Not enough clients is a common concern in my industry. Depending on who (client/advisor) I speak to, I get very interesting views on this issue. From the client perspective, if an advisor is constantly chasing for numbers, where will they get the time to really service the client and offer curated solutions for their needs?
As an advisor myself, I can naturally understand why many advisors view meeting more people as the solution to a lack of client issue. When I started out, my primary concern is simply survival. Can I make it in the industry? Naturally, it seems normal to assume that if I served many many clients, then my survivability would be ensured.
Shattering the myth
In a way, I consider myself lucky because I moved from an environment where I really served clients in the hundreds. I was a salaried consultant with one of the global insurers and at that time, I was servicing mainly blue collared clients. Business quality was poor but I was running 3-5 appointments a day, 7 days a week. You can imagine how many people I was meeting.
When I made the move to start my own financial advisory practice, I tried to replicate this 'law of large number' approach. I spent heavily on marketing and outreach efforts so that I could meet a lot of people. I tried everything ranging from roadshows, telemarketing, prenatal new mom initiatives, you name it, I probably tried it... In a way, I was thankful for this exercise because I used to blame the blue collar market for poor business quality. Later some of these initiatives got me meeting white collar clients and business quality was still bad. On top of which, business conversion was not very good either so client acquisition cost became very expensive.
What is bad business quality?
I view business quality as how meaningful the solutions taken up by the clients is to their goals and overall portfolio. In the past, when I didn't have adequate training, I thought $100K or $200K sum assured was sufficient but in reality, it's really not enough for an average client. I would also be happy as long as clients took up some form of savings solutions such as when they saved $100/month or $300/month. Today, I turn down clients if their savings mindset or their solutions they take up is not going to have any meaningful impact on their goals. (Discerning clients appreciate the honesty).
Poor business quality and bad conversion simply means clients do not believe your solutions can give them the life they want. It probably also means the client knows they need to get something done for themselves, are too lazy to find someone else and usually these insignificant commitments is treated as spending frivolously on an average restaurant meal or massage package.
Why is serving many clients with poor business quality an issue?
In the past, my mindset was having many clients is better than no clients even if everyone just bought a little bit. With my experience today, I say with great conviction that this mindset does an advisor and a client no favours.
A lack of clients problem has nothing to do with not meeting enough people. To begin with, many advisors won't really be bothered by the number of clients they serve if they were doing quality business because they can survive in this industry. Only if we are sleeping at home and not doing much, would I say that the issue with not enough clients is a result of a lack of activities. Otherwise, we need to call a spade a spade and accept that the fundamental issue is a lack of skills.
Root problem is a lack of skills not lack of clients
In business, there are certain terms we cannot ignore. One of them is conversion rate.
Conversion rate simply means if we met 10 prospects and 7 became our clients then basically our conversion rate is 70%. If only 3 became our clients then the conversion rate is 30%. So if our conversion rate is 30% and we are meeting 10 people a week, increasing the number of people we meet to 20 would still give us a 30% conversion rate.
"But we would acquire 6 clients instead of 3!"
Yes, hurray! Working hard is definitely good but it's a short term fix to a long term problem. In the first place, poor conversion rate carries deeper issues that impacts clients and this is what I am bothered about.
Poor conversion basically translates to lack of trust, lack of value, potentially poor communication skills. If the financial planning quality is less than ideal, serving 6 clients instead of 3 basically means more people gets exposed to this quality of planning. From a pro-client perspective, it also means client end up with less resources to do something meaningful for their life goals if they sought a second opinion few years later. It's clients' hard-earned money at stake!
What if conversion rate is high but business quality is low?
In a way, it's like an electronic product that is defective. Aggressively marketing it with special offers and exposing the item to more people would increase sales for the short term but eventually people will discover the product is faulty and business would then be once off. They will certainly not refer friends to buy.
On top of which, usually such tactics means low margins. Businesses with such strategies end up spending a lot to put the product in front of many people and potentially give discounts to incentivize people to buy. When the lifetime value of the client cannot be unlocked because the value given is low, then the initial investment cannot be recouped and the strategy because unsustainable in the long run.
Solve a lack of client issue by working on ourselves and focusing on business quality
Back when I transited from employed to self employed, I couldn't get any referrals because I was not referrable. My advisory skills were amateurish and a transactional attitude meant that people were seeing me like that electronic product that was defective. When I spent on marketing or courses to teach me how to acquire clients, I simply got more one time business which also means business sustainability issues didn't go away.
When enough was enough, I changed my perspective. I started focusing on solving the fundamental issue which was essentially what consumers are buying when they work with an advisor.
Quality advice.
Mentorship
I sought mentorship to learn how to do quality business. My mindset was less on survival but fulfilment. I wanted to build a career doing something purposeful.
We work for 40 years of our lives. How long would we want to do hit and run business?
Here's what I found out having learnt the ropes of doing high quality financial advisory:
Clients are not broke, they simply do not trust us enough to open their wallets to us.
When clients trust us, a regular income person and a high income person has the same sensibility to plan for their protection and retirement needs. Nobody retires saving $300/month...
When clients see the value of the advice we offer, they recommend their friends and family to us. It's like good food, you share because you think it's good not because you want to generate business for the restaurant.
When we can get referrals, we will stop chasing for numbers because it's so tiring compared to meet ups with interested people.
How to improve business quality?
Seek out a mentor running the business in the manner you wish to emulate. I'm a big fan of learning from the right people. I believe in perfect practice so learning from people who knows how to execute the steps right is important to me.
Can we teach ourselves how to do quality business?
Possibly. I think it'll take us years through trial and error. I'm not sure if this is a recommended strategy given that the guinea pigs in this process are clients' money...
Only invest in marketing when you can do quality business
There's a time and space to spend money on the business especially in the area of meeting more people. When we know we have something good to offer, we should aggressively let more people benefit from it. This would be the right time to spend on marketing because our return on investment (business margins) would be high. More people get to benefit from a positive experience consulting with us. Win - Win, why not?
Personally, I've strong convictions that the law of large numbers strategy in financial services gives this industry a bad name. I'm a strong advocate of doing quality business with clients because I believe this approach can help restore trust within the industry, make people less fearful to meet FAs and also help clients in a more impactful manner.
After reading this article, you might resonate with this message, want to share more about your challenges or ask more questions, feel free to drop me a message. I would love to get connected!
Be sure to share the article if you feel this information is helpful. You will enable a lot more people to learn more about financial planning as a career.
About Janice I specialize in portfolio optimization (ensuring you get maximum value for every dollar you put in) and retirement planning. I am also building a team of financial advisors who are committed to help responsible individuals attain their goals without misallocating their resources. Do reach out if you would like to explore a career with me. Clients look for me primarily to outsource their retirement planning needs so that they can focus on other aspects of life that interests them. Many of whom are very good in earning their incomes in their respective professions and wish to ensure their monies continue to work harder while they focus on what they are good at. Refer to client testimonials here. I've helped many clients who are referred to me reduce the costs they are paying for their insurance or help provide solutions when they deem they are stuck with huge commitments bought when they were younger but unsuitable for their present life stages. You can reach me at 94313076 or my social media accounts on Facebook and Instagram. Disclaimer: The content created are based on my personal opinions and may not be representative to everyone or any organisation. If you have any doubts or queries pertaining to insurance or investment, please seek professional advice from a trusted adviser in an official setting. You may also reach out to me if you do not have a present adviser using the message box under 'Let's Talk'.
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