If you work in financial services, you’re familiar with the Pareto Principle: 80% (or more) of your revenue comes from 20% (or less) of your clients. This pattern is fractal in the sense that it applies very specifically to your day-to-day activities (20% of your actions create 80% of your results) and very generally to the industry in which you work (20% of advisors generate 80% of the revenue for their firm).

In every organization, there are a few top performers who set the pace for everyone else. The Pareto Principle as a description has been so influential because we can see the evidence of it everywhere we go. In this article, we’ll explore what the top 20% of your colleagues do differently and what you can do to join them in the top tier.

I’ve been fascinated by the natural lifecycle of the successful Financial Advisor since I started working with FAs in the early 1990s. For the most part, advisors are self-taught—until recently, there was no degree program that prepared a student to build and manage an advisory practice. Because of this, the financial services industry attracts a wide range of highly motivated, creative and intelligent people who are willing to push themselves through a series of learning curves across a wide variety of skill sets. Over time, usually no more than a year or two, the many challenges involved in building a successful and sustainable practice push out all but the most driven and flexible personalities—those who are able to transform themselves into an effective advisor.

These two characteristics—drive and flexibility—and the concept of “self-invention” are so key to the future success of any advisor that they deserve a closer look. These are great personality attributes, but they are extremely fragile and difficult to sustain. Even before he begins his first job in the industry, the new advisor has been told that success requires constant activity: “It’s a numbers game.”

Interestingly, and in spite of the tons of advice they will receive along the way, most advisors learn that no one can accurately tell (1) which activities are going to lead to results, (2) how soon those results are going to accrue, (3) how to sort out the good activities from the better activities and (4) how to avoid the dead-end attempts. The first few years of every advisor’s career represent a grand experiment of trial and error followed by trial and success and the constant challenge of self-sustained activity.

What’s Enough?

Eventually a few advisors discover or invent effective methods, acquire some clients, and generate revenue. These are the advisors who maintain a high enough activity level for long enough to run into enough opportunities to establish their business. Dynamically, I have observed that these are the people who are driven enough to keep experimenting in spite of few immediate rewards, and who are flexible enough to back up and try again differently over and over and over.

In most organizations, no more than 20% to 30% are able to do this well enough to build an adequate income. Here’s the Pareto Principle again: 20% of trainees will be driven enough and flexible enough to succeed! The rest fall away, exhausted by a negative ratio between trial and error and unwilling or unable to maintain their investment. For me, it’s what successful advisors do about this negative ratio—and what you can do about it in your own business—that gets really interesting.

This is because the Pareto Principle isn’t finished: the next stage of the advisor’s lifecycle finds the surviving advisors sorting themselves out again. Observations over the past 20 years and across North America reveal that the majority of FAs “plateau” at a comfortable level of revenue and grow slowly, if at all, after achieving their first, moderate level of success. For most advisors in the “successful 80% group” who plateau, this occurs when personal income is high enough that the pain of continuing the trial-and-error and trial-and-success processes no longer feels worth the additional revenue those activities will generate. For many advisors this is a powerful, emotional experience of being caught between two extremes: the call of comfort versus the inspiration of future success. They can’t sustain activity in the face of the negative ratio between trial and error.

Interestingly, not everyone gets stuck in this way, and not everyone who gets stuck stays stuck. As the Pareto Principle predicts, the majority of advisors spend the bulk of their career managing a slowly growing or stable book of business. But observations over time reveal that the other 20% maintain their drive and flexibility. They aren’t satisfied with an average level of success and they aren’t seduced by comfort. Their self-concept requires them to continue the trial-and-error process and to continuously reinvent themselves. In fact, this group tends to accelerate their experimentation with new ideas.

Turning Insight into Action

These advisors have a built-in pain generator within their value system that constantly redefines the relationship between comfort and inspiration. Where 80% of advisors struggle with competing motivators and become stuck, the top 20% don’t allow the enjoyment of comfort to interrupt their pursuit of more success. So long as there is another advisor who is more successful or another milestone yet to be realized, these advisors cannot feel comfortable. To outside observers, these advisors appear irrationally driven to constantly achieve more and more. From within they feel a painful level of personal dissatisfaction, regardless of how much they have achieved.

As the Pareto Principle suggests, only a small number of advisors come equipped with this kind of nonstop agitation toward success. Fortunately, there is a simple strategy that the other 80% can take that installs a similar mind-set and shatters the balance between comfort and activity: set a completely unreasonable goal for your business to achieve within the next 24 months.

Let’s take a closer look at how this strategy can help. The key is in understanding how advisors get stuck in the first place. As we have seen, advisors invent their methods through a process of trial and error followed by trial and success. Success provides rewards, and these rewards motivate the advisor to take the same action again. In this way, habits are formed, assumptions are made and, as the advisor becomes more experienced, a set of constraints are installed in the advisor’s behaviors that limit how much success can be achieved.

As an illustration, consider the advisor who figured out how to find new business through cold-calling. Even the best cold callers must spend hours on the telephone to find a few investors willing to even talk with them on the telephone. As a strategy, cold-calling works, but it is highly inefficient and difficult to sustain over time. Of course, once the advisor has established a set of habits and assumptions about cold-calling, she will lock on to this method as the way to build a bigger business—and run right into the painful awareness that she’d rather manage what she has, and settle for less income than she might earn, than make another one or two or three thousand phone calls.

How an Unreasonable Goal Can Shake Up Your Assumptions

This advisor is now stuck. She wants to grow her business, but the pain associated with that growth is such that it isn’t worth the benefit. It will take hours of hard work to move the practice forward a few small steps. At least, that is what the advisor assumes.

It’s this assumption that needs to be shattered. The Pareto Principle invites us to look at the top 20% of successful advisors. They operate with completely different methods and completely different assumptions than advisors who are managing smaller practices. This is the key insight: an advisor who wants to grow his practice from $500,000 in production to $4 million in production must use different methods and operate according to different assumptions than he did when he was starting out. Changing assumptions and inventing (or discovering) new methods is the key.

This is where the unreasonable goal comes in: by setting a goal to double or even triple your level of business over the next 24 months, you are forced to shatter all of your assumptions about how to run your business and to establish new and more efficient ways of doing things. Stuck advisors change very little about their business from year to year and set reasonable, achievable and comfortable goals to grow by 10% or 15%.

As George Bernard Shaw once said, “The reasonable man adapts himself to the conditions that surround him.…The unreasonable man adapts surrounding conditions to himself.…All progress depends on the unreasonable man!”

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