I bought one of the first Honda Civic’s in Canada in 1974 and it really was a disposable car.  It was a tiny thing. You could easily dent the fender if you pushed on it.  Worse than that, every time it rained the *&$#% thing quit.  I thought my mini-car was cute – my Dad considered it a death trap – but I and everybody else who owned one really HATED one feature of this car. It wouldn’t run in the rain.  It coughed, sputtered and died. Sometimes in the middle of intersections.  It was cheap – on every level. 

Today’s Honda Civic is known for its reliability – it consistently wins quality and customer satisfaction awards and is one of the top small cars in the world. What changed? 

The Japanese applied a process called Kaizen to their quality control process.They analyzed and improved every part of their process and vehicles. 

That simple goal and its implementation had astounding results for their sales…and changed the car industry.  

So what is Kaizen and how can we apply it to financial services practices?  Kaizen is the process of continuously improving your skills so that you can become good (or great)… through incremental continuous change.   

On paper, the financial services industry is much more highly credentialed than it was 20 years ago.  There are thousands more CFP’s around the world – even newly developing financial advisor environments like China will have 100,000 CFPs within the next five years.  Those numbers speak to a global commitment to professionalism. 

But there’s a hole around the implementation of that knowledge.  

That hole is a lack of sales training – the training that teaches you the concept of how to sell the advice and the plan to the client as a valuable service to them – as well as the products to implement that plan.  

Few companies today are willing to put dollars into sales training and it’s not easy for individual advisors to do this on their own. Newer advisors have survived because of their drive and natural people skills, but they can be less effective at implementing and selling financial plans.  With some additional skills their success rate, advisor satisfaction and incomes could be substantially higher. 

Do you track components of your sales process? Many advisors don’t. I think the most basic way to start creating Advisor Kaizen is to apply some metrics to your actual performance in key marketing/sales areas…for your own information and benefit. This is standard in the Marketing industry, but not nearly as common in Financial Services. 

Why not start 2012 with some real analysis of your own Marketing/Sales numbers on the most basic of levels – financial services sales ratios? 

If you’re in an environment where you’re required to keep sales ratios, it’s common to keep them – often because Management requires it as part of the learning process…and then it gets dropped.  That’s a mistake. 

If you’re a seasoned professional in this industry – and you’ve had sales training – you probably stopped keeping your ratios years ago…because it was never presented to you as a tool to improve your own performance. 

Financial advisor sales ratios track the process of turning your marketing leads, contacts and presentations into sales and income. 

You might want to challenge your colleagues to keep their ratios this year and then work together to improve any ratio that is below the average.  Everybody wins if you all get better at producing more sales with less effort. 

But…in order to improve your skills you need to know what your current numbers are.  You’ll have to do a small amount of record keeping after each sale to develop your own ratios, but it isn’t onerous. You also need to set your targets and understand how to improve each one of the ratios if you’re below the average or the level you want to be at. 

Even the most experienced advisor can find that sales start to slip because you’ve changed your process or let something slide.  Ratios will show you where the issue is and what needs to be adjusted. 

So, bottom line, every successful advisor should know their own ratios, as well as their skill strengths and areas of potential improvement. 

Let’s look at how to do this. Some people like spreadsheets, some keep track in their appointment book or use electronic devices.  

There are six ratios.  The appointments/presentations ratio may not be necessary for you – but in some environments this can be an issue. I personally ran into this issue in a banking environment where referrals were required from other staff and until I taught them how to qualify a lead, the quality of those referrals was not very good. 

So here are key sales ratios components: 

Prospects (Leads):  All sources of potential clients including people you know, referrals, prospect letters, leads at shows, cold calls, mailings, marketing lists, drop by’s etc.  These are all potential sources of business. 

Contacts:  People you’ve actually talked to about booking an appointment. 

Appointments:  Booked appointments per week, month, year 

Presentations:  Appointments where you meet prospects, gather information and make proposals to them. 

Sales – by number (each type of product you sell is normally considered a different sale) 

Sales ($) – average $ per sale. 

Below are the average financial services industry ratios you can use as a starting point to create your own. 

Prospects (Leads)/ Contacts:  10 prospects create 3 contacts  = 3.3/1 

Contacts / Appointments: 10 contacts lead to 3 appointments = 3.3/1

Appointments /Presentations: this will be your own ratio if you are finding a consistent drop off between booked appointments and actual presentations.

Presentations/ Sales (by number):  3 presentations create 1 sale.

Average sale (by dollar):  $350 

Let’s look at an example.

In order to figure out how many sales you need this year to achieve your income goal, you start in reverse.Let’s say you want to make $100,000 and you are willing to work 48 weeks this year. 

For your annual numbers divide $100,000 by the average $ value per sale: $100,000/ $350 = 286 sales.

Presentations to make 286 sales? 286 x 3 = 858

Contacts for 858 presentations?    858 x 3.3 = 2831

Prospects/ Leads to generate 2831 contacts? 2831 x 3.3 = 9342 

So if you’re working 48 weeks you need to book an average of  858 / 48 = 18  appointments per week to make your income. On a weekly basis, you need 195 leads/59 contacts/18 presentations/ 6 sales to earn $100,000. 

So that’s your starting point – and the exercise should take you about 5 minutes using the average numbers.  You’ll need to track your own numbers over about three months to come up with your own personal ratios and then you can adjust your numbers for each ratio to match your current skills. 

Start 2012 by setting your annual income goal then create your general sales ratios.  Once you have your first month’s data you can adjust the ratios to reflect your own numbers. And in future issues, I’ll talk about the fixes you can apply to each ratio if one or more of your ratios is below industry averages and you want better results.