Do you have a formal business plan?

Probably not, according to the 2014 Drivers of Business Growth study, released by the FPA Research and Practice Institute. It found that more than two-thirds of financial advisors lack a written, formalized, well-documented plan for growth. Specifically:

• More than half of respondents gave themselves a failing grade when it comes to having a business development process.

• Only 9% rated themselves as “very effective” in that respect.

• Just 25% said they met or exceeded their goals last year; even more (33%) admitted they fell short.

• About a third have goals—but no plan to achieve them. (Would you let a client get away with that?)

• Only 10% of advisors have a marketing plan.

Small wonder that the FPA says a whopping 93% may never be able to sell their practices because they lack a sustainable profit model.

That’s the situation most advisors are in—and, as I explained in a previous column, it’s not going to get any better if you aren’t ready to accept and embrace the technological and social changes that are already impacting our business.

The good news, if you’re not operating as effectively as you would like: You can fix it.

Having met thousands of advisors over the years at industry events and seminars, and having coached and mentored many of them, I recognize that IAs by and large are very talented people—and I’m willing to bet you are, too.

Regardless of the channel you’re in—brokerage, bank, insurance, independent—you care about your clients. Also, regardless of the channel you’re in, you need a business plan that transforms your ability to serve clients into actually serving them.

We figured this out a long time ago, and it’s helped us create one of the largest advisory firms in the nation. Let me share what we’ve learned so you can decide if these principles might help you to grow your practice.

First, we use three simple words to define the core of our business plan: “educate,” “advise,” “assist.”

We place education first. When my wife, Jean, and I started our business in 1986, we started by offering college planning seminars to elementary school PTAs. Today, seminars remain an important component of our practice; this year, we’ll present about 800 seminars around the country, and we expect more than 30,000 people to attend. A full meeting/events team supports my 10 full-time presenters so that my advisors don’t have to do double-duty as speakers (freeing up their time to meet with more clients, so we can serve more people and collect more assets).

Other key elements of our business plan include identifying and finding our target market (you can’t talk to prospective clients if you don’t know who and where they are), working extensively with the media (to reach said target), creating a solid communication plan (so the target will respond) and, of course, developing an outstanding financial planning and investment management process designed to exceed the expectations of our clients.

I’ll cover these subjects in future columns, but let me provide for you here the five vital elements that are fundamental to our business model.

1. It isn’t what you know or who you know. What matters is who knows you.

We’ve learned the importance of spreading our message and highlighting our expertise through all forms of mass media:

• Broadcast media (as hosts and guests of terrestrial and satellite radio and television);

• Digital media (on websites, social media and search engines);

• Print media (in newsletters, books, articles, columns, e-mail blasts, blogs, Twitter feeds, Facebook posts and more);

• The stage (in seminars, webinars, workshops and keynotes); and

•  Direct mail.

We also communicate through influential people, or centers of influence (clients; prospective clients; and other professionals such as accountants, attorneys, real estate agents and loan officers).

The more people who learn that we have the knowledge and expertise that they, their friends and their clients want, the more clients we get. Being a great advisor isn’t enough; people have to know that we’re great advisors. And no one will tell them but us.

The best way, we’ve found, is to be where other advisors aren’t. For example, a magazine in our town publishes an annual list of its top local financial planners. We’re on that list, and every year all the advisors on that list pay for ads that appear when the magazine publishes its list. Everyone, that is, except for us. We never run an ad in that issue. Why not? Because everyone else does! The magazine becomes a cattle call. I’d rather place ads in something like a plumber’s magazine—someplace where I’d be the only planner there. Place yourself where you have the market all to yourself.

2. You must choose your approach.

Do you want to hawk your services like a TV pitchman? Or do you want to be known as someone who educates consumers? You need to choose, so you can laser-focus your efforts. Both approaches work, so neither is bad. Good pitchmen, after all, do make lots of sales (as demonstrated by the success of late-night infomercials), and there’s no denying that great advisors who are also great marketers build great businesses (just ask Ken Fisher). But I’d prefer to be known as an educator rather than a marketer.

3. You must choose your timing.

Will you be reactive or proactive? The former responds to the news: You give reporters your take on what’s trending. The latter sets the trend—establishing you as a thought leader, one who creates the news story rather than someone who merely comments on it.

For example, I was the first IA to say (starting back in the ’80s) that you should not pay off your mortgage. By saying things no one else was saying, it attracted lots of media interest (Oprah was intrigued!), which got me in front of millions of people, getting them to think about something they didn’t know and, in many cases, getting them to contact us to learn how we could help them.

4. You must choose your platform.

We’ve already discussed the media you can use. There are dozens of ways you can get your message out. Choose which methods interest you, and which play to your strengths. If you lack the time, skills or desire, hire others to do it for you—such as speakers, agents, PR specialists and ad agencies. You don’t have to be a great writer. Hire one. Graphic designers can design your newsletter, and public speakers can present seminars for you.

Remember, it’s not the speech you give, the conversation you have, the article you write or the interview you give that matters, per se. Rather, it’s your performance in each forum or platform—because people will equate your performance as a writer or speaker with your abilities as a financial advisor.
Even in everyday places (at cocktail parties, at the mall, at restaurants, at Chamber of Commerce meetings or on the soccer fields where your kids play), you must recognize that people are concluding how good an advisor you are by how well you are coming off in these other settings.

Does your website represent you in the way you want to be seen? Does your business card? How about the way your telephone is answered? What kind of furniture and reading material will prospective clients notice in your office?
Everything is a performance.

5. You must prepare for success.

When executed properly, your business development plan will get your phone to ring. Make sure you’re ready to handle the volume—or people will be disappointed at your lack of responsiveness, and your reputation will be damaged.

For instance, if you send out 10,000 pieces of mail for a direct-mail campaign and get a 0.3% response rate, that’s 30 phone calls. Could you handle them? If you can’t quickly return those calls and book the appointments that might result from them, you’re wasting your time and money—and annoying those who respond.

This means you must spend time and money before mailing those letters so that you’re ready to capitalize on the campaign’s success. Otherwise, you’re simply planning for failure.

There is no question that every advisory practice must have a successful business plan with sufficient resources devoted to make it successful. If you don’t have a plan, don’t know how to create one or don’t want to spend the time and money necessary to make it work, realize that you are unable or unwilling to compete with other advisors.

If this is you—and it is for two-thirds of the advisors reading this, according to that FPA study—then you have two choices: You can quit or retire. Or you can join a bigger firm that has figured out all this business plan stuff. The advisors of my firm let me do the marketing (which they hate) so they can focus on advising and serving clients (which they love).

You can make a similar choice: develop and execute a great business plan, or work with a firm that does it for you.

And please realize that if you fail to make a choice, the marketplace will make it for you. Without a business plan, you’ll fail to attract and retain enough clients—and you’ll be forced to either quit or join another practice. You and your clients will be far better off if you control that decision instead of letting market forces dictate it for you. 

Ric Edelman is chairman and CEO of Edelman Financial Services LLC, a registered investment advisor. He is an investment advisor representative who offers advisory services through EFS and a registered principal of (offering securities through) Sanders Morris Harris Inc., an affiliated broker-dealer and member of Finra/SIPC. He can be reached at [email protected].