Why Jerry Maguire is Wrong

“And suddenly it was all pretty clear. The answer was fewer clients.” — Jerry Maguire

Translation: “I’m abandoning the people who need me the most for the clients who can afford to pay a lot for my time.”

show_me_the_money

 Some advisors would agree, finding the logic simple and obvious:

My business is dependent on heavy personal contact, so I can’t just keep bringing in more and more clients. Therefore to make more money I have to replace my current clients with wealthier clients.

It’s also a lifestyle choice that reflects what you want to get back emotionally: staying in close personal contact with a smaller number of clients is personally satisfying.

I’m not going to argue that this is a wrong choice, but I will argue it’s not the only choice. And there are broader implications that you should think about in terms of the impact on the profession and for society as a whole: middle-income and mass-affluent clients will continue to lose good advisors to wealthier people.

It doesn’t need to be that way.

You can build a business to serve any client segment you choose. But you need to check your assumptions at the door. Particularly ones like “we meet with every client, every quarter” or “we have one deep planning process we use for every client”. If you drop these assumptions, you wind up with substantially more flexibility in serving clients to meet their needs. That opens up the potential to serve more clients well.

However, that’s just the potential. To actually do it requires a different way of organizing your business: one-size-fits-all technology and business processes don’t work any better for advisory practices than a one-size-fits-all planning process works for your clients. Make no mistake, it can be done.

Figuring this out starts by answering simple questions: Why did you get into this business? Who do you want to help? Once you know that, build your business to support that goal. If you want to serve the mass-affluent, design your business model to work for that client segment and do the work to document and test it.

The reason so many advisors struggle is a mismatch of service model, value proposition and client segment: a broken business model. And they assume their business model can’t change — so instead they change clients to those who can support that model. But those clients are often not the ones that motivate you, the ones you wanted to help when you got into the business.

The way you do business isn’t etched in stone, but it’s easy assume there’s only one model for being an advisor. Don’t. Almost anything is possible with clear thinking and a willingness to let facts guide you. The sooner you start to align the parts of your business model, the sooner you’ll begin seeing results.

Jerry Maguire was wrong about needing to have fewer, wealthier clients. But he was right that he could change the way he did business. You can too.

 

So how do you get started? How do you rethink your business model without spinning your wheels for hours? How do you avoid making changes that don’t really address the problem? In coming posts we’ll talk about designing a scalable advisory practice business model and avoiding common traps.

For now: what do you think? Why did you get into the business? Who are you working to serve? And what things have you done to make your practice scalable?



John Prendergast John Prendergast is the co-founder and CEO of Blueleaf. He serves on the board of WiredTiger, a developer cloud optimized databases. He is also the founder and organizer of the Lean Startup Circle Boston. In addition to his decade and a half as an entrepreneur, John spent nearly a decade as an investment banker and financial advisor.
  • Great article, John, and I think you raise an interesting question as it relates both to an advisor’s vision for themselves and their lifestyle as well as to the mission for their business.

    One of the great things about the financial advisory business is that I, as an advisor, can “do well by doing good” for the families I work with.

    And to your point about business model, I’m personally more focused on a smaller, wealthier group of families, but one of my colleagues who works for my firm and using my same patented wealth management process has 300 client families and continues to grow.

    This also gets into issues about whether an advisor wants to hire staff to help them manage the workload of a larger, more diverse client base.

    Ultimately, I think it really relies on what an advisor wants, both personally and professionally, and how they want to design their business to achieve their own goals. Regardless of which route they take, they can still focus on and help clients, and cutting edge technology like BlueLeaf can help them do this more efficiently while being more transparent and communicative with the families we hope to serve.

    Great topic for discussion.

    • Thanks Russ. You’re right. Flexibility is one of the great things about the business. It’s also a potential danger if we’re not really thoughtful about creating our businesses.

  • Thoughtful stuff, John.  I’m loving this new vibe in our profession that seems be ignoring the status quo.  We still have a long way to go, but it’s great seeing more and more clients and advisers saying, “enough is enough and there ARE better ways to do this”!  Thanks for being a champion for change.

  • John,

    Thank you for challenging this needless assumption that the path to a profitable advisory firm is to set high minimum asset requirements for client relationships. The reason I became a full-time technology consultant to advisors is to demonstrate how technology can add scale to an advisory firm, permitting profitable engagements for clients of all size and need!

  • John I can’t believe this post is already two years old :). Still, I don’t think we’ve come too far.

    This has been the deep seated logic in the industry for so many years. The concept of fewer and larger clients, however, is in direct conflict to scalability and efficiency.
    Through today’s practice management technology (like what you all
    provide at Blueleaf) combined with the ability to build a digital
    platform (think blogging and social media) offer the opportunity for
    scalable and personable communications as well as proactive service. It
    can be as simple as answering common client questions through blog
    posts. Let’s keep this conversation going. There is certainly more than
    one way to increase AUM in a wired world, and this is being proven every day.