The Triple Whammy of Advisory Business
The Triple Whammy of Advisory Business
Are You At Risk to the Triple Whammy?
The Triple Whammy of Advisory Services
Have you ever heard of The Triple Whammy? It’s the bane of a financial advisor’s existence. It is the wall, a storm on the horizon, and a rising flood.
The Triple Whammy will sink you. The Triple Whammy will leave you exhausted and exasperated. It will make you question your career choice. It will make you regret your decision to become an entrepreneur. It can strain your marriage and your family life. And it may also lead you to prematurely sell your firm to untangle yourself from the mess.
Hard decisions must be made to escape The Triple Whammy. Like Frodo unraveling himself from Shelob’s lair in The Lord of the Rings, every turn is full of unsavory choices that, when avoided, only lead us deeper into the web.
What is the Triple Whammy?
Too Much Work
For Too Many Clients
For Too Little Money
Repeat it:
Too much work, for too many clients, for too little money.
Who wants that? Not me. I doubt you do, either.
Part of what led me to start writing The Value of Advice and, specifically, The Focus 50, was I consistently noticed these dynamics at play. The Triple Whammy was in my practice. It was in my former firm. Though it wasn’t named, I heard about it on podcasts. I saw it on Twitter. And I discussed it often with friends and colleagues.
Advisory firm owners constantly confront the triple whammy because of an inability to make other hard choices, like raising fees, defining a niche, graduating clients who are a poor fit, and, often, overserving their clientele.
When you decided to start your financial advisory practice, you didn’t sign up for the Triple Whammy, but confront it you must.
The Triple Whammy leads to:
Overstaffing
Under compensation
Low Margins
Burnout
Inefficiencies
Frustration
Resentment
Challenging Client Relationships
A ‘Grow-at-all-costs’ mindset
I believe the answer to the Triple Whammy is the Focus 50:
Limiting the number of clients works as a forcing mechanism to focus on client quality, firm efficiency, delivering an outstanding service, lifestyle, and profit margin.
It’s like Warren Buffett’s punch card metaphor. Have you heard this one?
Charlie Munger relayed this focusing technique of Buffett’s during a presentation at USC Business School.
I could improve your ultimate financial welfare by giving you a ticket with only 20 slots in it so that you had 20 punches — representing all the investments that you got to make in a lifetime. And once you’d punch through the card, you couldn’t make any more investments at all.”
Under those rules, Buffett explains, “you’d really have to think carefully about what you did, and you’d be forced to load up on what you really think about. So you’d do much better.
Think of your client acquisition as a punch card, especially once you have a semi-mature business. Ask yourself, “If I work with this individual for the next twenty years will I be satisfied with the terms of the relationship? Will I always be happy to hear from them and proactively serve their financial needs? Will I feel compensated and valued for my efforts?”
A punch card mentality is vital in the beginning stages of your firm, but it is harder to implement. It’s difficult to say ‘no’ to a prospective client who wants to work with you despite your misgivings. I don’t begrudge you that. But take this: Every client I signed on despite personal hesitations presented challenges to my business down the road.
Every. Single. One.
So, what’s on the other side of the Triple Whammy?
If you are willing to make some hard decisions, here’s what is waiting for you on the other side.
Ideal Clients
Incredible Work/Life Balance
Ample Vacation Time
Hyper-profitable firm
Happy and well-paid staff/contractors
An efficient and respected practice
These sound pretty good, right?
I’ll write more about The Focus 50 and The Triple Whammy in future posts.
For now..
Your Cause is Righteous.
The Song That Made Me Buy an Electric Guitar
I was an acoustic guy. I don’t need an amp! Or electricity! But then I saw this video of Warren Haynes with the Dave Matthews Band. Hair blowing in the wind and tone for days. Have mercy!
I immediately saved up my cash for a knock-off Les Paul. I’m more of a Telecaster person now (and still very much an acoustic guitar lover), but I’ll never forget the feeling of listening to Haynes’ solo for the first time.
Enjoy!