Hiring young advisers
and sending them out to hunt for new clients usually doesn't work well. Try
hunting for new clients yourself
August 5, 2020 By Scott Hanson
The best
way advisers can grow their practices and increase the value of their firms is
not by picking winning investments, nor does it have much to do with improving
technology. Nope. The No. 1 thing advisers can do to grow is to bring on new
clients.
But most
advisers have hit a
growth ceiling because the time they used to spend networking
and acquiring new assets is now devoted to the management of existing clients and
picking investments, along with staff and facilities management. That is why,
when you look at the data (after you subtract market performance), over the
last 10 years, many of the firms we audit for partnerships have experienced no
actual growth.
What many
principals are doing wrong is that they’re hiring young associate advisers,
putting them on some sort of compensation “split,” and telling them to go out
and hunt for new clients. This approach has several issues, foremost among them
being that if a young adviser knew how to go out and drum up business, they
wouldn’t be working for you.
Except
for the occasional star (whom everyone is hoping to hire), the associate
adviser hangs on for a few years and brings in very little in the way of
“production,” the principal of the firm gets frustrated, and the adviser quits.
A far
better approach is to accept that as the principal of your firm, the greatest
value you can provide is to find more clients.
Think
back to when you began. If you were like most of us, you got a job with a
wirehouse or insurance giant, along with a bunch of other bright-eyed
youngsters. You then worked your tail off making calls, handing out your card,
going to networking events and trying to develop client relationships, all
while watching your frustrated colleagues give up and go on to other careers.
True, the
success you enjoy today is due in large part to the work you put in during
those early years, but businesses change, and you need to adapt.
Besides,
finding another one of you is not only hard, it’s time-consuming and despite
repeated attempts, most of us never do. And all that expenditure of time,
money, and energy has resulted in high turnover and zero growth for thousands
of firms.
The
organic growth I see today typically comes from hiring a great financial
planner or two, transitioning the bulk of the planning and client service work
to them, and then hiring a staff person to take
care of the managerial duties, so your time is freed up and you
can go out and drum up new business.
If you
transition to this model for few years, not only will your practice start to
grow, you’ll have a scalable, more recession-proof approach in place. And the result
will be that when you’re ready to retire, if you want to sell, you’ll command a
premium price.
Yes, it’s
hard work. But it’s the best way to grow your practice and increase the value
of your firm.
Scott
Hanson is co-founder of Allworth
Financial, formerly Hanson McClain Advisors, a fee-based RIA
with $8 billion in AUM.
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