Level 3. Salespeople simply move from prospect to prospect. Their work is transactional, and all that matters is finding the next prospect. But successful financial planners have ongoing contact with clients—people who previously bought something from them—and realize they don’t have the luxury of spending all their time hunting for new ones. Old clients call you, and you have to make time for them. This requires you to develop operational efficiency, and that’s when you find yourself at this new level. Congratulations! You’re now actually operating a real practice.
But this is where many advisors stop. They’re frozen at Level 3. That’s been fine, until now. Because, as we’ve discussed, external forces will interfere with your ability to sustain yourself at this level. You must move on.
Level 4. It is here that you deal with profit-and-loss statements, and you find that you’ve hired not just more advisors but also experts in other fields to help your firm operate and grow. People in such fields as IT, HR, operations, compliance, trading, marketing and more.
It is at this level that you’ve done something remarkable. Few Americans have ever contemplated it, even fewer have attempted it and only a tiny number have accomplished it: You’ve created something that has a value all its own.
Advisors at Levels 1 through 3 have one thing in common: They have jobs. They earn income from those jobs, and if they quit, their income stops. Even planners at Level 3 don’t have anything that anyone would buy for any material amount. But here, at Level 4, you’ve built something real. Something that can survive you, meaning that it has a material value. The question for you now is: How can you maximize its value?
If you don’t focus on this question, you run the risk of having that value dissipate.
Level 5. This is the ultimate level, a rarified achievement: You’re now managing a very large company, one worth hundreds of millions of dollars that one day will be acquired or launched as an IPO.
It’s not necessary for you to have such lofty goals of achieving Level 5, but getting to Level 4 is important. Everyone below these levels is at risk of being swept away by the shock waves of the next BOOM!
You can stay where you are. But I warn you, most who do won’t be in this business 10 years from now. Plan now for your retirement or for starting another career.
Or plan to merge with another practice similar to yours. Creating scale can help you withstand the boom when it hits.
Finally, you can join one of the firms already at Level 4 or 5. Hundreds of advisory firms, even those at Level 4, are in discussions with counterparts as you read this. The biggest, most successful firms will become bigger and more successful. Joining them will help you do that too.
Ask yourself which level best describes your operation, and how you’ll get yourself to the next one.
Ric Edelman, chairman and CEO of Edelman Financial Services LLC, a registered investment advisor, is an investment advisor representative who offers advisory services through EFS and is a registered principal offering securities through SMH. Advisory services offered through Edelman Financial Services LLC. Securities offered through Sanders Morris Harris Inc., an affiliated broker-dealer, member FINRA/SIPC. You can connect with him on LinkedIn or on Facebook at www.facebook.com/RicEdelman. Follow him on Twitter at @RicEdelman.