Don's Monthly Newsletter: "The Critical Gap in Advisor Development" - September 2024

Financial Advisors as a group are among the smartest people in the world. We rank alongside medical and legal professionals for native intelligence. Yet our failure rates are much higher than theirs. According to Cerulli, only 30% of Advisors make it past the first few years. After five years, the survival rate is closer to 20%. Why is that?

There are lots of reasons, of course. One is that it is difficult to build a successful business, any business, not just a financial planning business.

Another reason is timing. Poor timing can derail a career before it gets off the ground. Trying to make it as a new Advisor in a bear market is an almost impossible task.

A sensitivity to rejection is a third reason. An aversion to rejection always leads to not seeing enough people and not seeing enough people guarantees failure. Rejection hurts everyone and not everyone reacts well to it. Psychoanalysts call rejection a ‘narcissistic injury.’ A narcissistic injury hurts our self-esteem and reactions vary. There’s an interesting article in Psychology Today entitled Why Does Rejection Hurt So Much? The article is dated June 19, 2021. To quote the author Vanessa Moore, “Some get over their rejection quite quickly, while others remain permanently hurt and aggrieved: an example is Miss Havisham in Charles Dickens’ Great Expectations, who stopped all the clocks in her house at the precise moment when her fiancé jilted her.”

A fourth reason, in my opinion, is the way we are training new Advisors. I am not suggesting the training is wrong. I am suggesting the training is incomplete. Training today is technical because we live in a technical world. The industry requires a deep understanding of complex financial concepts, regulations, and products. There are several key reasons for this:

Regulatory Requirements: Financial Advisors need to pass licensing exams such as the Series 7, Series 66, and others, which focus heavily on technical knowledge, laws, and regulations. Advisors must ensure they comply with financial laws to protect both themselves and their clients.

Complex Financial Products: Advisors need to be familiar with a wide range of products, including stocks, bonds, mutual funds, insurance, and estate planning tools. Understanding the intricacies of these products is essential for creating sound financial plans.

Risk Management and Compliance: Advisors need to know how to assess clients' risk tolerance, ensuring proper asset allocation, and adhering to fiduciary duties. This requires strong technical knowledge to avoid potential legal and financial pitfalls.

Quantitative Skills: We rely on technical analysis, portfolio management strategies, and complex financial modeling to guide investment decisions. These skills require rigorous training.

There is a lot to be learned and only a limited amount of time in which to learn it. I get that. But with such heavy emphasis on regulatory and compliance concerns, we seem to forget that nothing happens without an appointment.

While this technical foundation is essential, a focus on soft skills—like communication, emotional intelligence, and simplifying complex ideas—addresses a critical gap in traditional training. Advisors who blend technical expertise with strong interpersonal skills are often more successful at building lasting client relationships and differentiating themselves in the market. In the real world of gathering assets and opening accounts, technical training will, in my opinion, account for maybe ten percent of an Advisor’s success. Ninety percent of an Advisor’s success will come from communication skills, people skills and grit. When I have the opportunity to train and mentor Advisors, Wholesalers and Client Relationship Managers, I focus on those three qualities. I know how critical they are to preventing failure.

Specifically, there are six skills that have been overlooked for so long that they have become forgotten. And that’s precisely why I feel we are seeing so many new Advisors who, through no fault of their own, are overeducated and undertrained.

These are the skills that can set you apart in the financial services industry. These are the tools to fast-track your success:

The Art of Persuasion

Mastering the art of persuasion is essential for building a successful business. The ability to inspire and influence others is what drives true success. Effective persuasion empowers you to turn your ideas into action, motivating clients to choose you and follow your advice. Without these skills, attracting high-impact clients and achieving business growth becomes a significant challenge. By becoming a master of persuasion, you'll enhance your ability to attract and retain clients who will significantly contribute to your success.

Distinctly Different: How to Break Away from The Pack:

Imagine three glasses of exquisite red wine on a table. To an average observer, they might all look similar, but to a true connoisseur, the differences are clear. In the same way, when families are searching for a Financial Advisor, they may see multiple options that seem comparable at first glance. To stand out and be the obvious choice, you need to distinguish yourself as the best communicator, the most skilled in people interactions, and the provider of the superior service model. It’s important that you know how affluent families select their financial advisors and why they are drawn to those who are unmistakably different. By making yourself distinctly different, you’ll forge a strong brand identity, build customer loyalty, and drive your business to new heights.

Mastering Conversational Skills

Meeting new people and initiating conversations can be daunting, yet these skills are crucial for financial advisors looking to expand their network and build relationships. Many Advisors struggle with this because engaging with strangers taps into deep-seated fears and uncertainties. The discomfort often stems from not knowing what to say, worrying about how the interaction will go, and lacking the confidence to improve the situation if it starts to falter. By refining these skills, you'll become more adept at starting and steering conversations, turning opportunities into meaningful connections and business success.

Mastering the Art of Storytelling and Storyselling

I urge every Advisor to unlock the power of storytelling in your financial advisory practice. Top-tier Financial Advisors don’t just explain—they captivate. They use storytelling to break down complex financial concepts into vivid, memorable "word pictures." Master the art of storytelling to simplify your message and resonate with your clients on a deeper level. While data persuades, stories motivate action. A well-told story can evoke the emotional connection needed for clients to trust your advice. In fact, Forbes reports that people are 22 times more likely to remember data when it’s woven into a compelling narrative. Advisors who can tell powerful stories naturally excel at selling themselves and their ideas.

The Power of Simplicity

Top-performing Financial Advisors understand one crucial truth: people don’t buy what they can’t grasp. That’s why the best in the business excel at taking complex financial data and translating it into clear, memorable concepts. They skillfully weave data into stories and analogies, making it easy for clients to understand and connect with. By doing so, they overcome the "Curse of Knowledge" and communicate with purpose and power. I urge you to master the art of simplifying your message and delivering it in a way that leaves a lasting impression.

Resilience: The Key to Sustained Success for Financial Professionals

As we climb the ladder of success, it's easy to drift away from the fundamentals that got us there. However, top-tier Advisors understand that excellence is rooted in consistently mastering and revisiting the basics. They refuse to accept anything less than their best, no matter how advanced they become. Mastering the basics is challenging and maintaining them requires even greater discipline—but that’s what separates the elite from the rest. There are essential basics you must master. And then you must create actionable strategies to ensure these fundamentals remain at the core of your practice.

I urge you to focus on and master these six skills. When trying to form meaningful relationships built on trust, being street-smart is a lot more useful than being book smart.

AskDON

This month’s coaching question comes from Russ in Ohio.

Don, I have some clients who stay focused on their goals and, as a result, they are committed to the long term. Their expectations are easy to manage. And I have clients who cannot stay focused on the long term. They are worriers and are fidgety. The clients who are long term are not likely to leave for another Advisor. The short term clients can and do leave. I can literally guess in advance who I am going to lose. My ask from you is a simple presentation that reinforces the long term message. I need something for those iffy clients that is easy to understand and easy to remember.

Russ, I have written a presentation for you to use. I’ve entitled it, "The Power of Patience: Why Long-Term Investing Pays Off"

Mr. and Mrs. Client, “Have you ever planted a tree and expected it to grow overnight?"

Give then a moment to think about their answer. Then continue.

"Think of your investment portfolio like a tree. When you plant a seed, you don’t expect a fully grown tree the next morning. You water it, give it sunlight, and nurture it. Some days, it may seem like it’s barely growing, but over time, with patience, it becomes a strong, sturdy tree."

“Now imagine checking on your tree every hour and pulling it out of the soil because it’s not growing fast enough. Each time you do that, you disrupt its roots and prevent it from growing. This is similar to how short-term thinking and reacting to daily market movements can harm your investments."

"The stock market is like weather—it can change from day to day. Some days are sunny, others are stormy, but just like a tree weathers storms and thrives in the long run, your investments grow stronger over time. Market volatility is normal, and just like with the tree, pulling your money out every time there’s a storm only weakens your growth."

"Staying invested over time allows your portfolio to grow and recover from the storms. Just like how a tree grows bigger and stronger over decades, your wealth accumulates over years—if you let it. The key is to remain patient and focused on the long-term goal, not the daily fluctuations."

"Here’s the data: historically, the stock market has consistently provided positive returns over the long term, despite short-term drops. By staying invested, you allow time to work in your favor."

"Like the roots of a tree growing deeper into the soil, your investments grow through the power of compounding—reinvesting your earnings to generate even more returns. This only works when you stay in the market and give your portfolio the time it needs."

"So, remember—just like a tree needs time to grow, so do your investments. The storms will pass, but if you stay patient and focused, the rewards will be worth it."

"Great trees don’t grow overnight, and neither does your wealth. Let’s commit to nurturing your financial future by staying the course and focusing on long-term growth."

Russ, if you use this tree analogy, I believe your clients will better understand the importance of staying invested over time and avoiding the temptation to react to short-term volatility. It reinforces the power of patience in growing both trees and wealth.

Thanks for your question.