As a financial advisor, are you operating a practice or a business?

Perhaps the answer is neither. You could be in a transitional phase, a sort of “no man’s land,” if you will, between the two models. And you might not even be aware of it.

Just as single-cell organisms were the first phase of life, solo practitioners were the origin of the financial planning profession. Later, just as life forms merged with others (OK, this analogy is a stretch, but work with me here, people) you may have joined or created a practice with one or two other professionals. 

You might even have a handful of advisors and staff in your practice at this point, causing you to believe that you’re now operating a true business enterprise.

I hate to be the bearer of bad news, but your fledgling practice is not a business. Not yet, anyway. You see, many talented financial advisors don’t own a business; they merely own their jobs. And because of the competitive, technological, regulatory, branding and economic/market challenges, those who own their jobs will die, just like the dinosaurs. And death will be swift, just as it was for them. For us, it won’t be a meteor (BOOM!) that kills off most advisors. Instead, it will be new regulations (the DOL is offering a taste with the fiduciary rule—BOOM!—that will flat out shut down lots of products, entire companies, some broker-dealers and insurance firms). Robo-advisors? BOOM! Underperforming markets? BOOM!

But many animals survived the meteor, and many advisors will survive, even thrive, during the explosions yet to come. Make sure you’re one of them. 

You can start by identifying where you are in the financial advisor evolutionary scale. And to help, we’ll shift to a shoe store analogy.

Level 1. If you’re like most advisors, you began by clerking. Think back to when you talked to your very first prospective clients. What product did you sell them? A stock? A bond? A mutual fund? I bet you sold them whatever they were willing to buy. Just as shoe store clerks don’t really sell you a pair of shoes, you didn’t sell the investment. At the shoe store, customers point to a pair they like and ask whether it is in their size. The clerk trundles off to the back room and delivers the order. He simply gives them what they asked for. 

And that’s how most advisors start. You had a client who wanted tax-free income, so you sold him or her a municipal bond. Another wanted stocks, a third liked to trade options, and still others liked mutual funds. The product mix in your book was as eclectic as your clients. And while most advisors start out this way, some stay at this level forever. Maybe this is still where you are. 

Level 2. Talented advisors evolve from “clerks” into “salespeople.” The latter term may seem pejorative, but it isn’t. A good salesman gives people what they need and uses effective strategies to do so. (Con artists are the ones who sell people products they don’t need.) And if you’re unable to persuade people to do what’s in their best interest, you won’t be a successful advisor.

Think about the shoe store again. When someone tries on a pair of boots that look terrible on them, the clerk-turned-salesman recommends a different pair that better suit the needs of the customer (even if they cost less).

Financial planners who are good salespeople don’t merely give clients what they say they want. Instead, they tell clients what they need to do and recommend products to meet those needs. Thus, salesmanship is an elevation of the advisor’s career.

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