All of these actions result in what I call "success on purpose" - and it's an approach that any advisor who wants to enhance his or her success should be adopting right now.
My firm's new survey of 219 advisors included each of the three major industry channels: RIAs, wirehouse employees and independent broker-dealer representatives. All of the advisors surveyed have been in the industry for at least five years and manage at least $50 million.
As we examined the results, we segmented the advisors by net income - the one metric that best indicates the level of success. After all, a firm can have a great many positive things going for it, but ultimately none of those factors matter if it isn't profitable. Here's what we learned:
* The vast majority of advisors (66.2%) earn $150,000 to $499,999 in average annual net income.
* The next largest group (16.9%) is the least successful, earning less than $150,000.
* About one in eight (12.3%) earn $500,000 to $999,999.
* A very select group (just 4.6%) generate the best results: net incomes of $1 million or more.
The group of top-earning advisors caught our attention - especially when we saw that their incomes in 2010, compared with 2009, rose by an impressive 27.5% on average. The other three groups' year-over-year income growth was nowhere near as good, ranging from 11.8% to 18.7% on average.
BEST MANAGEMENT PRACTICES
What accounts for the fact that a small group of advisors greatly outpaces their peers in terms of both net income and income growth? I've said that it's partly due to a highly client-centric approach relative to other advisors. But there's more to it than that.
Our research and experience, both in the new study and earlier survey, tell us that time and time again the most successful advisors are those who deliberately focus their efforts on clear goals. They position themselves to attract affluent clients and then leverage their teams and systematic processes to serve those clients very well while earning a high profit. They succeed on purpose.
HOW THE SUCCESSFUL SUCCEED
We found that the top advisors earning at least $1 million stand apart in a number of key business management practices, revealing and reaffirming important clues to their success. For example:
They position themselves to attract the affluent. Financial services professionals identify themselves with a broad range of titles, including financial advisor, wealth manager, investment advisor, financial planner, investment consultant, wealth advisor, investment manager, personal CFO, investment expert and more. Knowing what advisors call themselves is instructive in not just how they promote themselves to prospective clients, but also how they think of themselves and their businesses.
In our survey, advisors in the higher-income groups are much more likely to position themselves as wealth managers than are those in the lower-income groups. Among the top-income group, fully half call themselves wealth managers. In contrast, financial advisor is used most often by those in the two lower-income groups. While certainly an accurate term, it is less likely than wealth manager to position a financial advisor as someone who is well qualified to address the financial concerns of the affluent.
They engage in formal business and marketing planning. Elite financial advisors' actions are part of a deliberate, formalized approach to growing the business. As seen in the charts, 70% of the top-earning advisors have formal business and marketing plans. This number exceeds all other groups in both types of planning and is markedly higher for marketing planning. These figures aren't dramatic enough to suggest that formal planning alone is generating their big success. However, such planning does provide important clarity and discipline for deliberate action.