Why Do Financial Advisors Fail?

Building a financial advising practice isn’t for the faint of heart. In fact, this is arguably one of the toughest industries to find success.

Without putting in the work, at least.

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

And typically, 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.

 

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. And while that is important, your efforts need to be more active and proactive.

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. Ultimately, your client may still make a poor decision, but you will have done your job and established your credibility.

Now, the reason some advisors are too passive is because of 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, “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.

Expecting to build your practice on hope… won’t build a practice.

 

 

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 and you will never know everything there is to know. Still, many advisors bury themselves in brochures and trainings for hours on end but fail to put that into action.

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.

It’s important to curate your learning path in a  way that compliments 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 your knowledge.

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!

If you don’t believe in the advice that you’re giving, it would be natural to start with strangers. But, when you think you have something of great value you’d first want to share it with your friends and family first and foremost, right?

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.

 

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 and what makes sense in building that sustainable, referral-based practice.

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.

 

How To Overcome The Fear Of Failure As A Financial Advisor

Most financial advisors fail due to fear. This fear manifests itself differently in different advisors – the fear of picking up the phone, asking for that referral, or being proactive in your practice building.

In this business, the majority of what you want is just right outside of 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 team to see if Consolidated Planning is the right fit for you.

 

Exp. 11/2027

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Consolidated Planning, Inc. is an Agency of The Guardian Life Insurance Company of America® (Guardian), New York, NY. Securities products and advisory services offered through Park Avenue Securities LLC (PAS), member FINRA, SIPC. OSJ: 6115 Park South Drive, Suite 200, Charlotte NC 28210, Phone # 704-5528507. PAS is a wholly owned subsidiary of Guardian. This firm is not an affiliate or subsidiary of PAS. This material is intended for general use. By providing this content Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity.