Singing from the same hymn sheet
Financial advisers should beware dealer groups that promise them the world during the courtship phase but fail to deliver once the marriage contract is signed, writes Anne Fuchs.
When a popular band or singer announces a concert or festival appearance, people camp out at their local Ticketek office or wait up until all hours of the morning struggling with a tedious online ticket booking process.
They make reservations to complement the concert, including accommodation, transport and restaurants.
The excitement builds up and up (as does the cost) as the pre-concert emails arrive and advertisements and interviews flood television sets. Then concert day arrives, they arrive at the venue and the show begins.
And that’s when reality sets in. They can’t see the artist from their seats; the sound is muffled and what was promised to be a two-hour show turns out to be an hour of support acts, a half-hour intermission and maybe a 20-minute appearance from the artist.
The ticket came with a promise of a great time from a great artist – the actual experience was completely underwhelming.
Over-promising and under-delivering
I have seen the same kind of thing happening in financial services, when dealer groups promise the world to incoming advisers at the recruitment stage only to dramatically under-deliver once the contract is signed.
The notable difference is you can walk out of a concert after a disappointing show and be only a couple of hundred dollars out of pocket; when you sign on to a licensee, you’re stuck in a contract with a dealer group that will probably never deliver on their promises.
Promises of referral sources, lead generation and acquisition opportunities are the most common, with some dealer groups using these as lures to encourage advisers under the age of 45, who really need to grow their businesses.
Although the offer of these opportunities is often on the table at recruitment, advisers won’t have access to material supporting the offer before they buy a ticket to the game – ie, sign the contract.
Dealer groups may also make other statements in the sales process – such as that the firm’s profitability will grow because of their SOA templates or planning software workflows – but when asked for examples within their existing network the silence can be deafening.
Too many times I have seen deals made and opportunities disappear into thin air.
False promises can only lead to adviser disappointment and resentment and do nothing to foster the long-term, trusted working relationships that need to be in place between a financial planning business and their dealer group.
Adviser beware
Just as my advice to the concert ticket buyer would be to review previous performances by the artist or similar artists with the same record company to make sure they get what they pay for before committing to buying a ticket, planners should also make sure that what they are promised will actually be delivered before they enter into any agreements.
But how do you do that?
- For a start, request a meeting with prospective referral sources before joining the dealer group to ensure they will actually help you meet your business goals. What if you and a referral source can’t stand each other?
- Request a full review of any books of clients the dealer group offers for purchase.
- Make sure funding is in place and the valuation methodology agreed upon before signing a Corporate Authorised Representative contract. Again, you have to make sure the book will help you achieve your business objectives.
- Ask for software log-ins to test these with your staff. What if your definition of a good SOA template or best practice Xplan workflows is different to theirs?
Where does the dealer group excel?
Certainly there is no such thing as the perfect dealer group, just like everything in life. Identify what your non-negotiables are.
Be clear about what your business in fact needs from a prospective dealer group – and speak with firms already in the group to validate the promises.
Is there a track record already and are there satisfied customers?
Equally, go in with your eyes wide open knowing that the dealer group won’t be great at everything they do, and that you are accepting of that – because the one area they excel in is where your business needs support.
Moving dealer groups is a time-consuming, tedious and disruptive process, so be smart about it. Put your commercial thinking hat on, demand solid assurances from dealer groups, hold them to their promises and make sure you’re all singing from the same hymn sheet.
Anne Fuchs is the founder of Pinnacle Practice.
AUTHOR
Staff Writer
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