Hortz: Why do you believe this change in managing and operating a financial advisor practice is so needed at this time amid such volatility, uncertainty, and complexity of issues on so many fronts that we are dealing with right now?
Robinson: The reasons you mentioned are precisely why we believe that adapting and changing to current conditions is perhaps the only way to survive in any field, but especially as an advisor. Consider the headwinds affecting advisors right now: fee compression, consolidation, the move to virtual advice, robos, etc. In some cases, these are systemic shifts. An advisor can choose the status quo, but the risk of making that decision today is multiples higher than that same decision 10 years ago. We have found that advisors who are also entrepreneurs are more inclined to attack these shifts head on, where an owner or steward might react slower.
Hortz: That brings us to an interesting topic. How then would you characterize and define the difference between a business owner and an entrepreneur?
Robinson: Generally speaking, I believe the primary difference between business owners and entrepreneurs comes down to risk. This is both the types of risks taken, but also a person’s preference for risk. In my view, a business owner takes calculated risks that are well-defined and often linear. On the other hand, the entrepreneur is more likely to take larger risks on the basis of recognizing a larger opportunity, which is often unseen to most, even when standard measures might put the risk of ruin higher than the expected payoff. I often sum up the difference with the notion that business owners prefer calculus, while entrepreneurs prefer statistics.
Hortz: How do you see this difference in mindset applies specifically and is relevant to financial advisors and the financial services industry?
Robinson: In my view, there is a common misconception that all financial advisors are also entrepreneurs. I do not see the advisory business as being statistically different from any other industry in terms of the mix between business owners/operators and entrepreneurs.
The difference in risk tolerance between the two manifests itself in how quickly and wholeheartedly they embrace change. Whereas an owner/operator may choose to more methodically scale their practice, an entrepreneurial advisor is more likely to rapidly implement larger-scale changes.
Even though the pace of change is more rapid among entrepreneurial advisors, that does not mean they do not hit a ceiling from time to time. In fact, hitting the ceiling is a common frustration we hear from advisors who fit the entrepreneurial mold. They see potential for their practice, they sense it is right in front of them, yet they just cannot quite get to that next level. That’s where the Entrepreneurial Operating System can add tremendous value. It is an accelerant that helps an advisor figure out how to get there.
Hortz: What are some key questions or distinctions that an entrepreneurial advisor needs to focus on versus a traditional advisor business model?
Robinson: The entrepreneurial advisor continually asks questions like: How do I compete? What’s my edge? Am I personally focused only on the highest-impact activities?
Traditional advisors might try to do a little of each of the four pillars described in The Elite Advisor Playbook. Entrepreneurial advisors take a different approach. Rather than try to carry the world on their shoulders, elite advisors evolve their practice so they can focus only on high-impact activities – while outsourcing anything where they add the least value relative to the time commitment required.
Outsourcing can take many forms. In the area of client service, it could mean implementing technology that makes routine servicing more efficient and differentiates the practice from others. For wealth management, it could be outsourcing the investment management function, which frees the advisor up to spend time on client service and business development. Another big one we have seen in this time of social distancing is the use of video. Elite advisors were early adopters of shifting to video, which gives them an edge.
Hortz: Any other thoughts or recommendations you would like to share with practitioners on becoming a more elite, entrepreneurial advisor?
Robinson: Being elite suggests the ability to perform better than most and demonstrate superiority in quality, rank and skill. This is inherently a very high standard that is worthy of aiming for because it will improve an advisory firm’s ability to help its client achieve their goals, while improving the firm’s profit margins at the same time. Practically speaking, an advisor can begin walking the path toward being “nextgen” simply by taking small steps like adding efficiency through technology and leveraging digital communications. Additionally, embracing outsourcing in all facets of the business, but especially investment management, can free up valuable time to focus on working “on” the business versus working “in” the business. The bottom line is that the change does not have to be big to be impactful.
It is vital to understand who you are, where your strengths lie, and how you are going to compete against other advisors who are implementing the strategies and tactics discussed in the Playbook. Perhaps it is best summed up with an Avett Brothers lyric – “decide what to be and go be it.”
The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation, and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors — Pershing, Voya Financial, Ultimus Fund Solutions, Fidelity and Charter Financial Publishing (publisher of Financial Advisor magazine).