Paul Kingsman

Just because something is simple to understand, doesn’t mean it’s easy to do.

When we hear explanations that are straight-forward and uncomplicated, often we move quickly to assume that doing them will be easy. When we find that it’s not, we become angry – even frustrated. This is compounded by the fact that we then feel worse for failing at something that initially looked effortless.

Let’s use weight loss as an example.

Think about losing weight. Losing weight can be boiled down the following formula: Expend more calories than you consume.

Simple.

Yet apparently anything but easy. Weight Watchers 2009 revenues alone were $1.5 billion with the entire US weight-loss market exceeding $55 billion.

While expending more calories than you consume (losing weight) might be simple to describe and understand, doing it successfully and safely is not easy.

When we assume we know the amount of effort required to reach a goal or objective based upon our ease of understanding, we can open ourselves up for disappointment. Ease of achievement is not necessarily correlated with ease of understanding. Simple is more of a cognitive response, still requiring a physical and emotional doing and result. Just because cognitively we can understand it, doesn’t mean physically make it a cake walk.

We often revert to breaking things down into smaller pieces, thinking that by making them more understandable, they will become easier to execute. Don’t be fooled and frustrated by this.

When you’re pursuing goals:

Understand that even when things sound simple i.e. picking up the phone and dialing, it is not necessarily so.

Don’t diminish your assumption of the effort needed to achieve the task just because it can be articulated briefly and with few words.

Don’t get discouraged by what sounds simple turning out to be difficult.

Instead,

Realize that the main thing is getting the task done.

See that because it’s not easy, most people will not carry through and complete the task properly.

Understand that by you doing so, you deepen conviction for what you’re doing and increase your chances to grow your business and deepen and develop as a person.

Remember our scenario:

Independent adviser on 85% payout.
Goal: Within 4 years, to annually generate before expenses, $340,000
Charging 1% on assets managed

You’ll need to generate $400,000 to your grid, the company will take 15%, leaving your 85% payout at $340,000.

If you’re looking to generate the above scenario, you need to be managing $40mm – it’s that simple.

Over 4 years, that means you’re hunting $10mm each year.

The next step is a combination of you deciding how many clients you’d like to work with and what their ideal asset level will be. This goes a little deeper than just doing numbers as it forces you to think about how you’ll structure your business and which type of client you’re looking for. For the purposes of this series, we’re assuming you want to be gathering assets by offering different planning and investment platforms for your clients. We’ll cover what those look like a little later in the series.

Once you’ve solved that issue, come back to the numbers.

Remember, you’re looking for $10mm in Year 1. $10mm at 1% is $100k – of which you’ll keep $85k. If your expenses are running at roughly 20%, you’ll keep $68,000 before taxes. Depending on your cost of living, etc, the first year might challenge you a little, but keep focused on what Year 2 and beyond will look like.

If you decide your sweet-spot are clients between $500k and $1mm – great. Now figure out what that looks like.

It might look like this:

3 $1mm clients ————— $3mm
4 $750k clients ————— $3mm
8 $500k clients ————— $4mm

That means you’re looking for 15 clients. That’s a little more than a new client each month and way less than 2 new people a month. Can you see and feel how achievable this is?

They’re out there needing to meet you. Who are those 15 people who will be blessed to work with you this year? If you get more than the 15 great people this year, and they’re the right people – fantastic. Obviously looking forward from here, you’ll build a practice of 60 or so ideal people. We’ll look at just what this might look like later on also.

By having a number of right people you’re pursuing rather than an asset level, you’ll become discerning as to who deserves to be working with you and who doesn’t.

By being specific about what you want to be generating in your practice, you can see clearly the number of clients you need and the respective number of assets each must have.

Next week, we’ll look at some different criteria for finding and selecting clients. Some people prefer a niche strategy, others prefer the AAA approach. We’ll look at each next week.

Happy Hunting.
-Paul

Start building the practice you desire by being clinical and putting down some real numbers.

Often advisers aren’t as realistic and practical as they need to be so here’s an example of what thet can look like. Although things don’t happen as neatly as we’d like them to, you must begin from somewhere. It’s not as hard as what people think it is. Just because there are so many opinions available to listen to, doesn’t make building a successful practice a complex thing.

Scenario: Adviser who is increasing clients, but none too significant enough to skew the book.

Independent adviser on 85% payout.
Goal: Within 4 years, to annually generate before expenses, $340,000
Charging 1% on assets managed

Adviser needs to generate $400,000 to their grid, the company will take 15%, leaving their 85% payout at $340,000.

If you’re looking to generate the above scenario, you need to be managing $40mm - it’s that simple. There’ll be bits and pieces – maybe an insurance contract here, a transactional payment there, but by and large, lets get some larger guidepost numbers down first.

We’ll set a 4 year goal, a fixed date with which to reach that by – let’s say by December 31, 2014. Not 2014, not December 2014, but by December 31, 2014.

That means you need to bring in $10,000,000 in year 1.

Note: The more realistic you are with first year numbers, the easier you’ll survive. You’re covering overhead yourself, so I’ve factored this into the scenario somewhat. Obviously expenses will vary relative to location.

Next week we’ll look realistically at how that will be made up.

As you’ll see, with a realistic, focused, clinical approach to finding the right number of right clients, along with a great relational demeanor you develop, getting the money you need, clients you want and having time to do what you love, is closer than you think.

See you next week.
-Paul

While advisers are provided with a load of information about the importance of focusing on relationships, the most important thing is to know the ‘X’ number of perfect relationships you need based upon the assets you need to manage to enjoy the lifestyle you want – it’s that simple.

It sounds great to talk about deep relationships, but you can have 5 awesome relationships and chances are, unless one of them is Warren Buffet or someone of his bank balance ilk, you’re going to starve to death. You have to know the ‘X’ number of people you need at that particular asset value, then go relentlessly hunting, find them and bag them.

There’s nothing wrong with getting clinical. In fact, by getting clinical about exactly what you need, you’ll more quickly set up strategies to then find the people you wish to work with.

If you intend to charge 1% on AUM, and are on an 85% payout structure, you’ll gross (without office, admin. and other operating costs being removed) $8,500 for every $1mm client you find – $4,250 for every $500K client.
If you want to make $85K annually, you’ll need to find 10 of these people if you average $1mm each time – 20 of these people if you average $500K.

If you want to be generating $340K in 4 years, you’ll need to find 40 people who have $1mm, or 80 people who have $500K.
You could find 10 or 20 per year for the next 4 years straight and there’s your $340K!!

Not bad.

Whether you need 40 or 80 clients, who gives a rip – once you’ve got them, there’s you’re $340k. That’s pretty good and I say worth shooting for.

Yes, first you must know why you want what you want. But after that, once you have your dream TARGET goal locked in your mind, go and get it.

It’s that easy…well actually, the next steps take some effort, but they’re worth it.

Stay tuned to learn them.