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Free Advice From a Mentor

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(Note: When I wrote this early in my blog’s history, when I was a senior executive for a Fortune 150 financial services firm. Now with the added perspective of an entrepreneur and consultant, I find the words truer than ever.)

I have mentored dozens of young professionals over the years, and even though each situation is unique, I always end up giving these three pieces of advice. It’s not like I planned it all out, or even wrote it out before now, but here they are:

  1. There is no secret handshake
  2. Focus on getting better, not getting credentials
  3. It all starts with you

There is no secret handshake

The CEO of a venture-backed technology company whom I know well once asked me: “Do you ever get the feeling that when someone comes to you for career advice, what they’re really looking for is the secret handshake?” 

Yes, I have gotten that feeling.

My best mentoring relationships have involved mentees who truly want to improve their performance, learn new skills, take on more responsibility or just learn more about what a potential career path might look like for them.

The best way to ensure that a mentoring relationship with me is short (and not particularly rewarding for either of us) is to mistake it as an opportunity to simply learn the secret handshake.

Do you really think I’ll hire you or connect you with someone merely because you want more money or a better title?

Put some clothes on that naked ambition, you’ll catch a cold.

Focus on getting better, not getting credentials

I often get questions like “Should I get an MBA (or any one of the alphabet soup of certifications in the financial industry: CFA, CFP®, CIMA, CTFA, etc.)?”

My consistent answer to all who ask is that if you want to learn more about that particular area and want to study it deeper, go for it. I’m a big believer of continuous learning, and earlier in my career I worked to get an MBA and put a few initials after my own name.

On the other hand, if you think that simply tacking those initials after your name will open a whole new world for you, you will probably be disappointed.

I still remember a soon-to-be-freshly-minted MBA who wanted to ‘remind’ me that he would have this very important graduate degree by the time of his next performance review, and that he hoped that would qualify him for a promotion.

I ‘reminded’ him that he was still the same person with the same level of performance, so probably not.

It all starts with you

This is kind of a two-for-one. First, I mean that before you start on any exploration of future paths, you need to understand your strengths, your passions, what gives you energy and what saps you dry.

I also mean that the whole process of working with a mentor isn’t a passive activity of absorbing second-hand knowledge through osmosis.

I was very proud and excited when my company asked me a few years ago to participate in the pilot of a program called MentorConnect, kind of an internal match.com to put mentors and mentees together based on specific skills and experiences.

I learned to start by asking mentees to share any relevant standardized test results they may have taken recently (Meyers-Briggs, PDI, StrengthsFinder, DiSC, etc.), and if they didn’t have any, I had them start with StrengthsFinder 2.0. Not only did this help give the mentee and me a logical starting place, it helped to quickly identify those who were only looking for the secret handshake. Those types often would not do the work.

I also recall the bright young assistant who was referred to me by her boss for some career advice a few years ago. She wasn’t sure what she wanted, but she was sure she should be higher in the organization by now. I took her to lunch, and we talked for an hour and a half. I gave her a couple of books to read for our subsequent meetings. I must have followed up three of four times when I ran into her, but she hadn’t quite found the time to even buy the books, let alone read them.

I guess I wasn’t completely surprised when she dropped by a couple of months later to let me know she was quitting the firm.

She was going to work on her MBA.

And no doubt continue her quest for that elusive secret handshake.

You Do Realize This is a People Business, Don’t You?

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Bankers sometimes have a hard time understanding why their industry has satisfaction ratings right down there with utilities, cell carriers and bankrupt airlines. Maybe it’s because they sometimes have more in common with these business models than they would really care to admit. Companies and industries that score poorly in customer satisfaction tend to treat customers like replaceable cogs in their profit machine, rather than empowered consumers with unmet needs and lots of alternatives.

Source: flickr.com via David on Pinterest

David Armano has an amazing knack for boiling down sometimes complex concepts to compelling and easy to grasp infographics. And while the one above was intended to depict a much broader economic view, I think it works just as well in the narrower context of financial services.

It’s not a Wonderful Life any more

Financial institutions have long since evolved from the folksy image of It’s a Wonderful Life‘s Bailey Building and Loan. Competitive forces drove the financial industry to embrace consolidation, standardized underwriting, securitization, more consolidation, credit cards, ATMs, broader product offerings, specialized segmentation, data analytics, even more consolidation, and countless other changes. Over the long run, much of it was good, and the industry has improved efficiency and profitability over time.

But somewhere along the way, too many institutions (and too many advisors) came to believe in that seductive fiction that has fooled so many other industries– that customers are easily locked in with real or perceived monopolies, contracts, terms and conditions, EULAs, whatever– and that the path to profitability is to leverage that servitude with a cascade of new (and usually involuntary) revenue streams from the indentured.

Many bankers are truly puzzled by the virulent public reaction to their attempts to defray the costs of delivering deposit accounts. After all, they have cost accounting on their side. It has been a well-known fact amongst bank executives for at least 25 years that most checking accounts are unprofitable in a fully-loaded cost analysis. A similar Pareto Principle has long existed across client cohorts as well– the “vital few” subsidize the “trivial many”.

Why recapturing costs alone doesn’t work:

So why not focus on reducing the unprofitability of a large percentage of your clients? Managing the cost to serve is a very real issue for most firms, and I am a firm believer in the need to focus marketing efforts on clients who have a high probability of being profitable in reasonable amount of time.

What I think most firms and advisors misunderstand is that many clients at every tier actually are willing to pay more– if they receive something of value in exchange. And here’s where it get’s a little tricky– the clients get to decide what provides value and what does not– and not every client will choose the same things.

What does work:

This is where data analytics can really add the most value. Finding clients who will willingly choose to consume additional services for additional cost. (If you do it right, you can add $5 in revenue for every $1 in added cost.)

Firms that really do it right focus their efforts across all of the client segments, not just on reducing unprofitability in the lower tiers. Further improving the profitability of the top 20-25% of your clients can improve their subsidization of the masses and reduce the temptation to annoy the majority of your clients. (Banks and checking accounts may have been the original “freemium” business model.)

Let’s go back to the airlines. The ones thriving, both in customer satisfaction scores and in profitability, are improving the customer experience for all of their clients while they simultaneously raise the bar for their most profitable clientele. Doing only the latter creates ill will that will never be offset by increased profitability for the subsidizers.

You do realize that this is a people business, don’t you?

Open Forum: What is the Disruptive Potential of “mWealth”?

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A recent article in Fast Company magazine (As Smartphones Get Smarter, You May Get Healthier: How mHealth Can Bring Cheaper Health Care To All) described how the technology in today’s smartphones are and could be used in modern healthcare (ultrasounds on the screens, HD cameras for cancer screening, accelerometers to guide physical therapy, microphones as stethoscopes).

It got me thinking…

What is the disruptive potential of mWealth?

…use geolocation to…

…use your HD camera to…

…use existing apps to…

What is the disruptive potential of “mWealth”?

Five Leadership Lessons From The Godfather

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Godfather

Today Paramount and Cinemark are celebrating the 40th anniversary of the release of The Godfather with a one day showing of the iconic film in 55 Cinemark XD theaters. The movie is my all-time favorite (with the possible exception of The Godfather II). In honor of the anniversary (which is actually later this month), I offer these five leadership lessons from the film:

You need a wartime Consigliere

When Michael was plotting his revenge against the other families, he announced that he was replacing his own step-brother as trusted advisor: “Tom Hagen is no longer Consigliere. He’s going to be our lawyer in Vegas. That’s no reflection on Tom, it’s just the way I want it.” Then to Tom: “You’re not a wartime Consigliere, Tom. Things could get rough with the move we’re making.”

Loyalty, history and track record are important factors in keeping people on your team, but don’t confuse them with having the right people with the right skills and experiences in the right positions at the right time.

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Just because some businesses might be OK for other people, they may not be right for you

When Don Corleone sits down with Sollozzo, who is seeking financing and political protection in order to expand  his illegal drug business, Don Corleone tells him: “…I must say no to you and let me give you my reasons. It’s true I have a lot of friends in politics, but they wouldn’t be so friendly if they knew my business was drugs instead of gambling, which they consider a harmless vice. But drugs, that’s a dirty business.”

Credit unions buying fintech companies. Fintech companies getting bank charters. Banks and credit unions partnering with fintech companies to create new offerings. None of these are necessarily bad ideas, but expand your offerings because it makes sense strategically, and because you are sure you understand the risks and are sure you can execute.

Don’t do it because it’s an appealing source of new revenue. If you’re simply looking for a new source of revenue, why not sell hamburgers?

 

“Never tell anyone outside the Family what you are thinking again”

After Sollozzo exits the above scene, Don Corleone tells this to his hot-headed oldest son Sonny, after Sonny had asked a question of Sollozzo about his proposal, revealing a potential rift in the family.

In this era of social media communications and 24/7 open-source networking and crowd sourcing, remember to keep some things just within the company. That’s how competitive advantages are created.

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“Leave the gun. Take the cannoli.”

Experienced hit man Clemenza offers this simple advice to Rocco after he kills the traitor Paulie along an abandoned stretch of highway.

The leadership lesson: Know what’s important to keep close and what is expendable. Sometimes it’s time to move on, and sometimes it’s time to hang on. Know the difference.

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Make them an offer they can’t refuse

When the singer Johnny Fontane comes to Don Corelone for help in getting a movie role he covets, he is worried that it is already too late since the movie starts shooting in a week. The Godfather confidently reassures him that he will be able to influence the film’s producer: “I’m gonna make him an offer he won’t refuse.”

The old horse’s head in the bed routine is typically not recommended, but you should understand that dealing in the currency that’s important to the other party is the key to influence. Understanding their true wants and needs and worries. If you can help them achieve what they really want, you may very well make them an offer they can’t refuse.

…and They Don’t Hire Advisors Very Well Either

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In my February 25th post They Can Always Spend More… I referenced several massive financial failures of the rich and famous. Forbes continued the hit parade yesterday in Robert Laura’s article What Broke Athletes And Celebrities Can Teach Retirees:

The statistics are startling:  Sports Illustrated estimates that 78% of former National Football League players are bankrupt or under financial stress within two years of retirement.  An estimated 60% percent of former National Basketball Association players are broke within five years of retirement, and recently a host of MLB players fell victim to an alleged ponzi scheme at the hands of Robert Allen Stanford.

Laura offers this advice for retirees:

If they’re not meeting expectations or able to illustrate the value they add to your relationship, then start shopping for a free agent.

How many of your clients are shopping for a free agent right now?

In countless surveys, “I don’t hear from my advisor often enough” is typically the top reason clients leave or consider leaving their advisor.

In my February 14th post How Sticky Are Your Relationships? I noted that Valentine’s day was a great day to reach out to your clients (just like any other day).

Today is Leap Day, truly a quadrennial opportunity to reach out and keep yourself off of the free agent list.

Why Your Team Is Not Successful

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Struggling to understand why your team is not successful?

As a leader, it’s your job to figure out the answers. Here are five questions to ask yourself:

  1. Is everyone on the team clear about the team’s overall goal and their specific objectives?
  2. Do each member’s objectives tie out to the overall team goal?
  3. Does every member of the team have the ability and the drive to achieve their objectives?
  4. Is everyone held accountable for achieving their objectives?
  5. Does your culture support and encourage constant learning, growth and adjustment?

Is everyone on the team clear about the team’s overall goal and their specific objectives?

A survey conducted by the consulting firm Partners in Leadership found that 84% of respondents “indicated that changing priorities create confusion around the key results the organization needs to achieve“ (emphasis mine). Everyone on your team needs to have a consistent answer to the question “What are our overarching goals?” Otherwise, everyone is not “rowing in the same direction”, as the saying goes.

Do each member’s objectives tie out to the overall team goal?

False success is worse than clear failure. Failure is important, healthy and good. Failure teaches you what did not work if you are brave enough to embrace the lessons learned and make adjustments in the future (see below). False success comes from creating individual victories for the members of your team that don’t add up to team success. Individuals should have goals that are highly aligned with things within their control (sales, audit results, client satisfaction, etc.), but they should also be aligned with the goals and needs of the entire team or organization. There is no real victory in celebrating a bunch of individual “winners” if it doesn’t add up to a team win. Chicago Bulls coach Phil Jackson’s goal was not for Michael Jordan to necessarily average 35 points a game, it was for the Bulls to win the NBA championship.

Does every member of the team have the ability and the drive to achieve their objectives?

It’s important to be brutally honest about the ability (skill) and drive (will) of each member of the team. Skill without will is worthless, and you will be doing the rest of your team a favor by separating those players from your team. Will without skill is preferable, but not everyone can be trained to do the job adequately. Think about moving these players to a role to which they may be better suited.

Is everyone held accountable for achieving their objectives?

Nothing hurts team morale and undermines top performers’ discretionary effort than seeing those around them fail to be held accountable for underperformance. Ensuring accountability without devolving into finger pointing is an art well covered in the book The Oz Principle: Getting Results Through Individual and Organizational Accountability.

Does your culture support and encourage constant learning, growth and adjustment?

Ray Dalio, the founder of acclaimed hedge fund Bridgewater Associates, has written and shares freely an amazing piece of managerial advice which he titles, simply: Principles. It is available in its entirety from the firm’s website. It is a treasure trove of quotables (sure to be shared in future posts), but the relevant advice here is in a section he calls “To Get the Culture Right…”

Create a Culture in Which It Is OK to Make Mistakes

but Unacceptable Not to Identify, Analyze, and Learn From Them

If you can answer yes to each of those questions, your team is surely on its way to success.

They Can Always Spend More…

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Whitney Houston may have been broke before she died, and now her estate may have problems.

NBA star Allen Iverson may be broke, too.

And as this story in today’s Huffington Post relates, he has lots of familiar company in Mike Tyson, Lenny Dykstra, Dorothy Hamill, Terrell Owens and many, many others.

In 2009, Sports Illustrated ran a story called How (and Why) Athletes Go Broke, which tells the tales of woe of several athletes, and details some of the common causes of high profile bankruptcies.

My personal favorite is the story of MC Hammer’s bankruptcy. One of many causes was the construction of a $30 million mansion. I remember reading at the time that Mrs. Hammer had the architect tear down and rebuild their marble and gold-fixtured master bath, not once, but twice, because it simply wasn’t fabulous enough. The architect knew something was wrong when she got an unexpected call from Mrs. Hammer asking how much money they could save by cutting back to ceramic tile and stainless steel fixtures…

What’s the lesson here for financial advisors?

No matter how much your clients make–

and you can add as many zeroes as you like–

they can always spend more.

I learned that lesson first hand as a young private banker. Wealthy clients never have a shortage of hangers-on and would-be beneficiaries, and they multiply exponentially if your client is famous.

I remember several years ago, sitting at the kitchen table with a 17 year old high school student and her mom because the student’s boyfriend, my 23 year old major league baseball player client,  wanted to buy a new house. It’s probably more accurate to say that the girl’s mother wanted him to buy a new house. “Joint tenants with rights of survivorship” she instructed me to title the property.

I was disgusted with the entitled way the girl’s mother treated the player. They had ordered pizza before I arrived, and when the doorbell rang she slapped the player on the chest with the back of her hand and held out her open palm. He dutifully reached into his wallet and gave her money to pay for everyone’s pizza.

I was not surprised when the player called me the next day and said “put the house in my name as sole owner”.

I was also not surprised that he left the girl and her mother behind when he was traded to a new team later in the season.

Famous or not, your clients are likely to have a lot of open palms held in front of their faces. While they may need a good financial plan, a comprehensive estate plan and appropriate asset allocation to help make sure money lasts, the one thing they may need most is a rational voice in their ear.

That should be you.

No matter how much they make, they can always spend more…

See also: …and They Don’t Hire Advisors Very Well, Either.

Are You Using Technology to Engage and Collaborate With Your Clients?

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I created this blog to explore the intersection of leadership, advice and technology to improve the lives of financial advisors and their clients. Leadership is a critical element for any organization, and there are many great sources to tap for inspiration and further exploration.

But setting leadership aside for the moment, I have lately found myself thinking more deeply on how technology can enhance the advisor/client relationship– and how rarely it actually does.

In my last post, I reflected on banking as the second oldest profession in the world; and for much of the industry’s history it was not what we would call today a very “scalable platform”. It was a person to person business, and despite much innovation, in many respects it still is. Especially in the high net worth and ultra high net worth space.

Technology has been employed on a very large scale in transaction processing, record-keeping, funds transfer and numerous back office functions for analytics, risk management and compliance. But front office investments in technology have all too often been focused on cutting costs or improving advisor productivity. Good for shareholders, but what about the client experience?

Dodd-Frank and other legislation is quickly pushing compliance spending to the top of the priority list. A 2011 survey by Aite Group and Wall Street & Technology found the 25% of CIOs ranked compliance their top priority– up from 10% in 2010.

As tablets move into the workplace, the traditional advisor/client face to face conversations are moving to more collaborative “shoulder to shoulder” conversations, and many firms and advisors are not prepared for what I believe is truly a seismic shift.

Financial technology firm Balance Financial had a blog post entitled “What Facebook Taught Us About Personal Finance Tech“. The post described some of the challenges advisors and firms face:

Again, personal finance is a naturally collaborative chore.  Even more, professional financial services rely on collaboration.  If you are a financial advisor or CPA, you must interact and engage with your client to deliver services.  You have to get to know your clients, collect information, stay informed of changes to their life and find ways to stay relevant in an ever changing world. 

In the future, look for tools and solutions that use technology to help make the naturally engaging & collaborative process of professional financial services more efficient and rewarding.  The most powerful technology being developed today makes the natural interaction and communication between humans more transparent, more efficient and more frequent. 

I first learned of Balance Financial at Finovate 2011, and I recently had the chance to sit down with Balance CEO Devin Miller to learn more about how his company is using technology to improve the lives of advisors and their clients.

It seems like so much of the recent innovation in the financial industry has been to empower the do it yourself investor and borrower. I think that’s a really good and healthy thing for the industry, but so many clients don’t want to do it all themselves. They want a trusted advisor, but they don’t want to give up the cutting edge technology to get it.

In order to retain and win clients and assets in 2012 and beyond, advisors will need to engage and collaborate more with their clients. Technology can be a great enabler when it’s designed with the right end in mind.

How are you using technology to engage and collaborate with your clients?