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Most financial planning businesses need to make changes, but it is difficult

With the prospect of RDR forcing change on many financial planning businesses, the issue of making changes is top of mind for many financial planners that we work with. But the experience of the Fundhouse Adviser programme, where financial planners are actively working on making changes in their businesses, it is clear that enacting change is not easy. We believe that getting to understand why change is difficult is probably the key step in getting into a position to be able to implement change effectively.

Successful Change = Knowledge + Willpower + Perspective

There are probably three key factors that make change difficult:

•   Lack of knowledge
•   Lack of willpower
•   Having the wrong perspective

Understanding how these three factors make change difficult provides a great starting point for making change happen in your business.

Knowledge is key, but it needs to be applied

Brock Henry who writes a blog entitled “Strategic Simplicity” suggests that change is difficult due to two primary factors: a lack of knowledge, and a lack of willpower. Anyone reading this article would be well aware that ignorance is no defence in law, and so too for financial planners, not knowing about what RDR is likely to require of financial planners will be no defence for a lack of change in their business. So assuming that you are a financial planner armed with knowledge, the real challenge is how do you apply that knowledge? According to Brock Henry, willpower is the key.

Willpower is motivation, both of yourself and others

But what is willpower? There are many ways that one can unpack this term, but in the spirit of “Strategic Simplicity”, I’m going to equate willpower with motivation. Which begs the question, how do you motivate yourself and where your business requires it, others, to change?

One way of understanding motivation is to look at how those who have achieved much in their lives view the topic. Steve Jobs, the legendary founder of Apple believed that the key is to love what you do and that you should live each day as if it’s your last. In so doing you would soon know when to make changes in your life. And in a similarly inspirational vein, author Paulo Coelho observes that, “When you want something, all the universe conspires in helping you to achieve it”. So if you want to make a change, go for it, and the universe will help you! It is inspiring stuff.

Motivating others is challenging and is not about external incentives

But making change happen in your business is often not just about you changing something yourself, but also getting others to change. Logically the knowledge and willpower formula would still apply. Obviously you need to inform your colleagues of the change that you want to make. But encouraging their willpower may be slightly more challenging.

Daniel Pink, the author of a book entitled “Driven”, has done much work in this area of motivation, and he suggests that ideas of external motivators such as “incentives” have little impact, unless someone is doing a very basic repetitive job. There are very few of these types of jobs in financial services. In fact Pink says that using incentives to motivate someone who is doing a job that requires some degree of cognitive ability will at best fail, and could even impede performance.

Motivation is internal, and comes from autonomy, mastery and purpose

Pink argues that to get people to work effectively, and in my view to implement a change, they need to have three factors in place:

•   Autonomy – the ability to decide how they will do the work or make the change that is needed. Where staff members get the sense that they have no autonomy over how change will be enacted are unlikely to support that change fully.

•   Mastery – the ability to actually do the work or in the case of change, the capability and resources to do so. A lack of capability (or training), and a lack of resources or support will undermine the potential to achieve mastery and impede the change process.

•   Purpose – an understanding of the meaning or purpose of the task at hand, or the change that is being made. Change that does not fit into the broader purpose of the business is likely to be doomed from the start.

Asking why your business does what it does is key

Increasingly people want and need a sense of purpose in their work. Simon Sinek, author of the book, “Start with Why: How Great Leaders Inspire Everyone to Take Action”, suggests that businesses often talk about “what” they do, and “how” they do things, but increasingly they need to ask themselves the question “why”? He talks about the Golden Circle in which businesses operate, and they tend to focus on the two outer circles – the “what” and “how” of their business, and ignore the “why” at their peril.

When it comes to change, it makes sense to start with the “why?” of change, before addressing “what?” and “how?” questions.

Sinek’s insights, as well as Pink’s observations on motivation suggest that to make a change requires more than just knowledge and willpower.

Perspective is the missing element in effecting change successfully

It seems the missing element is what I like to call “perspective”. Stephen Covey, author of Seven Habits of Highly Effective People provided a wonderfully simple model to demonstrate the power of perspective. He said that depending on how a person “Sees” something, will determine what they “Do”, and what they do, will determine what that they “Get”.

Essentially he is making the point that our actions are a consequence of our perspective. By asking the question “Why?” one is getting a perspective on, or looking through the lens of, purpose.

Remember you are an owner of a business, not just a manager or technician

Another way of considering perspective, is provided by Michael Gerber, in his book The E-Myth in which he considers what makes entrepreneurs succeed, or not. According to Gerber, in a financial planning business, (or any entrepreneurial business for that matter) there are three broad perspectives that an owner or entrepreneur can take on any change, or in fact on anything they do in the business.

The first perspective is that of a Technician (in this case the Technician would be a Financial Planner) which is where most entrepreneurs begin their journey. Doing the actual work required to deliver the service. In other words, being the Technician. Gerber argues that most entrepreneurs get stuck in this perspective and unable to elevate themselves above this, and forget that they have two other perspectives they need to consider, that of being the Manager and the Owner of the business. Gerber argues that it is critical to make decisions and changes in your business viewing such decisions and changes through the lens of each perspective.

Making a change will have different implications for different perspectives

As a practical example of this let’s take the hypothetical case of John, a financial planner who has his own business and has two junior financial planners who work with him. Having started his business as a Technician who enjoys giving advice to clients, John enjoys doing financial planning and believes that it is important that his two junior planners do so too. So each of the planners in the business are encouraged to show their flair and add their personal touch to how financial planning is done in the business. This leads to great relationships being built between planners and clients, each client being treated with a bespoke financial planning process and plan. From a Technician’s viewpoint, John thinks this is a great outcome. But from a Manager and Owner’s perspective this is a terrible outcome. Trying to manage the consistency of advice across different clients becomes a nightmare, and if one of the planners were to leave the business, the chances are that the clients would leave with that planner. As an Owner, John has no protection of the client base that he probably perceives as belonging to the business. But to elicit change in the business, John has to take off his Technician’s viewpoint, and look at things as an Owner. This also aligns to the “Why” of change discussed earlier.

The perspective of the owner is key for making value-enhancing changes

In order to grow value in the business and ensure that clients are attached to the business rather than individual planners, John has to accept that the business in fact needs to introduce a consistent planning process to the business, and whilst each planner will have their own style, the outcome of the process needs to be that clients get less attached to the planner and more attached to the process and experience of dealing with John’s business, no matter what planner they are dealing with. John will never make this change if he just looks at the problem from a Technician’s viewpoint. He needs to view the problem from the perspective of a Manager and Owner, to be able to make a decision that makes the business easier to manage, lowers the risk of losing clients, and ultimately grows the value of the business.