The Practice Doctor is IN

Al Depman, CLU, ChFC, CMFC, BH

Converting Client Opportunities in 2010 – And Beyond

My favorite science-fiction writer, the late Arthur C. Clarke, wrote a novel entitled 2010: Odyssey Two as a sequel to his bestselling 2001: A Space Odyssey. Clarke was quite a forward thinker and forecast the use of satellites as communication tools before there was even an organized space program. However, in these two Odyssey books, he optimistically proposed that we’d have colonized outposts on the moon and commercial space travel by 2001. On top of that, he projected that by 2010 we’d be exploring the outer planets in manned vehicles and would have encountered an alien race.

Ah, well. 2010 is upon us and we’re still racing around in jets, cars, and space shuttles.  The closest we’ve gotten to an alien race is discovering (by robotic devices) water on the moon and maybe some microscopic fossils on Mars.

What prevented Clarke’s optimistic vision from becoming true? That old bugaboo: reality happened. The unforeseeable events and trends included population shifts, wars, economic booms and busts, underfunded science research, social needs and programs taking precedence over space travel, globalization, terrorism, and even a degree of public apathy toward the space program. 

Each year, advisors attempt to do some prognostication of their own. It’s called “planning for the next year” and the results are not unlike Clarke’s envisioning of the future: reality happens and even the best laid plans often go awry.

I’d like a dollar for every business plan that was put together in December, stuck in a drawer, and forgotten. Many advisors understand the theoretical need for an annual game plan, but act as though they prefer to wing it, falling back into poor prospecting and selling habits, hoping for an elephant to peek over the horizon. 

Naturally, this behavior drives practice management consultants nuts. I’d prefer to have an advisor wake up on January 1, 2010, with a 90% chance of meeting his projected income goal. Yes; it can be done! Of course, there are those overriding events that can doom even the best of plans. In this decade alone, we’ve had 9/11 and the Crash of ’08. On a personal level, illness or relationship problems can throw a monkey wrench into plan execution. In these situations, the advisor must have true accountability partners monitoring the plan so she can react quickly and adjust, minimize the damage, and even take advantage of changing market conditions.

Let’s take a look at the components of a strong business plan for 2010.

My approach is to look at the year through four income layers:

Layer 1:  Recurring revenue from existing clients

Layer 2:  Income from converting opportunities with existing clients

Layer 3:  Income from brand-new clients

Layer 4:  Income from other sources

Layer 1: Recurring revenue from existing clients.  This layer is usually a combination of the following:

• Assets Under Management
• Trail commissions (mutual funds, annuities)
• Recurring plan fees/annual retainers for plan updates
• Group business renewals or fees
• Insurance renewals

The threats to this income layer are clients moving assets, replacing products, or lapsing coverages due to:

• Sub-par performance
• Bad publicity
• Competitive pressures
• Perception of poor value provided by you and your team

To be sure your recurring revenue doesn’t fall prey to any of these threats, your strategy should include:

• Advisor:  Maintaining one-on-one contact with top tier clients and reinforcing your value proposition
• Team:  Driving client contact protocols and offering superior service

Layer 2: Income from converting opportunities with existing clients. How well have you planted the seeds for future product and service sales? This layer can include:

• Obtaining additional assets
• Placing (cross-selling) additional products and services
• Updating or replacing existing products––without “churning” of course! There are legitimate reasons to replace products that are underperforming or have outdated features, as well as converting term to permanent insurance
• Updating existing strategies in light of regulatory, market, or legal changes
• Transitioning clients to a fee-based financial planning program or moving their assets to other money management platforms
• Legacy planning for top clients. Getting to know the next generation can open up plenty of opportunities
• Replacing or enhancing benefits in light of client job transitions such as job loss or retirement

The threats to not identifying or converting these opportunities with existing clients are:

• Losing a client who is unaware you provide those services, and goes elsewhere as a result
• Leaving money on the table because someone took advantage of an opportunity you did not

The strategies to thwart these threats are:

• Advisor:  Identifying client opportunities and integrating them into the review process
• Team:  Maintaining the CRM database and the opportunities inventory; scheduling reviews and opportunities into your client meetings; getting business issued in a timely manner

Layer 3: Income from brand-new clients. This layer is all about your Client Acquisition system and where you’re going to find new clients:

• Referrals (including Centers-of-Influence)
• Friends, family, relatives (from both advisor and team)
• Public forums
• Seminars, including “bring a friend” events
• Trade shows and professional workshops
• Speaking and presentations
• Networking groups, both informal and formal
• Worksite marketing, defined as working with individual members of existing group retirement plans or group health insurance clients
• Orphans
• Observation/face-to-face––starting conversations when you’re out and about
• Lists for prompting and feeding during COI meetings
• Walk-ins, call-ins
• Prospect Inventory
• People who said “call back” later
• People who initially said “no” but agreed to let you stay in touch

The threats of this layer of new client income are:

• Having no statistics for reference––what was an average new client worth in terms of revenue in 2009? How successful were seminars in the past year? Projecting income is guesswork without these statistical analyses.
• Allowing prospects to slip through the cracks

The strategy to prevent these threats is:

• Advisor and Team: developing a strong Client Acquisition system with particular attention to recording prospect sources and posting outcomes from each source.

Layer 4: Income from other sources.  Some possibilities for this layer include:

• Joint work and other commission/fee sharing with other advisors
• Bonuses
• Recognition – trips, conferences
• Overrides on advisors you mentor
• Other production payouts
• Stipends for training or other services
• 1099 work
• Royalties, speaking fees, and the like

The threats to this layer are:

• Not being aware of bonus points or recognition levels
• Not being open to collaborations with other advisors

The strategies to avoid these threats are:

• Advisor:  Knowing the bonus and recognition targets and tracking progress toward them; finding other advisors willing to do joint work in which both parties benefit by earning additional income and learning new skills.
• Team:  help track the progress towards bonus and recognition points

The bottom line formula for 2010 planning looks like this:

   Existing Clients recurring revenue (Layer 1)

+ Existing Clients converted opportunities (Layer 2)

+ New Clients (Layer 3)

+ Other compensation (Layer 4)

= Total income for 2010 

Your chances of forecasting success next year will be stronger using this approach and monitoring it at least quarterly, making adjustments as necessary. It’s not rocket science or Space Odyssey visionary material––it’s simply smart planning. Arthur C. Clarke would be proud!

The Doctor is OUT

Al Depman, CLU, ChFC, CMFC, BH, a.k.a. “The Practice Doctor”, is MitchAnthony.com’s Business Practice Consultant. He is the creator of “The Practice Management Assessment” tool and materials and has authored numerous articles in professional publications on practice management, and author of the book, How to Build Your Financial Advisory Business and Sell It at a Profit, now available from McGraw Hill. Al combined his Liberal Arts studies with 10 years of management experience with McDonald’s Corporation to enter the financial services world 25 years ago. Since then, Al has evolved from an MDRT-level sales rep into a full-time consultant specializing in helping others engineer their business practices to the next level. Contact him at al@mitchanthony.com.

© 2009 Al Depman