May 1998, Vol. 1, No. 2

Editor's Note: The transition from a brokermanaging an individual book of business to manage alarge business with the earnings equivalent of tenMcDonalds franchises is not accomplished in one leap,but through a series of several small steps. Practicemanagement and professional development are veryrich topics in investment management consultingbecause consultants are running a business from dayone. We have asked Steve Drozdeck, former director ofProfessional Development for Merrill Lynch world-wide to write a series of articles on practice manage-ment. The keys to Steve's insight are his access andexperience with the top brokers in the business(surprise: a disproportionate percentage are consult-ants), his years of research at Merrill and his propri-etary research on what makespeople successful, not tomention his experience intraining over 40,000 brokers.In the coming months, lookfor several dynamic, interac-tive articles which willprovide invaluable personalinsight on how you might bestbuild your practice.

The 2% Differential(Senior Consultant, April

1998) highlighted four charac-teristics of the star performersin the financial servicesindustry: (1) consultative selling mindset, (2) profes-sional knowledge, (3) business management and (4)personal motivation. This and subsequent articles inthis series deal with the four characteristics in greaterdetail.

As a reader of this publication, you are identified asa "super achiever" in the investment managementconsulting business. Hence, below you will see ideasthat describe your current business practices and hope-fully a few things which other top producers are doingthat can enhance your business. Additionally, the ideaspresented may also help your associates and assistantsservice your clients more effectively.

A business should not develop by chance. Soundbusiness practices will substantially increase the proba-bility of success for any business. Dealing with thesecritical issues will increase the level of your produc-tivity, presuming the other three characteristics are inplace.

Senior Consultant

Managing Your Business For SuccessSteven R. Drozdeck and Karl Gretz

1. Having a "You, Inc." Attitude/Mindset2. Developing a Professional and Personal Mission

Statement3. Strategic Planning4. Critical Few Objectives5. Effective Goal Setting6. Analyzing Your Book7. Culling and Cloning Your Book8. Effective Delegation9. Performance Evaluation (How To, Want To, Chance

To)"You, Inc."

You do work for your firm. You also work for yourself.It is useful to think of yourself as the President and

CEO of your own business,your own franchise, "You,Inc." Consider the differencesin work habits that wouldoccur if you had purchased aMcDonald's franchise insteadof becoming a financialconsultant (FC). You wouldpay a very large franchise feeand then spend 12+ hours aday working to develop yourbusiness and to pay off themoney you borrowed. Thisheavy workload mightcontinue for a few years asyou built your business. Youwould worry about personnel,

stationary, local advertising, payroll, quality, cleanli-ness and a host of other things.

In contrast, as a FC, you don't have to pay a sum ofmoney to get a franchise, instead, you get paid to trainand develop your business. As a FC, you make a goodprofit margin in comparison to most other businesses.Most of the day-to-day business details are handled byyour firm, and you do have certain responsibilities tocontinually develop the business. We find that the starsin the financial services industry are very careful abouthow they allocate their time and efforts. They are veryrarely seen standing around the water cooler or coffeemachine. Very few will bother with office gossip orwith general BS'ing. For the most part, when they are atthe office they work hard and tolerate few non-produc-tive interruptions. Maybe, that's one of the reasons thatthey are stars.

As the CEO's of their own company, they areconstantly asking themselves: "Is what I am now doing

A business shouldnot develop bychance. Sound

business practiceswill substantially

increase theprobability of

success for anybusiness

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moving me towards one of my goals?" "Is thisproductive?" "Is this worth my time andeffort?" They realize that they are personallyresponsible for their success and that the otherfinancial consultants are not going to be puttingany money in their pockets.

Developing a Professionaland Personal Mission

Statement

A mission statement is a written descriptionof your "vision" for your career. It encompassesall that you are and wish to be in all areas ofyour life. As numerous experts, such a StephenCovey, will attest, a mission statement helps anindividual or a company focus its energies andmaintain its efforts over the long term. Itbecomes a guiding principle and is simul-taneously useful in maintaining long-term motivation.

Developing a mission statement canbegin with carefully formulating answersto questions such as the following: • How would you describe the "purpose

of your business" in such a way thatthe listener would get excited aboutdoing business with you in three sen-tences or less?

• What differentiates you and your firm fromthe competition?

• What is your investment philosophy?• What are the resources that you can draw

upon to help you help clients?• Why are you in business?• How do you specifically help people?The answers to these questions can also be usedto enhance your sales presentations.

Each person has several roles in their livesthat a mission statement can positively effect.These roles include: professional, mental,physical, social, family and professional. Amission statement can be written to encompassmany of your important goals and positivelyinfluence your internal and external image.

Strategic Planning andGoal Setting

Strategic planning consists of a number ofsteps which help fulfill the mission statement.If the mission statement is where you want togo, then the strategic plan is the map to gettingthere. It begins with an analysis of your current

business (described more fully in the nextsection) which leads to a determination ofwhere you would like to be/go personally andprofessionally in the future. Then short-, inter-mediate-, and long-term goals are set to helpensure that the strategic plan is accomplished.Finally, an on-going monitoring system isemployed which both keeps us on track andallows for regular plan enhancements/modifi-cations. The most important result of thisprocess is that you systematically and purpose-fully become successful, rather than obtainingrandom results.

Analyzing Your Book

Most reps throughout the United States andCanada spend inordinate amounts of their time

and efforts on clients who are producing littlerevenue and who have limited revenue poten-tial. The result of this analysis will allow you tospend your time and efforts in the areas whichwill achieve maximum results.

We've employed the following "PointValue" system of analyzing client value withnumerous brokers. Points are added based uponnet commissions, assets, activity, referralpotential, etc. Points are subtracted for exces-sive service time or personality conflicts. Theresulting scores help determine which clientsshould be more fully serviced.

The computations in the exhibit are madefor each client, which includes all relatedaccounts. This allows us to take into considera-tion smaller clients who are "connected" toother, larger clients.

Categorizing Clients

Clients are then categorized as A, B, C or D,based on their point value. A-clients generallyrepresent the top 25% of the business (possiblygenerating as much as 80% of the commissionrevenue, and B's the next 25%, etc. It iscommon for financial advisors to discover that

the majority of their time and effort is spent onC and D clients, and relatively little time ontheir best clients.

Culling and Cloning a Book

Closely analyze the characteristics of the Aclients since they are the best clients withwhom you have had the greatest success andwho offer the greatest potential. Clone theseclients by asking for referrals and targetingindividuals who match their characteristics(perhaps through a mailing list). Next, look tothe best B clients and try moving them into theA ranks by effectively profiling them for addi-tional needs that you can meet, as well as gath-ering additional assets. Do this for the C and Dclients by giving them at least one additional

profiling call. However, if after every-thing, you have a client (or prospect) thatoffers little potential, yet is costing youmore time and effort than it is worth, it isprobably time to reassign the account andspend your time on more productiveavenues.There are numerous ways of culling abook, including reassigning the client toa new broker or sales/administrative

assistant, trading the client with another broker,putting them in a category of very inactiveaccounts and letting your sales/administrativeassistant deal with them, etc. (Note: If youchoose the inactive accounts approach, try tohave their monthly statements segregated fromyour active accounts.)

We've found that most financial advisorsseem to be extraordinarily reluctant to "let go"of any client because of the "potential" forsomething to occur in the future. Many peopleaccumulate things in their garage for years andyears until they become overwhelmed withtheir gadgets, gizmos and momentos (trans-lating to mostly "junk"). Sometimes the bestthing to do is have a garage sale and cleanhouse. This analogy is appropriate to our bookof clients. Productivity tends to rapidlyincrease when you can focus your time andefforts on the people and tasks that make adifference.

Critical Few Objectives

Once the strategic plan has been estab-lished, it is important to determine whatspecific activities are necessary to accomplish

A mission statement is awritten description of

your "vision"for your career

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This helps to ensure that you systematicallybuild the skills necessary to attain the goal.

3. Each goal must be testable in some objec-tive manner. If it is not measurable, it is notmanageable. This requirement also reducessubjectivity which can actually get in theway of achieving goals.

4. Write your goals down and review themperiodically. Study after study has demon-strated that those who have written downtheir goals have substantially greater proba-bility of attaining their goals than peoplewho don't. Failure to write goals oftenresults in people forgetting the goal,reducing the goal or neglecting the goal.

5. Be sure you understand each goal. If yourgoal is to generate a certain level of income,

how much production must you have? Howmany clients must you be working with?How many orders must you write? Whatadditional training might you require?

6. Your goal should not cost more than it isworth. Make sure you include your personaland family needs when you write your goal.For example, spending Saturday at theoffice may negatively impact your relation-ship with your family. Working late everynight may negatively impact you health orrelationships with your children.Unconscious, internal conflicts can result inunnecessary stress, procrastination, fear ofsuccess, illness, divorce, etc. (A comprehen-sive list of questions to fully explore theramifications of a goal is available onrequest.)

Intermediate and Short-TermGoals

Each of the goals is then further brokendown to a series of accomplishable, measurablesteps that define what we must do on a daily,

your short-, intermediate-, and long-term goals.Basically, it is determining A, B and C priori-ties that are suggested in virtually all timemanagement systems. Determine the A activi-ties and concentrate on them first. Simple. Yet,many people are guilty of wasting time with B,C and even D items during the business day.

Many financial advisors reluctantly wouldadmit that they would fire a sales/administra-tive assistant if that person consistently wastedtime and consistently neglected to complete theimportant tasks. Hold yourself to the samestandard that you would hold an employee.Remember, most CEOs and franchise ownershave to work harder and more efficiently thananyone else.

Effective Goal Setting

Once your long-term, strategicgoals(s) are determined, it is important tofine-tune them so your probability ofsuccess is maximized. Many people havegreat ideas, hopes and aspirations, yetnever get anywhere with them becausethey did not correctly "form" the goalsand/or make them motivating enough toaccomplish. This segment, therefore,presents two distinct processes: An effec-tive goal setting model, and a discussionof specific short- and intermediate-term goalsto allow the strategic plan to be attained. Eachis an important part of the process. Theseprocesses can be applied to virtually all profes-sional and personal goals.

Six Steps of Goal Setting

There are six critical steps to establishing agoal which is a motivating, dynamic source oflong-term power. (The sixth is the most impor-tant and, generally, least considered.)1. Goals must be stated positively. State your

goal in terms of what you want to achieve,rather than what you want to avoid.

2. Your goals must be in your control. Eachgoal should be challenging but realistic.Don't bite off more than you can chew, orlist a goal whose attainment is based uponoutside factors such as market appreciationor some specific person giving you referrals.Think of your desired result and work back-wards from there to determine the knowl-edge and experience necessary to get there.

weekly, monthly basis. If you don't set specifictimeframes, then you have "all the time in theworld" and may not have the psychologicalboost that deadlines may provide. Furthermore,accomplishing daily goals provides the psycho-logical feeling that you are "successing" (activeverb as opposed to eventually becomingsuccessful) and helps avoid the "rat on a tread-mill" feeling from which so many financialadvisors suffer.

Setting a daily plan and monitoring youractivities can help ensure these daily andweekly goals are met, and therefore, that yourlong-term strategic goals are attained.

Performance Evaluation:The "How To, Want To,

Chance To" Model

"People don't plan to fail, they fail toplan." However, what happens if youhave planned but aren't attaining yourgoals? The following applies to virtuallyevery situation in which someone is notgetting what they want and can be usedas an evaluation tool to assist yourself orothers in determining where the "roadblocks to performance" may be.There are several reasons why people fail

to achieve their goals or otherwise performaccording to expectations. If you or someoneyou know is not performing well, it is probablythe result of either not knowing how to do someaspect of the job, not wanting to do the job (orpay the price), or being blocked by someobstacle that is sufficiently large that they don'thave a chance to do it − or a combination of thethree. Listed below are a few questions that canbe considered in each of the three categories tohelp understand the reasons behind theperformance concern/issue. The questionsprovided here are not comprehensive, yet canbe used as idea generators.

How To

One common reason for failure to achieve agoal is lack of required knowledge. You maynot have a specific skill, or you may not fullyunderstand a given product or service.Fortunately, these problems can usually befixed fairly easily with education/training.Questions to ask that fall into this categoryinclude:

Once your long-term,strategic goals(s) are

determined, it isimportant to fine-tune

them so your probabilityof success is maximized

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S E N I O R C O N S U L T A N T

James P. OwenCo-Founder

Stephen C. WinksCo-Founder, Publisher & Editor-in-Chief

Sydney LeBlancConsulting Editor

Mamie Woo McNealProduction Editor

Eddie BryantMarketing Consultant

Advisory BoardJerry Bott

Merrill LynchJohn Brock

Brock-Hazzard/First Union SecuritiesDick Charlton

New England Pension ConsultantsBob Cluck

Canterbury CapitalHarold Evensky

Evensky Brown & KatzJeff Frum

Wells FargoRich Gleason

Salomon Smith BarneyKathleen E. HegenbartSalomon Smith Barney

Brian HunterPrudential Securities

Greg HunterAlex BrownBill Johnson

CapTrustJohn Kelsey

Salomon Smith BarneyKeith Phillips

Morgan Stanley Dean WitterBob Rowe

Morgan Stanley Dean WitterDick Smith

Capstone Investment GroupJim Yanni

Yanni Partners

Do you (or the person) know how to:• perform the procedures necessary to do the

job?• be flexible in strategy and tactics?• use interpersonal skills to achieve effective

cooperation?• use technical skills?

Want To

People often fail because they lack suffi-cient motivation. Your success will depend inlarge part upon your ability to maintain yourdrive to succeed. Questions to ask that fall intothis category include:

Do you (or the person) want to:• do what is required?• work for the kinds of incentives the job

offers?• have more or less independence or power

than the job allows?• achieve the same goals (personal/profes-

sional) that the job demands?• be competitive and assertive as needed?

Chance To

Sometimes something blocks us fromachieving a goal. Such obstacles might includeclients who fail to return new account forms ordealing with an overwhelming number ofphone calls or administrative duties, etc. Whenthese occur, it is necessary to work directlywith the source of the delay. Questions to askthat fall into this category include:

Do you (or the person) have the chance todo the job as it is set up; that is, do you have:• the information, tools and working condi-

tions you need?• the right kind of supervision and/or help?• impossible deadlines, goals or conflicting

demands of equal priority?• accurate feedback on execution needed to

correct performance?

Thoughts on StressManagement and

Maintaining Motivation

Stress is a major problem in our society andis the cause of over 75% of all time lost fromwork. The inability to effectively handle stressis one of the greatest reasons for failure or lackof motivation. Most of the ideas within thischapter are also stress management tools. Ifyou have a strong sense of purpose, a definitiveplan for attaining it and a method of successingand feeling good about yourself, and canreassess the goals and performance at will, thenmany of the sources of stress are neutralized orcan be readily identified and dealt with.

There are numerous books on stressmanagement that can be read which give addi-tional techniques on dealing with stress. To onedegree or another, the following pieces of sage

advice summarize the key stress managementskills:• Take control of the things that you can con-

trol, and reduce the impact of events youcan't control (often with contingency plan-ning).

• Remember: Don't sweat the small stuff - andit's all small stuff.

• If something occurs and you realize that"someday you'll look back on this andlaugh," then why wait? Laugh now andlaugh often.

• Have balance in your life. Take into accountyour mental, physical, social, family, spiri-tual/moral and professional well-being. Be arounded individual, rather than lopsidedperson.

• Keep your personal mission in mind andmaintain a positive mental attitude.

Conclusion

The industry's superstars share four charac-teristics which differentiate them from others,and which result in substantial differences inproductivity. Effective business managementskills is one of the keys to success. Each of itsmajor components was briefly explored in thisarticle. It is now up to you to determine whereyou are and where you want to be in five years.It is your choice to "run" or "ruin" your busi-ness. It's not easy to be a success. The only realway is through hard, diligent work. It is ourhope that this article has assisted you in thepursuit of your goals.

About the Author

Steven Drozdeck has been involved in thefinancial services industry since 1974. He hastrained over 55,000 financial professionals inall aspects of their profession and written overnine books and numerous courses. In 2001 heformed The Progress Center. He and 25 otherfinancial experts deliver over 300 courses atdifferent levels of sophistication and depth,dealing with such topics as Sales Strategies,Practice Management, Product Knowledge andMotivation. From Rookies to Top Producersand from Sales Associates to Sales Assistants,the courses are designed to increase produc-tivity and professionalism. For more informa-tion about these courses, visit The ProgressCenter at www.TheProgressCenter.com or call435-753-8848 for information. Steve is alsoavailable for speaking engagements viaFinancial Forum (435-750-0062).

Senior Consultant

THE VOICE OF THE INVESTMENTMANAGEMENT CONSULTANT