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