 
By Frank C. Bearden, Ph.D., CLU, ChFC
If a financial advisor is to be successful, he
must constantly consider which areas to emphasize in his practice.
This is difficult to do early in a career, when a new advisor often
hasn’t had enough experience to know which areas to emphasize
and which to refer to respected peers. More time in practice will
provide additional feedback that will allow an advisor to see areas
of strength and weakness, interest and disinterest. From this information,
he can begin to chart a course that will optimize his success.
Industry trends
A number of changes in the industry have greatly influenced the
importance of discovering areas of emphasis in a practice. These
developments include increased ethical scrutiny of financial advisors
from the media, regulatory authorities, and even clients; a more
sophisticated client base; and increased empowerment of clients
due to the large amounts of financial information available. Advisors
are also facing a growing client desire to separate the price of
financial products from the price of financial advice and more competition
for clients.
This article will provide a method to determine
the right emphasis for your practice. First, I will define a financial-services
practice, which will give you the perspective you need to decide
what to emphasize and what to refer. Then I will describe a decision-making
process—the steps to follow to determine and emphasize your
“A” game.
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| Everyone
does one or more things really well, but no one does everything
well. |
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The practice
A financial-services practice is an agency of service to the public,
offering a series of services in exchange for compensation. Clients
engage the practice to do certain things for them, such as analyzing
their financial needs and wants, determining appropriate changes
to existing products or suggesting new products to consider, and
securing, installing and possibly managing these products in terms
of the clients’ objectives.
In return, regardless of whether or not you are
compensated by commissions or fees, the client clearly provides
the source of funds for the compensation you will receive.
The importance of ethics
The foundation on which any practice rests is a code of ethics.
This code is simply a set of behaviors directed by core values you
believe are important. The values tell you which behaviors are acceptable
and which are not. The NAIFA Code of Ethics provides such a series
of behaviors that are not only acceptable, but are also obligatory
for financial advisors who are NAIFA members. It is within the parameters
of these behaviors, endorsed by the code of ethics you choose or
create, that you must determine the areas of service your particular
practice will provide.
Choosing your niche
Once you understand that your practice is basically a provider of
services, you should first consider the broad span of services your
practice is equipped to provide. For example, if advisors in your
practice are licensed to sell insurance and investment products
and to provide investment advice for a fee, each of these should
be included in the general list of services.
You should then ask yourself which high-quality
services your practice provides. In other words, ask yourself: “In
my practice, what do we do really well?” If you deliver exceptional
service in needs-want analysis and the application of life insurance
products, but do only a modest job with health insurance concerns,
you should consider life insurance analysis and application as a
high-level service. You need to be very honest here if you want
this exercise to bear fruit. Sometimes it’s useful to talk
to a respected peer who knows the practice and will speak candidly.
Once you have separated accommodation or average-quality
services from those you perform well, you should then analyze the
time spent on each quality level of service. If, for example, you
spend 50 percent of your time initiating, carrying out, and supporting
A/B-level services, and 50 percent of your time with C-level services,
you should perform some near-term planning (one year) to accomplish
two objectives.
First, consider which of the B-level services
can be readily increased to an A level. Second, increase the time
in “A and B improvable to A service” to 80 percent.
Intermediate-term planning (three years) should involve efforts
to raise A-level service to 90 percent.
The benefits of shifting your time to the services
you perform at a high level are fourfold. First, offering high-quality
service makes finding and keeping high-quality clients easier. Second,
your employees will be more productive and creative when performing
services they do well. Third, compensation tends to follow the quality
of service, so practice revenues should increase. Finally, employees
enjoy work much more when they “play to their strengths”
as opposed to doing something for which they have limited ability.
Remember that changes in the marketplace have
a way of rendering some professional services obsolete over time.
With this in mind, you should also assess the abilities or “core
competencies” of your employees. The criterion here should
be: “What high-level skills and abilities do we have?”
This knowledge will allow you to modify the services you offer in
line with marketplace changes, improve the accuracy of your firm’s
forecasts and give you more direction in hiring professionals and
other staff.
Everyone does one or more things really well,
but no one does everything well. In order for you to survive and
thrive now and in the future, you must know the core strengths of
both your practice and those of your employees.
Frank C. Bearden, Ph.D., CLU, ChFC, is a field
manager, financial advisor and agent in San Antonio, Texas, and
a member of NAIFA-San Antonio. You may reach him at fcbearden@yahoo.com.
January 2005
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