Why Do Financial Advisors Fail?

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The freedom to run your practice while positively impacting others and an average annual income of $130,000 is just one of the reasons many are drawn to this career. There aren’t many career fields that provide the rewarding possibilities experienced by financial advisors, and even fewer with relatively low barriers to entry in terms of cost and education requirements.

So what’s the downside to this career?

Well… 80-90% of new financial advisors fail within their first three years. Yikes!

We’ve helped hundreds of financial advisors launch their careers over the past 40 years. Here at CP, we’ve seen rookie advisors become wildly successful. We’ve also seen our fair share of advisors fail to make it in the business.

There are five common reasons financial advisors fail. We’ll take an in-depth look at the reasoning behind these common failures and what you can do to avoid making these same mistakes. At the end of this article, you’ll know what it takes to make it in this career.

Let’s dive in…


REASON #1: Financial Advisors Are Too Passive

Many new advisors try to market their practice using passive methods like posting on social media or spending hours crafting the perfect website. There is nothing wrong with using social media to sell or grow your business. Tools like LinkedIn can be massively helpful for prospecting when used actively.

However, sharing third-party content on a social media platform will not magically get prospects to line up for your services. If social media is part of your marketing plan as a financial advisor, you will need to find ways to engage with your prospects rather than hoping your posts move them to action.

Spoiler alert: They won’t.

Many new advisors lack confidence in their knowledge and skills when working with clients and are too passive with their advice. As a fully licensed financial advisor, you will have more financial knowledge than most of your clients and prospects. You are the expert and need to be confident in your recommendations.

Passively guiding clients by only delivering the advice the client wants to hear helps no one. If a client makes a bad decision, muster up the courage to have a difficult conversation. Don’t be a jerk, but be direct and tell them where you stand. The client may still make a bad decision, but you will have earned their respect and established your credibility.

The reason many advisors are too passive is fear. They are afraid to make a phone call to a prospect, so they make social media posts instead. They are afraid the client will fire them if they say, “Client, you need to reduce your spending and save more money,” so they try to make the plan work when they know it won’t. Because they are afraid, passive advisors rely on hope instead of actions.

Like Wayne Gretzky said, “You miss 100% of shots you don’t take.” Similarly, a passive advisor will fail 100% of the time.


REASON #2: Financial Advisors Spend Too Much Time Preparing And Not Enough Time Doing

There is a wealth of information to be learned when you first enter this industry. It’s unlikely you’ll ever know everything about the work you can do as a financial advisor. Still, many advisors bury themselves in brochures and trainings for hours on end but never reach out to a prospect to share their newfound knowledge.

There will always be one more thing to learn before you feel ready. We’ve seen it time and time again, and it always ends the same way.

There is nothing wrong with wanting to sharpen your skills and hone your craft. However, as a new advisor, you must curate your learning path in a way that complements and encourages your work with clients. After all, what good is your knowledge if you aren’t using it to impact change and improve lives? Client interactions compound your learning and help to internalize you knowledge.

You didn’t become a financial advisor to study all day. You became an advisor to help people and earn a living.

The root cause of this behavior is a lack of confidence. The only way to gain that confidence is by actually doing the work with clients in the real world. This requires you to commit to getting outside of your comfort zone and believing that confidence will come.


REASON #3: Financial Advisors Shy Away From Their Natural Market

An advisor’s natural market comprises people they already know, like friends and family. Often, advisors with this behavior say, “I can talk to strangers just fine. I just don’t want to sell to people I know.”

This is troubling for a few reasons. First, it’s not a logical thought process. Being more comfortable selling to strangers than people you know means that you’re either embarrassed or don’t believe you can help… but you can!

Both are fear driven responses due to a lack of confidence. The second reason this statement is troubling is that it is often untrue. In most cases, the advisor is just as uncomfortable talking to strangers as they are their natural network.

If you don’t believe in what you’re the advice that you’re giving, it would be natural to start with strangers. But, when you think you have something of great value, perhaps a ‘financial cure of cancer’, you’d first want to share it with your friends and family-and if you had time after all of that you’d share with acquaintances and strangers.

You must find a planning firm that aligns with how you would want to be treated as a consumer. You must find a planning firm that aligns with your belief systems as a person. This business gets much easier, quickly, when you align these with who you are.

Often, working on your first couple of cases with an experienced advisor or utilizing your back office planning team can help overcome any concerns you may have about working with friends and family. Here at Consolidated Planning, we’ll walk you through this process, so you’ll have the confidence to take that first step.


REASON # 4: Financial Advisors Don’t Ask For Referrals

Asking for referrals is uncomfortable, let’s just say it. It isn’t the most enjoyable part of your career.

We’ve found that financial advisors need to contact at least 300 prospective clients per year to close the 30 new clients they need to build their practice successfully. If you were asked, you could probably come up with 200-300 names right now. Those names would get you through your first year in the business, and then everything would come to a screeching halt in year two when you ran out of names.

If it takes ten prospect contacts to get 1 client, you need to add at least ten names to your pipeline each time you add a client otherwise, your pipeline will be at risk.

Referrals are a great way to keep your pipeline of prospective clients full. Yet many new advisors fail to ask, and there are dozens of reasons why. Some common causes include fear of rejection, not knowing how to ask, forgetting to ask, name flow isn’t currently a problem and more.

Make asking for referrals a part of your practice. Some suggestions we offer our advisors are:

● Use an agenda for all of your client meetings and put referrals on the agenda.
● Ask the client what they’ve found valuable in your work together then ask who they know that would also find value in that.
● Scope out their social media connections before the meeting and find a couple of people that would make good clients then ask for the introduction.

With practice, asking for referrals will become natural and will ensure your practice continues to grow.

REASON #5: Financial Advisors Try To Be Everything To Everyone


When you’re new in the business and don’t have many clients, it’s easy to think that any client is a good client. Don’t fall into that trap.

People will come to you that aren’t a good fit for the work that you do as an advisor. They might be a DIY stock trader looking for hot stock tips. That’s not you. Stick with what you know. Aunt Susie might come to you wanting to buy $100 worth of savings bonds for her two grandchildren. Again, probably not the best use of your time.

Don’t go on wild goose chases that take you away from your core services.

Be clear about the type of clients you work with and the value you bring to them. The more precise you can be in this, the more knowledge you will develop and the more value you will deliver.

Don’t be afraid to say “no” to prospects that aren’t a good fit for your practice. Prospects aren’t a good fit if they don’t follow your recommendations or they don’t have the means to take action on your recommendations.


Financial Advisors Are Afraid of Failure

Most financial advisors fail due to fear. This fear manifests itself differently in different advisors. Sometimes the fear of picking up the phone to call shows up in an advisor’s passive marketing. Other times, the fear shows up as a lack of confidence in an advisor’s knowledge. Other times, it’s a fear of reaching out to friends and family, asking for a referral, or turning away business that isn’t a good fit.

In this business, 90% of what you want is sitting just 10% outside your comfort zone. If you want to be successful as a financial advisor, you better get comfortable being uncomfortable. You must commit to doing the work of a successful advisor before you feel confident being a financial advisor.

If you’re ready to put in the work, reach out to our recruiters to see if Consolidated Planning is the right fit for you.


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Published:  October 31, 2022