Building a $250 Million Practice from Scratch
February 18, 2014
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In late January, I delivered a keynote talk at a conference for an RIA’s top advisors, with the explicit mandate of helping those in the room get off to a fast start in 2014. In the question and answer period that followed, the first question was deceptively simple: “If I was starting from scratch as an advisor today and had the goal of getting to $250 million in assets in 10 years, assuming I didn’t had have a big network, how would I make that happen?”
As an entrepreneur who’s built and sold a couple of businesses, I know that startups are never easy. Indeed, when I was recruited just after the tech wreck to serve as CEO of a broker dealer with 3,500 advisors, I saw first-hand the challenges facing advisors. But hard as it’s been in the past to build a business from scratch as a rookie advisor, intense competition and investor skepticism make it dramatically tougher today. This was reinforced by a recent article suggesting that historically 80% of rookies who entered the Merrill Lynch training program failed to make it past the three-year mark.
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But the fact is we can learn from rookie advisors who, despite all the obstacles, are building large practices from scratch. To achieve a peak level of success entering the financial advisory space today, you have to get a lot of things right. I’ll cover four foundational decisions today and wrap up with some others in next week’s column.
Step One: Deliver differentiated value to a defined audience
If there’s one unassailable truth about highly successful financial advisors of the future, it’s that they’ll be specialists.
I’ve previously written about how specialists across a variety of professions earn twice as much as generalists due to their higher level of expertise, both perceived and real. But specialists don’t just excel because of expertise – by focusing their efforts, they provide demonstrably superior value. Indeed, Michael Porter of Harvard Business School, generally acknowledged as today’s leading thinker on strategy, believes that the big trap that most businesses fall into is trying to be better than their competitors when they focus on being different.
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