5 Questions to Answer in Developing your Strategy

Tuesday, May 22nd, 2012

by Norm Trainor, The Covenant Group

1. What is your Busi­ness Model?

Great com­pa­nies describe the essence of what makes them unique in a sim­ple and com­pelling man­ner. For Wal­mart, it is low­est price. Wal­mart rev­o­lu­tion­ized retail­ing by focus­ing upon oper­a­tional excel­lence. The firm does a bet­ter job of sup­ply chain man­age­ment than any com­pany in its space. As a con­se­quence, they are able to ruth­lessly drive down costs and offer lower prices. Four Sea­sons dif­fer­en­ti­ates itself through the qual­ity of ser­vice. Isadore Sharp explained how Four Sea­sons can charge twice the room rate of Hilton or Westin by say­ing: “It is because we do com­mon things uncom­monly well.”

The level of response of great lead­ers in defin­ing the Busi­ness Model is trans­for­ma­tional. The intent is not to com­pete with the exist­ing play­ers, but to make them irrelevant.

Your per­for­mance mea­sures in devel­op­ing your Busi­ness Model are busi­ness via­bil­ity, share­holder wealth and return on cap­i­tal. The time­frame is 10 years or more.

Tra­di­tion­ally, finan­cial advi­sory firms mea­sure suc­cess based upon com­mis­sion earned and assets under man­age­ment {AUM}. The real mea­sure is prof­itabil­ity or earn­ings before inter­est, taxes, depre­ci­a­tion and amor­ti­za­tion {EBITDA}.

Keep in mind that Strat­egy is the align­ment of the out­puts or objec­tives you want to achieve, the sys­tems and capa­bil­i­ties you have to real­ize your objec­tives and the oppor­tu­ni­ties and chal­lenges the envi­ron­ment pro­vides. Your chal­lenge as a leader is to fig­ure out the strat­egy required to max­i­mize share­holder value and return on your cap­i­tal and time invested.

2. What are your prod­ucts, ser­vices, mar­kets and ideas?

One of the ways in which you can pos­i­tively impact EBITDA is through prod­uct and ser­vice mix. As we have dis­cussed, there is sig­nif­i­cant poten­tial for increased prof­itabil­ity of the client rela­tion­ship through the sale of insur­ance prod­ucts, the offer­ing of fee based plan­ning in the areas of finan­cial, estate, tax and busi­ness suc­ces­sion plan­ning and a focus on the whole fam­ily wealth continuum.

This requires a bal­anc­ing of inte­gra­tion and return on cap­i­tal. Rather than mea­sure suc­cess based upon com­mis­sions or asset man­age­ment fees, the key is to mea­sure the over­all prof­itabil­ity of each client rela­tion­ship life­time. The oppor­tu­nity and chal­lenge is to build clients for life.

3. What are your sys­tems and processes?

Great busi­nesses are built upon replic­a­ble processes. A process is a pat­tern or method­ol­ogy that is repeat­able, dis­tin­guish­able and transferable.

A typ­i­cal Star­bucks loca­tion gen­er­ates ten times more rev­enue than an owner oper­ated cafe across the street. The dif­fer­ence in rev­enue is a bi-product of the effec­tive­ness and effi­ciency of the sys­tems and processes Star­bucks instills in each of its oper­a­tions. It is not about the peo­ple who work in Star­bucks ver­sus the employ­ees of the owner oper­ated busi­ness; it is about the sys­tems and processes.

One of your chal­lenges is to imple­ment sys­tems and processes that are repeat­able, dis­tin­guish­able and trans­fer­able. Finan­cial ser­vices train­ing can help you develop, expand and enhance the sys­tem capa­bil­i­ties of your firm.

4. How do you assure qual­ity and con­tin­u­ous improvement?

Great lead­ers instill in those around them the belief that every­one has a stake in the busi­ness get­ting bet­ter. Apple is a clas­sic exam­ple of the relent­less focus upon improv­ing every aspect of the prod­uct and the user expe­ri­ence. Effec­tive­ness is doing the right things. Effi­ciency is doing things right. Your sys­tems and processes ensure that peo­ple are doing the right things. Super­vi­sion and man­age­ment ensures that peo­ple do things right.

5. What is Ser­vice Excellence?

The para­dox of Ser­vice Excel­lence is that the answer begins with your answers to each of the first four ques­tions. Sat­is­fac­tion is the ratio of expe­ri­ence to expec­ta­tion. Doing com­mon things uncom­monly well requires a com­mit­ment to excel­lence on the part of every employee. It also involves the recog­ni­tion that what is value added today will be expected tomorrow.

Con­tin­u­ous improve­ment is a fun­da­men­tal under­pin­ning of excel­lence. The prin­ci­ple of cre­ative destruc­tion does apply. As a leader, you are con­stantly con­fronting the sense of enti­tle­ment that comes with suc­cess. Enti­tle­ment is an illu­sion. Yet, it is a nat­ural bi-product of success.

We believe that we have earned the right to client loy­alty and to high fees. Peo­ple are grate­ful, but only for a short time. Then, they want to know what we are going to do for them going forward.

Great lead­ers con­tin­u­ously chal­lenge peo­ple to be bet­ter at what they do, to con­tin­u­ously learn and grow. As a result, they bring out the best in peo­ple who are com­mit­ted to grow and make it uncom­fort­able for peo­ple who do not share the val­ues of excellence.

Great lead­ers also ele­vate the level of the con­ver­sa­tion. They edu­cate those around them with regard to the firm’s busi­ness model, prod­ucts, ser­vices, mar­kets and ideas, the sys­tems and processes that dif­fer­en­ti­ate the way in which they do busi­ness and the relent­less focus upon qual­ity and con­tin­u­ous improve­ment. These are the ele­ments that lead to Ser­vice Excel­lence. Lead­er­ship train­ing facil­i­tates a cul­ture of ongo­ing feed­back that informs every­one with regard to the stan­dards of ser­vice excel­lence and their contribution.

Sum­mary:

In answer­ing the above ques­tions, start by describ­ing your Busi­ness Model i.e. how you will assure the via­bil­ity of your busi­ness, the return on your time and cap­i­tal invested and the cre­ation of share­holder wealth. This will nat­u­rally lead to an explo­ration of the prod­ucts and ser­vices you offer, the mar­kets you serve and the ideas that dif­fer­en­ti­ate your busi­ness. It will require you to think about the sys­tems and processes required to serve your clients and attract new clients. Ulti­mately, you will evolve a pic­ture of Ser­vice Excel­lence and what is required to be effec­tive and effi­cient in deliv­er­ing this level of ser­vice to your clients. The Covenant Group is here to help in estab­lish­ing effec­tive sys­tems and processes.

Fol­low The Covenant Group

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Tags: Assets Under Management, Business Model, Business Viability, Client Relationship, Covenant Group, Depreciation, Financial Advisory Firms, Great Leaders, Insurance Products, Isadore Sharp, Measure Success, Norm Trainor, Operational Excellence, Performance Measures, Quality Of Service, Return On Capital, Shareholder Value, Shareholder Wealth, Supply Chain Management, Walmart
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The Single Best Way to Start a Client Meeting

Wednesday, November 30th, 2011

What does it take for a meet­ing with a key client to be successful?

Answer­ing that ques­tion requires you to first quan­tify how you mea­sure success.

Here are three alter­na­tive definitions:

• 1. First and fore­most, did the clients agree to move for­ward on at least one thing that will advance their agenda , mov­ing them towards their goals and leav­ing them bet­ter positioned?

• 2. Did the clients agree to move for­ward on at least one item that that will advance your agenda and leave you bet­ter off?

The list of pos­si­ble items here is lengthy, for example:

• A shift in your com­pen­sa­tion model
• Con­sol­i­dat­ing accounts they have elsewhere
• Agree­ing to deal with one of your team mem­bers on day to day issues instead of call­ing you
• Open­ing the door to talk­ing about needs that you’re not deal­ing with cur­rently (so insur­ance if you only have their invest­ments, invest­ments if you only have their insurance)
• Find­ing a way to get to know their kids bet­ter and poten­tially to begin work­ing with their children
• Intro­duc­tions to fam­ily mem­bers or their accountant
• Refer­rals to col­leagues at work

• 3. In the process, was your bond with these clients strength­ened? Did they walk away feel­ing bet­ter about your depth of knowl­edge and pro­fes­sion­al­ism and the extent to which you truly care about their long term suc­cess, beyond the rev­enue you gen­er­ate from their account? Did they leave say­ing to them­selves: “Am I ever glad that Dan’s my finan­cial advisor”

Shap­ing your conversation

I’m going to sug­gest that depend­ing on the cir­cum­stances, a meet­ing can be suc­cess­ful with­out spe­cific actions taken to advance your clients’ agenda or your agenda, but it’s impos­si­ble to have a truly suc­cess­ful meet­ing unless clients walk away feel­ing bet­ter about your rela­tion­ship. Even in tough mar­kets like we saw dur­ing the global finan­cial cri­sis, if clients don’t walk out of a meet­ing more con­fi­dent than they felt when they walked in, the meet­ing wasn’t a success.

I recently got a call from an advi­sor who’d attended one of my work­shops about a year ago and who’s a reg­u­lar reader of these articles.

Over the past year, she’s imple­mented a num­ber of ideas and feels that her meet­ings are much more pro­duc­tive as a result:

• 1. Before call­ing a client to sched­ule a meet­ing, she reviews her files and writes down her goals for the meet­ing, one or two things she hopes to achieve that will leave the clients bet­ter off and advance their agenda and also one thing that will leave her bet­ter off, advanc­ing her agenda.

• 2. When set­ting up the meet­ing, she starts by ask­ing clients what ques­tions they’d like to cover, then adds her own items to deal with (often emerg­ing from those goals she’s writ­ten down) and from that cre­ates an agenda, which she emails to clients before­hand and which is tabled at the start of the meeting.

I encour­age advi­sors to leave the line beside the first item blank and to say “You’ll note that he first item on the agenda is blank. That’s for any ques­tions that have come up since we set the meet­ing up or any­thing else that you’d like to talk about that’s not on the agenda.”

• 3. In devel­op­ing the meet­ing agenda, she fac­tors in some of the research I’ve writ­ten about on the “peak-end effect”. This research sug­gests that what shapes client rec­ol­lec­tions of any expe­ri­ence the most are the “peaks” — the highs and the lows — and what hap­pens at the very end. As a result, she struc­tures the agenda to be sure to end on a high note.

“What should I know about?”

This advi­sor has also incor­po­rated the idea of leav­ing the first agenda item blank, but after ask­ing clients about what else they’d like to dis­cuss that’s not on the agenda, she’s added another ques­tion of her own.

“At that point, I ask clients what’s hap­pened in their lives since we last met that I should know about, whether good or bad.

I have about 150 client meet­ings a year. About 95% of the time I don’t hear any­thing new or I hear great news about pro­mo­tions or buy­ing a vaca­tion home or their kids get­ting uni­ver­sity schol­ar­ships or per­haps expect­ing chil­dren them­selves. In those cases, we con­tinue on with the meet­ing, unless of course their good news has finan­cial impli­ca­tions we need to discuss.

Every cou­ple of months, though, the answer causes our meet­ing to move in an entirely dif­fer­ent direc­tion … I hear about health or work issues with them or fam­ily mem­bers or kids strug­gling with school or careers. Some­times their issues have spe­cific finan­cial con­se­quences that we talk about. Often though, I’m just there to lis­ten and to empathize … it’s amaz­ing how often clients tell me they have no one to talk to about these issues.

At times, that con­ver­sa­tion ends up con­sum­ing our whole meet­ing and we resched­ule. Occa­sion­ally I’m able to point to clients or peo­ple I know who’ve run into an issue sim­i­lar to theirs and ask if they’d like me to find out whether that other per­son would be will­ing to talk about their expe­ri­ence. And where clients are really strug­gling and need more help, I have a cou­ple of psy­chol­o­gists who I refer peo­ple to.

I know this won’t be every advisor’s cup of tea … most of the guys in my branch really don’t want to get into the soft stuff with clients.

But for me, there are four ben­e­fits to start­ing off meet­ings with that ques­tion — ‘What’s hap­pened in your lives since we last met that I should know about, whether good or bad?’

First, I think it sends a pos­i­tive sig­nal about my con­cern for every­thing going on in my clients’ lives.

Sec­ond, it helps me do my job bet­ter, by ensur­ing that plans reflect clients’ cur­rent circumstances.

Third, where clients have pos­i­tive things hap­pen­ing in their lives, which is most of the time, I’m able to con­grat­u­late them and talk about their good news a bit, I find that estab­lishes a pos­i­tive tone.

And finally, where clients are deal­ing with tough issues, I think it’s part of my role as their finan­cial advi­sor to make sure I know about that and to sup­port them as much as I can.

This advi­sor is right when she says that this approach won’t be a fit for every advi­sor. But it’s still worth think­ing about how you’re going to begin client meet­ings to max­i­mize the chances of a suc­cess­ful out­come, how­ever it is that you define suc­cess. And per­haps this advi­sor will inspire you to apply your own cre­ativ­ity on the ques­tion of the best way to start client meetings.

    Lat­est Advi­so­r­An­a­lyst Prac­tice Growth Sto­ries

Tags: Accountant, Circumstances, Colleagues, Compensation Model, Definitions, Extent, Family Members, Finding A Way, Global Financial Crisis, Insurance, Introductions, Investments, Measure Success, Professionalism, Referrals, Relationship, Team Members, Term Success
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The Single Best Way to Start a Client Meeting

Tuesday, March 1st, 2011

What does it take for a meet­ing with a key client to be successful?

Answer­ing that ques­tion requires you to first quan­tify how you mea­sure success.

Here are three alter­na­tive definitions:

• 1. First and fore­most, did the clients agree to move for­ward on at least one thing that will advance their agenda , mov­ing them towards their goals and leav­ing them bet­ter positioned?

• 2. Did the clients agree to move for­ward on at least one item that that will advance your agenda and leave you bet­ter off?

The list of pos­si­ble items here is lengthy, for example:

• A shift in your com­pen­sa­tion model
• Con­sol­i­dat­ing accounts they have elsewhere
• Agree­ing to deal with one of your team mem­bers on day to day issues instead of call­ing you
• Open­ing the door to talk­ing about needs that you’re not deal­ing with cur­rently (so insur­ance if you only have their invest­ments, invest­ments if you only have their insurance)
• Find­ing a way to get to know their kids bet­ter and poten­tially to begin work­ing with their children
• Intro­duc­tions to fam­ily mem­bers or their accountant
• Refer­rals to col­leagues at work

• 3. In the process, was your bond with these clients strength­ened? Did they walk away feel­ing bet­ter about your depth of knowl­edge and pro­fes­sion­al­ism and the extent to which you truly care about their long term suc­cess, beyond the rev­enue you gen­er­ate from their account? Did they leave say­ing to them­selves: “Am I ever glad that Dan’s my finan­cial advisor”

Shap­ing your conversation

I’m going to sug­gest that depend­ing on the cir­cum­stances, a meet­ing can be suc­cess­ful with­out spe­cific actions taken to advance your clients’ agenda or your agenda, but it’s impos­si­ble to have a truly suc­cess­ful meet­ing unless clients walk away feel­ing bet­ter about your rela­tion­ship. Even in tough mar­kets like we saw dur­ing the global finan­cial cri­sis, if clients don’t walk out of a meet­ing more con­fi­dent than they felt when they walked in, the meet­ing wasn’t a success.

I recently got a call from an advi­sor who’d attended one of my work­shops about a year ago and who’s a reg­u­lar reader of these articles.

Over the past year, she’s imple­mented a num­ber of ideas and feels that her meet­ings are much more pro­duc­tive as a result:

• 1. Before call­ing a client to sched­ule a meet­ing, she reviews her files and writes down her goals for the meet­ing, one or two things she hopes to achieve that will leave the clients bet­ter off and advance their agenda and also one thing that will leave her bet­ter off, advanc­ing her agenda.

• 2. When set­ting up the meet­ing, she starts by ask­ing clients what ques­tions they’d like to cover, then adds her own items to deal with (often emerg­ing from those goals she’s writ­ten down) and from that cre­ates an agenda, which she emails to clients before­hand and which is tabled at the start of the meeting.

    Lat­est Advi­so­r­An­a­lyst Prac­tice Growth Sto­ries

Tags: Accountant, Circumstances, Colleagues, Compensation Model, Definitions, Extent, Family Members, Finding A Way, Global Financial Crisis, Insurance, Introductions, Investments, Measure Success, Professionalism, Referrals, Relationship, Team Members, Term Success
Posted in Dan Richards | Comments Off