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Wednesday, September 3, 2008

Henry Ford would have made a great financial planner—take a lesson

Eighty years ago Henry Ford uncovered the efficiency of product standardization and the assembly line. The product was so standardized it gave rise to the joke that a customer could have a car in any color—so long as it was black. Even though this winning formula for efficiency and profitability is decades old, most financial advisers ignore it and have organized their businesses inefficiently.

Many financial advisers treat each individual financial client as a custom, individualized project. Unless you have financial clients that will pay you a lot (i.e. you earn at least $15,000 annually per client), you will never have a good business with this approach.

Your business must be set up as a process. Every new financial client gets the same services and products. Sure, they may get them in different proportions, but every client who gets the "moderate portfolio" had better own the same stocks or funds or you are setting yourself up by spending excessive time on each account, providing personalized service when it’s not necessary and you’re not being paid enough to do so. You do it because you are desperate to gain and retain financial clients as you have an inadequate marketing system.

A really good business is a cookie cutter approach to dealing with clients. That does not mean clients get some impersonal program. It means they get a great program because you have honed the creation of your services and products that you offer to the exact needs of the finely focused homogeneous market you service. If you cannot treat each client in a similar fashion, then you have not adequately focused your target market and you will forever be spending 12-hour days at the office.

Does Intel design a new chip for each customer? No, they do not do projects. Their business is a process, producing millions of the same chips per month.

Should every business be designed as a process? No. Estate planning does not often lend itself to a process and each client may need an individualized program. Just make sure that when you work on a project basis like this, you get paid a lot.

Let’s take examples to make this clear. Do you think attorneys charge a lot? They must because it's difficult to make a process out of the work they do. Each client is a separate consulting project with new research and investigation required. But notice that family doctors set themselves up as a process. The doctor offers a very narrow set of products and services.

He can advise on these issues:
Joint pain
Soft tissue maladies
Head ache
Cold and flu

He uses the same prescription drug whenever he sees the same situation (i.e. he recommends the Merck drug for joint pain every time, rather than what many financial planners do—recommend the ABC growth fund one month and the XYZ growth fund next month). If a doctor is confronted with a need outside of the narrow products and services he offers, he sends you to the specialist.

Each patient gets 20 minutes:

· 4 minutes asking questions
· 8 minutes observation of patient
· 8 minutes to administer a treatment, prescribe a drug or refer to a specialist


Family physicians are the ultimate example of professional efficiency.

Once you define your target market, let’s take retirees for example, you select the products that are appropriate for people who are retired: fixed income investments, conservative equities, health insurance products. And while each client is an individual with individual circumstances, they all have a need for some degree of these products.

Of course, Mr. Smith may get 100% fixed income products with the funds he brings you because he has a large net worth and no need to tolerate equity volatility nor does he need equity growth. He has adequate health insurance and no need for long term care insurance. Mrs. Jones, with a more modest portfolio, gets a portfolio of 60% fixed income, 40% equities and she also needs more affordable health insurance and a long term care policy. While each financial client is different, they all get the same building blocks in different proportions.

Through this standardization of clients and the products and services you provide, you get very efficient. Assistants can handle much of the grunt work and you get to leave the office at 3 pm for golf.

Take a lesson from Henry Ford. For efficiency and profit, standardize what you offer.

Post provided by Javelin Marketing