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Great leaders are not just willing to adapt to the changing dynamics of the marketplace – they are eager to do so. How that lesson played out for Starbucks over 20 years ago is relevant for advisors today.
The following is our rough coverage of the 2021 Sohn Investment Conference, which is being held virtually and features Brad Gerstner, Bill Gurley, Octahedron's Ram Parameswaran, Glenernie's Andrew Nunneley, and Lux's Josh Wolfe. Q1 2021 hedge fund letters, conferences and more Keep checking back as we will be updating this post as the conference goes Read More
In 1996, Starbucks opened their first store outside of North America in Tokyo. Howard Behar was the founding president of Starbucks International (Howard Shultz was running all of Starbucks). At the time, he conceded that he was “angry all the time,” a characteristic that seems unfathomable 22 years later for a man who today embodies the definition of a “servant leader.”
But back then, Behar was dealing with pressing deadlines and a multitude of challenges, including dealing with the complexity of Japanese regulations. Bringing the Seattle-based company to Japan meant overcoming import-export rules, including exporting Italian espresso machines to Tokyo. The Japanese government made Starbucks take the machine apart and grind down every single piece to determine the material composition.
This sent Behar into a tirade until a team member showed him a Chinese character with the translation:
Big noise on stairs. Nothing coming down.
The response struck him in such a way that his anger melted into laughter and triggered reflection on his leadership style.
He changed his perspective and decided to embrace challenging rules so much that Starbucks would exceed any standards, not just meet them. This served as a defining moment in Behar’s incredible leadership journey that would help propel Starbucks from 28 stores to 15,000 across five continents.
Wealth management: Where are the leaders?
What does leadership look like in wealth management? How would you score on the “Behar Index?” Historically, the prized skill set in wealth management has been sales, not leadership. Although those two skills overlap, they don’t have a direct correlation.
Consider the following deductive reasoning:
- The average financial advisor age is somewhere in the 50s.
- That 50-something-year-old has been in the industry for roughly 30 years.
- The advisor attrition rate over those 30-years is incredibly high – possibly in the high 90%.
- Many current advisors got their start as brokers, back when the training program, compensation “grid,” and eat-what-you-kill mentality required sales skills to survive.
- The end result: an industry bias towards sales skills.
For roughly three decades, the success formula consisted of two key steps: shine on the prospecting call to get the appointment (or close the deal); and, next, convert the prospect to a client during the face-to-face meeting. As sales skills were polished and refined, other skills like management, recruiting and even client service took a backseat. The opportunity cost of those “secondary” skills were too great and the application too minimal.
Now, consider this statistic: approximately 4% of advisors control 60% of the AUM in the growing RIA channel, according to Cerulli. Large enterprise firms offering scale and efficiency are gobbling up market share. Is sales important? Absolutely. Are other skills like client service, recruiting staff and personnel management becoming just as important? Probably.
One of the single biggest challenges facing the wealth management industry is that many legacy advisors are overinvested in a single skill – sales. To make matters worse, that skill set, and the industry, are being simultaneously revolutionized. For example, the cold-calling model that built the foundation of the 50-something-year-old’s book hasn’t been relevant for years. The sophistication and reach of the digital age is transforming every corner of the industry, putting traditional methods in the crosshairs.
Separation between the best and the rest comes down to the advisor’s response to one simple question: Are you willing to transform?
Read the full article here by Sam Ushio, Advisor Perspectives