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
of wholesaler
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.