For sales people, regardless of the industry, there tends to be just a handful of metrics that will truly determine their ability to build a long-term, sustainable franchise. I tend to worry less about sales goals (the “output” which we really cannot control) and focus more on the activities (the “input” which we can control). So, while these metrics are your “report card”, it is the activities surrounding them that will determine your success.
Metrics that matter:
1. Same store sales – how many assets are you raising from recurring FAs? Most likely you will get 60%-75% of your annual sales from your top 50 FAs…and, most likely you will have to replace 10 of these FAs each year. Think of it as a rolling-cycle where you are renting their money for 3-5 years. Every year you lose 20% of your top producers and they have to be replaced in an effort for you to grow your franchise.
2. New producers – given this perpetual rolling-cycle, you have to place a priority on developing new relationships. You need to create very specific activities in an effort to foster these relationships because we all know they don’t happen after one visit. I would suggest that you have a minimum of 20% of your visits with folks that have not given you any assets in the previous 12 months. For some, this means getting out of your comfort zone.
3. Million-dollar producers – how many FAs have entrusted over a million dollars of their client assets in your products over the previous 12 months? Are these FAs the same as the previous year? Who fell off the list and why? How many of these million-dollar producers are new vs. same store sales? What is your client engagement strategy to ensure they feel special?
4. Number of strategies held by an FA – this is one of my favorite metrics simply because it shows your ability to gain meaningful wallet-share. It is easy to get an FA to commit to a strategy. The goal should then be “drafting” off the original strategy into other mandates. The more strategies they hold the more committed they are to you and your firm….and the less likely they are to abandon ship.
So my advice is to focus on the activities that ensure you are maximizing these metrics. Create a quarterly “report card” that measures your success and make sure you are being transparent and accountable.
Unfortunately, we are in the business of renting money and we have to place a priority on extending the lease payments. Every year the average asset manager loses approximately 30% of their assets due to redemptions. Yes, it is a harsh reality, but we need to focus on the activities that not only raise assets but also help extend the longevity of the holding period. FAs redeem for 3 reasons and only one of them is in the sales person’s control:
1. Clients need the money (out of your control)
2. Severe underperformance (out of your control)
3. You did not properly manage expectations on how the product is expected to perform in different market conditions. (i.e. holding a Value Fund in a Growth market)
Number 3 requires full-disclosure when you present the strategy AND constant communication while they hold the strategy. If done properly you can extend the lease payments and become a true partner to the FAs franchise.
Happy 2019!