What Makes Today s Financial Advisors Successful By Norm Trainor & Herb Koplowitz, Ph.D

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What Makes Today’s Financial Advisors


By Norm Trainor & Herb Koplowitz, Ph.D

What makes a financial advisor (FA) successful? The answer to that question has

changed over the last 20 years. Yet, the financial services industry still views the FA role through a 1980s prism. Back then, it was possible to be a top advisor by mastering the art and science of selling. Companies hired salespeople. The common wisdom held

motivation to be the key to an FA’s success once they had mastered the basics of product knowledge and sales skills. Surprisingly, this view is still prevalent in many financial institutions (FIs) today – hire motivated individuals, provide them with the basic skills and knowledge and with right incentives to stay motivated and they will become successful financial advisors. Just think of how many conferences you have attended in the past year where the main speaker was motivational. There are three problems with this approach: 1) motivation does not overcome lack of capability, 2) the skills required by the FA today go well beyond selling into the skills of business building and 3) skills and knowledge will not overcome a deficiency of basic mental horsepower.

This paper addresses two questions: 1) what is the FA’s work and 2) how does a financial institution or independent marketing organization (IMO) develop a field force of FAs capable of doing it. We will show how the FA’s role has moved through paradigm changes over the past 20 years, where it might evolve to next, and what FIs and IMOs must do in recruitment and development. We end with a summary of our

recommendations to FIs and IMOs and suggest some strategic implications.







We shall start with the FA role as it existed until the late 1980s and show how it has changed since then. For each paradigm, we will discuss the approach the FA takes to their work and the capability required to work from that approach. We end with implications for recruitment and development.


When Norm started in the insurance business in 1970, the FI provided the FA with an office and clerical assistance, marketed and trained the FA, and provided a management infrastructure. All the insurance agent and stockbroker had to do was sell.



Norm wanted to learn how the more experienced salespeople did their work, and he found that people did insurance sales at two levels. Tom Barker worked at the lower end of what we call the Sales Paradigm. Tom would find a prospect, most often a friend or relative of an existing client. Tom would follow the routine he had learned in sales training, ask a few qualifying questions about health and income, and then say, “Mr. Jones, you qualify for Product A which has these features and benefits. You qualify for Product B which has these features and benefits. Which would you prefer?” Tom needed to know products and regulations and the skills of face-to-face selling and asking for referrals. He focused on prospects and clients he would sell to in the next three months. The archetypes for success were the Granum System and Wilson Learning’s Counselor Selling. The Granum System provided the framework for building a life insurance clientele. Counselor Selling taught agents a more effective approach to managing the face-to-face selling process. The only judgment required was whether the client’s overall behavior and demeanour were consistent with the answers they give during the sales interview. Tom needed to judge whether the prospect would buy permanent or term life insurance and their willingness to proceed to the next step in the process.

Norm also went on sales calls with agents at the higher approach to the Sales Paradigm, like Jack Hanley. Hanley’s work was to sell a process, not simply a product. He needed additional kno wledge to do estate planning and business succession. And he needed additional skill in dealing with the client’s attorney and accountant. It might take four to six months to develop a relationship with the various buyers and obtain their commitment to the proposed solution. The task is more complex than simply selling a product. But Jack really showed his value to his clients when in a sales situation. Unlike Tom, Jack interviewed his clients not only to find out what they would qualify for but also to

determine what they needed. He would then say, “Mr. Jones, of all of the products on the market, this is the one that best meets your needs for security and growth.

While Tom only determined what his clients qualified for, Jack found the product that best fit all of their needs. What allowed Jack to do this went beyond his motivation and his skills. In basic terms, Jack was brighter than Tom. In technical terms, he had more cognitive capacity, a greater ability to handle complexity. FIs and IMOs need to understand cognitive capacity for two reasons:

§ The FA role has become more complex, and so FAs with higher cognitive capacity need to be recruited.

§ Cognitive capacity matures at its own rate. There is nothing we know of that can increase a person’s ability to handle complexity. You can motivate the unmotivated, educate those without knowledge and train the unskilled. But you get an FA of the right cognitive capacity by recruitment.

Cognitive capacity falls in distinct layers called “strata”. Tom was operating at Stratum I, the beginning of adult capability. It is characterized by two factors (see Summary Table):

§ Someone at Stratum I can take on tasks no longer than three months. That’s why Tom was not working beyond a few months as he planned the development of his pipeline of prospects.



§ Someone at Stratum I works with information declaratively. That is, they think of one product, method or factor at a time when making a decision. Tom could determine whether a client qualified for a product but could not juggle all of the factors required to determine which was the best product for the client.

Jack, with greater cognitive capacity, was working at Stratum II. He was able to take on tasks up to a year in length and would have felt bored if he was not working at least three months out. He would naturally be building his pipeline out further than Tom would. In addition, Jack could make a judgment regarding a number of related factors, doing the cumulative processing that characterizes Stratum II work:

§ finding the product that best matches the client’s objectives and decision criteria. § finding the best mix of growth and preservation that is consistent with the client’s

risk preferences

§ building a social and business relationship with the client to become referable This enabled Jack to sell proactively, following leads and referrals and building arguments supportive of the prospect’s making a commitment.

The licensing process is arduous enough that it eliminates most applicants who lack Stratum-I capability. An FI or IMO wanting more agents working like Jack would have to recruit Stratum- II-capable people. This is not onerous as Stratum-II capability is required for such roles as school teacher, bank branch manager, front-line manager, etc. After recruitment, these salesmen would benefit greatly from additional teaching and training in mutual funds and related regulations and policies, balancing a portfolio, selling, soliciting introductions to prospects who meet multiple criteria, etc.

2. 1990


In the 1990s, FIs began changing the FA role from career agent, an employee of the FI, to independent agent. The Covenant Group has been preparing FAs for this paradigm since 1995. Again, we find a lower and a higher approach to this paradigm of the FA’s running their own business.

Sally Majors started working with us, in the lower approach to the Business Paradigm, when she recognized that the FI was marketing its own brand and its own products but not marketing her. She needed her own marketing to make it easier to come face-to- face with clients. We helped her focus on real estate agents as a market where she had a number of connections through friends and relatives. Early on she said, “I get it now. If I work well with several agents from one real estate office, I’ll develop a good reputation there and so may be able to make a presentation to everyone in the office. That

presentation will make it easier for me to get face-to-face with other agents in the office and sell to them. Within 18 months, I should be able to do this in several real estate offices.” Completing this plan required Sally to have knowledge of the real-estate-agent market and to develop skills in marketing to that sector, skills and knowledge we were able to help her develop. But she could only work with these skills because she could do the serial processing she demonstrated above, reasoning of the form AàBàC, and this



characterizes Stratum III. Her cognitive capacity at this level also allowed her to work in the 1- to 2-year range, the time-span range required for longer tasks in this approach – developing a marketing event next year or turning a complex prospect into a trusting client. We expect that this marketing approach is fast becoming a minimum strategic requirement, and this poses recruitment challenges as the Stratum-III capability required for it is rather rare, likely in under 10% of adults. (See Jaques, 2002.) FIs may find Stratum-III capable people in roles that are typically at Stratum III: elementary school principals, regional directors of banks (managing a number of branch managers), managers of front- line managers, etc. They then need to be developed by learning not only the products and how to sell them but also how to identify a natural sector for their business and how to market to it.

At the higher end of the business paradigm are FAs who recognize that they are running a business and need to manage their practice as a business both to maximize profit and to build a company they can sell on retirement. When we started working with Jim Brenner, he said, “I now see that I must spend more time working on my business organization than selling and marketing myself. I hired Janice a few months ago to do marketing. She is collecting referrals from our current clients so she can build a database that will allow her to design targeted marketing events next year. At the same time, I am scouting around, building relationships with younger people who I believe will be good agents to work with me so I can recruit them and then train them and so build my practice’s capacity. I need to coordinate my activities with Janice’s so the extra demand she generates and the extra capacity I generate come to fruition at the same time. I want to learn from this a repeat it so that my business triples over the next four years.” The parallel processing that Jim used, coordinating several series, and his work in the two- to five-year time frame, characterizes him as working in Stratum IV. At this level, he needs to understand how to develop a business plan, how to structure an organization to meet his objectives, how to find and select people who will succeed in those roles and how to manage those employees. We expect that roughly two percent of the adult population is capable at this level, so finding them is a challenge. FIs may find Stratum-IV capable people in roles that are typically at Stratum Stratum-IV: secondary school principals, area general managers of banks (managing a number of regional directors who each manages a number of branch managers), factory managers, etc. They then need to be developed by learning not only the products, sales and marketing but also business building.

Summary Table Stratum Time Span

(length of longest task)

Process Approach to practice

IV 2 – 5 years parallel build a business III 1 – 2 years serial market and sell

II 3 – 12 months cumulative sell what best meets all of client’s need I up to 3 months declarative sell what client qualifies for




We expect the future of the industry to include Stratum-V-capable FAs who will bring two additional dimensions to the role:

§ They will reframe their business focus from financial advice to life planning. The way information is processed at Stratum V is declaratively – but at a higher level of

abstraction. The Stratum V entrepreneur is typically concerned with the definition of their business, the concept underlying its strategic focus, ensuring that they are in the right business.

§ They will work on where their business will be in five to ten years, adjusting strategy to fit the expected environment. The more mature advisor is working on succession and exit strategy. Other advisors may focus on attaining economies of scale by purchasing and integrating Stratum-IV practices.

People of that level of capability are rare and will be difficult to recruit. The challenge for the FI and IMO is to create a compelling value proposition that attracts and retains

advisors with this level of capability. The extent to which the FI and IMO provides support and development to assist advisors in growing their business will be key elements in attracting and retaining high Stratum capable advisors.



This article suggests two strategic questions for FIs and IMOs:

§ What is your strategy for dealing with FAs at each level of capability? Does the organization’s strategy imply you should be recruiting at some capability levels and not at others?

§ How will you ensure that your products, processes and support mechanisms meet the needs of FAs from your preferred level of capability?

Once these strategic issues are addressed, the tactical questions remain:

§ How will you attract FAs at the level of capability your strategy is designed to support? There are fewer people capable at higher strata and recruiting them will require a new approach.

§ How will you develop FAs at each level of capability? Today’s FA needs more than product knowledge and sales skills. Our experience demonstrates that today’s and tomorrow’s FA must be competent in business management, marketing, relationship management and resource management. Each of these areas of capability requires a systems understanding.

The Financial Advisors world has become much more complex than it was in the 1980s or early 90s. The recruitment, training and development of Financial Advisors must be designed to equip them to succeed and prosper in a more complex environment. FIs and IMOs need less focus on motivation and more focus on capability, both cognitive capacity, which must be recruited, and skills and knowledge beyond sales, which the organization can develop in its FAs. Those financial institutions and independent marketing organizations that get it right will attract higher calibre individuals, develop



them to much greater levels of productivity, and reap the benefits of having a more successful sales force.



Jaques, Elliott (1996). Requisite Organization: A Total System for Effective Managerial Organization and Managerial Leadership for the 21st Century. Arlington, VA: Cason Hall and Co., Publishers.

Jaques, Elliott (2002). The Life and Behaviour of Living Organisms: A General Theory. Westport, Connecticut & London: Praeger.





Norm Trainor is the founder and CEO of The Covenant Group.

Herb Koplowitz is the Vice President of Organizational Effectiveness of The Covenant Group.

The Covenant Group educates and coaches Financial Advisors, providing them with business tools to enhance their performance.