investment-oriented practice to a wealth management business model. The failure rate was extremely high--only one out of ten advisors made a successful transition. But all that did had a coach to help them along the way. Success coaching is a mandatory component for advisors to propel their business to the next level of professionalism and productivity.
On a related note, it's important to understand the associated financial results of such a transition. The average increase in first-year annual income for successful advisors in our study was 35%. This may seem like a pipe dream, but it's possible if advisors and vendors work together.
As financial institutions try to build solid relationships with the best advisors by providing the strongest products and the most sophisticated training programs, more coaching programs will emerge. Success coaching and other value-added programs may be the means for you to achieve a higher level of financial success. This will entail identifying those financial institutions whose products makes sense for your clients and who have success coaching programs that are relevant to your practice. There is an unequaled opportunity for growth when advisors leverage the expertise and resources of financial institutions and partner with their product providers.
Hannah Shaw Grove is the author of
five books on private wealth and advisory practice management. Russ
Alan Prince is president of the consulting firm Prince & Associates.