Financial Services Journal

The following is based on one of The Covenant Group's clients, Greg Chu. All of the names and telling details have been changed to preserve client privacy.

When Greg Chu became a financial advisor twenty years ago, he thought he'd be running the business. He never dreamed the business would be running him.

Greg's practice generated close to half a million a year in revenue, but he'd been at that level for the past five years and didn't know how to get beyond it. Plus, overhead, marketing expenses and a staff of three took a huge bite out of his income. Generating half a million so he could take home a third of it didn't excite him anymore.

"I want to gross one million within two years," Greg said when we met.

I asked Greg if he had a business plan.

He laughed and said, "Nothing on paper."

"It's difficult to get anywhere without a business plan. Your business plan is where you define your business, clarify your vision, set objectives and develop strategies to reach those objectives. We can use your goal of generating a million in revenue as a basis for formulating a vision, but before we do that there's something more fundamental I want to explore with you."

Greg looked curious. "What?"

"To whom would you say you are accountable?"

Greg thought for a moment before answering then said, "My clients, I suppose."

"Why do you feel accountable to your clients?"

"That's why I'm in business. I'm here to serve my clients; I can't let them down."

"A lot of advisors give me the same answer, but it's one that can cause a lot of confusion and frustration. And, quite often, it can limit growth."

"How so?"

"If you feel accountable to your clients, you're always going to be at their behest. Your clients are constantly turning to you and expecting you to be there. You're going to feel obligated to be available all the time. It becomes difficult to extricate yourself from client involvement and to work at a higher level, to examine your business - to spend time on your business plan, to set objectives, develop strategies… your clients will continually pull you away from running your business. In fact, most advisors who say they are accountable to their clients feel that the business is running them; they're not running it."

Greg agreed that's exactly how he felt.

"Other advisors tell me they feel accountable to their spouse."

"Yeah, I feel that too," Greg added.

"And that's a dangerous game to play. You need the freedom to do what's right for the business without feeling the weight of your wife's expectations."

"Especially when my wife thinks I make half a million a year."

"Exactly. It's okay to have your spouse involved in the business if they have a structured role and clear purpose, but when they're on the outside, they don't understand the complexities and the issues you're dealing with. And that's what creates tension."

Greg nodded.

"Many other advisors tell me they feel accountable to their employees."

"Yes, I do feel that as well. I really love the people who work for me. I know they depend on me and the salaries I pay them."

"You're carrying a lot on your shoulders," I said.

"Yeah, sometimes I don't want to get out of bed in the morning. I feel like I can't make a mistake or everyone who depends on me will suffer."

I nodded. "Most CEOs feel like that, but it doesn't have to be that way."

"What's the solution?" Greg asked.

"The first step is understanding the difference between responsibility and accountability. Responsibility is a personal feeling of obligation. You might feel responsible for providing for your wife and family, for giving great service to your clients, or for creating a great and secure place to work for your employees æ but that doesn't mean you're accountable to them. Accountability is based on a clear objective or set of objectives that another party holds you accountable for."
"But there is no one to hold me accountable to anything. There's just myself."

"Exactly, and that's the problem."

"So what do I do?"

"You need a board of directors. And you need a sound business plan. Those are the two elements of accountability. Your business plan sets the objectives. It establishes what you are committing to, and your board is the party that holds you accountable. This allows you to focus on the business and not feel overwhelmed by the weight of your personal responsibilities."

"But it's not like my wife and family and clients and employees disappear, right?"

"No, of course not. The point is, if you create a business plan that accounts for all those other people, then you don't need to worry about them. All you need to concern yourself with is the business."

Greg looked confused.

"Okay. Take your wife and family for example. If your vision calls for a million gross in revenue, you need to look at what salary you are going to pay yourself. And don't make the mistake many advisors make of thinking of your income as revenue minus expenses. You are an employee of the business. You need to pay yourself a fair wage for the work you do. If your plan allows you to make a wage big enough to sustain the lifestyle you want for your family, then all you have to concern yourself with is achieving the objectives of the business. Same with your employees. Does your vision include roles for them? If it does, then again, by simply focusing on the business, you'll take care of your employees. And the same is true for your clients. Your business plan will outline a sales and service strategy. If you execute that strategy, your clients will be happy. But remember, if you want to grow your business to a million in gross revenue, you're not going to be able to do all the servicing on your own. You'll need to focus on building the business, on your top clients and relationships, your marketing plan, your resource plan…. You'll need others to support client service. So part of your plan will have to include communicating your service plan to your clients and setting clear expectations."

I could see relief wash over Greg. "I've never looked at it like this. What you're saying is my business is a separate entity. I'm not the business. I'm a part of it. And if I'm an effective CEO, I'll be able to build a business that will take care of all the responsibilities in my life."

"Yes. But you need good corporate governance. Your board of directors is there to hold you accountable. If you fill your board with knowledgeable and experienced people, they will be able to support and challenge you in your effort to meet your objectives."

Excited about this new approach to his business, Greg spent the next few weeks assembling a board of directors that included himself, his spouse, a center of influence, an accountant, and a lawyer, who was also a close friend and a client. Over the next year the board met every quarter. At the first meeting, Greg presented his business plan. As Greg later explained, the advice from his board was invaluable. They liked the essence of his business plan, but tore holes in many areas. Greg explained, "In some areas, mostly around servicing, they thought I was trying to do too much. They advised me to hire a sub-producer, which I hadn't considered, because I didn't think I could afford it. But they showed me that by hiring the sub-producer I'd be able to focus on my top clients and develop enough revenue to support the new hire as well as increase my profitability. Having their support encouraged me to be more proactive about my business and gave me the confidence I needed to go to my lower level clients and let them know that they would be serviced by someone else instead of me." By the end of the first year, Greg was able to report to his board of directors a revenue increase of 28%, the first substantial increase in years.

Lessons learned
Greg learned three important lessons about accountability:

Norm Trainor is the author of The 8 Best Practices of High-Performing Salespeople, a speaker and principal of The Covenant Group, a company that specializes in helping advisors build their practices. The Covenant group has worked with many of the world's largest financial institutions, including such firms as Swiss RE, CGNU in Hungary, Guardian, BMO and Clarica, helping their management and advisors create and sustain high performance by adopting a systems approach to practice development. The Covenant Group's proprietary practice development system, The 8 Best Practices of High-Performing Advisors Program, has been adopted by organizations around the world and is a leader in the industry. For further information, visit The Covenant Group's Web site at www.covenantgroup.com or email info@covenantgroup.com or call The Covenant Group at 416-304-1766.