3 Lessons From An Advisor Losing $1,000 Every Day
NOTE: If you’re a new financial advisor, make sure you check out Your First Year As A Financial Advisor, where I reveal several things every new financial advisor ought to know.
What is your biggest expense?
Your staff? Your office lease? Your own salary?
Wrong, wrong, and wrong.
I know that some of you are thinking that marketing is your biggest expense, but that’s wrong too. Marketing is an investment, not an expense.
Your biggest expense might shock you. It’s probably something that you’ve never even considered.
Your biggest expense… costing you thousands and thousands of dollars, even millions over the course of your career….
Is the white space on your calendar.
I was talking to an advisor earlier this week who was utterly convinced that marketing was his biggest expense. He was spending $2,500 or so on each seminar and even more money on direct mail.
He was building his business left and right but was tripping over a nickel to get a penny. He did that by cutting his seminars.
Here’s what I mean….
I asked him, “How much are you making, on average, for each client you bring in?”
He told me, “A ballpark figure is about $3,000 or $4,000.”
I said, “Okay - let’s say $3,000. What’s your closing ratio? If you have ten appointments this week, how many new clients will you bring on?”
“I’d bring on three.”
“Riiiiight…..and how many appointments do you get per seminar?”
“I usually get six or seven appointments.”
“Okay…..so you’re telling me that you typically bring on 2 new clients per seminar. This means you make $6,000 from a $2,500 investment. And you want to stop doing that?”
That’s when he had his revelation. It seems simple to me now, but a lot of financial advisors make this mistake. They view marketing as an expense when the only real expense is the blank space on their calendar.
You see, this financial advisor (let’s call him Mark) was focused on the absolute number, not the relative number. When he receives his business credit card statement, his jaw hits the floor because he sees himself spending double or triple or more on marketing.
Again, that’s when they start tripping over nickels to pick up pennies.
Sometimes financial advisors get freaked out when they see that they’re spending more to market their business than they take home each month. The average financial advisor makes around $80,000 per year ($6,667 per month), so when they see that much or more being spent on marketing, they think they can cut a few things and end up with more money in their pocket.
Wrong. Without INVESTING money in marketing, there is no take-home pay.
You could be the best financial advisor in the world, but if nobody knows you, you won’t be successful. That’s why your calendar’s white space is keeping you from reaching all of your goals.
Let’s assume that you want to bring in $20 million in new assets this year. To tell yourself something like “I need to see more people” is too vague. You need to figure out what it will take to reach $20 million in assets, based on your average case size and your closing ratio.
For example, if your average case size is $250,000 and you close 20% of your appointments, that means that you need 80 new clients. ($20,000,000/$250,000 = 80 new clients) From there, you know that you need to have 400 new appointments this year. (80 X 5 = 400)
If you aren’t taking action to generate those 400 appointments, you are failing. I want to call it like it is… you are failing. Many people don’t realize how important marketing really is. Instead, they spend too much time reading and analyzing plans and doing other busywork.
Or they say, “It doesn’t work for me” or “it’s too expensive”.
It’s so sad to see a financial advisor who has tons of experience and is extremely educated but struggling. This is the same advisor who isn’t marketing. Yet, I see less experienced advisors, who aren’t as well-versed or as well educated running circles around their peers.
The more you market, the more appointments you have. The more appointments you have, the more money you make.
The actual dollar amount that you spend on your marketing is 100% irrelevant. It does not matter. If I told you to spend $1 million on ads right now, you’d probably freak out a little, right? But what if I told you that you’d get $3 million back? That’s how the game is played.
Of course, I recommend starting out small. You test and tweak until you know for sure that you have a profitable marketing strategy - one that’s giving you a solid ROI. Then you scale that thing up like crazy. You POUR money into it.
But that’s the major key. You have to have a profitable marketing machine. If you struggle with marketing and think it can’t work for you, it’s because you aren’t doing it right. Period.
A prime example of not doing it right is spending money on “branding”. I cringe every time I hear people say that they’re spending (wasting) money to “build their brand”. You are not in the brand-building business. You are in the marketing business. And no, branding and marketing are not the same things.
Marketing brings people in - it elicits a response. Branding doesn’t. You should never spend money on branding because if you’re marketing enough, you will build your brand for free. It’ll be a nice little bonus.
A lot of times this “branding” takes the form of an ad on a financial radio show or maybe even a billboard. But until you can definitely show me that $1 on a billboard makes $2 (which can be done with a unique phone number), I’m not a fan.
This is what really matters:
But if you spend $0 and make $0, you could be led to believe that everything’s hunky-dory. Big mistake! If you aren’t spending anything, you’re missing out on the potential revenue the marketing could’ve generated for you.
So let’s go back to our financial advisor friend, Mark, who makes about $6,000 from every $2,500 seminar investment. When Mark considered cutting his marketing “expense”, he really would’ve given up over $40,000 in additional revenue each year.
We threw in all of the other opportunities Mark was missing by not maximizing his potential and found out that he was leaving a little over $1,000 per day on the table. That’s a pretty big loss.
So what can you learn from Mark? I think there are three big lessons here:
1. Marketing is an investment, not an expense.
Expenses are usually sunk costs. You’ll never get your money back from your dinner at Outback last night. That’s an expense. But when you’re sending out mail into the community or eliciting direct response via ads or cold calling people, it’s an investment. You are planting seeds to harvest in the future.
When you view marketing as an expense, you focus only on the dollars you’re losing instead of the dollars you gain in return.
Besides, there aren’t many investments that can net you a 2 or 3X return in such a short amount of time.
2. Dollars should be funneled through strategies giving you positive ROI.
It’s one thing to stop spending money on a loser. It’s another thing entirely to cut a winner at the heels. It would’ve been a big mistake for Mark to cut his seminar “expense” when it was consistently delivering a 3X ROI.
Your goal should be to figure out how much it costs you to acquire a customer and how much money you make per customer. From there, the only questions you should ask are, “How much can I scale this?” and “How quickly can I do it?”
3. Your missed opportunities have dollar costs associated with them, and they’re very real.
It’s easy to think that you’re doing well. Especially if you’re doing better than the people around you. But if there’s white space on your calendar - appointments with prospects that you’re NOT having - you are losing money.
It’s critical that you start associating some level of pain with these missed opportunities, and a good way to do that is with a dollar figure. In Mark’s case, he is “losing” $1,000 every single day he doesn’t maximize his potential.
P.S. If you're a financial advisor who wants to get more clients from LinkedIn, make sure you check out How to Get Clients With LinkedIn: How Financial Advisors Can Set Appointments and Convert Prospects With LinkedIn