He called me last week.  Actually, his “executive assistant” did.

After explaining to me who she was, who her boss was, and where they were located, she began asking questions about my upcoming Renegade Advisor meeting.

“Our company CEO, Michael, is interested in your upcoming meeting in Cincinnati.   But he said there must be a system that you’re trying to sell, so I’d like to know more about that.”

Prior to our call, I visited the company website.  Ten employees.

BTW:  What’s the deal with everyone these days calling themselves a “CEO”?  Unless you’re publicly traded with a market cap of a billion, you’re just the “owner.”  It’s like the word “entrepreneur.”  Sounds great, but is usually misused.

But I digress.  This firm has ten employees, 9 of whom are in the support role:

1 Event Specialist

1 New Business Specialist

1 Consultant

1 Administrative Specialist

1 Client Services Manager

2 Seminar Coordinators

and of course 1 Executive Assistant.

Seriously, what does an executive assistant do?

I must have said the magic words because eventually I was patched into the CEO.

After a few minutes of chit chat, I confirmed my suspicions:

Mostly commission shop.  Almost no recurring revenue.  Overhead runs at 70%.  Owner works 7 days a week (although he did manage to have five kids, so he does get some time off).

He’s won almost every FMO award imaginable but one:  the wealthiest advisor.  That’s because he’s broke.  He “owns” his building.  Ah no, there’s a mortgage on that.  Has two homes.  Yup, both bank-owned.  He admitted just one bad month of selling commission products would financially crush him.  But it didn’t seem to bother him that much.  After all, he had a line of credit with his bank.

“Right now we’re in a growth mode.  I’m not too concerned with profitability.”

“When you say growth mode, what do you mean?   Equity?”

“No, revenue.”

“But if revenue doesn’t translate into profit that you can bank, what good is it?  You have no equity in your practice.  It seems like as soon as you increase revenue, you hire someone to absorb it.”  Silence.

You like charity?” I asked.

“Yes, I do.”

“Good.  You’re the most charitable person I know.  You’re employing 9 other people and bringing home very little for yourself.   I’ll bet your next door neighbor makes at least as much as you do and works half as much.”

“Yes, but he doesn’t own a business.”

“I’m sorry, but neither do you.  A business is something you can sell.  Something with assets and recurring revenue.  You have very little.”

To this advisor, a large staff and lots of activity embodied success.  The fact he brought in less than 25 cents of every dollar earned didn’t seem to matter.  He followed his FMO’s definition of success.

But was it worth it?

Almost every financial advisory firm I’ve studied can generate significantly more profit by cutting waste, simplifying their processes, and implementing systems.  What results is a leaner firm in terms of staff and effort, but far greater in terms of profit.  Your FMO won’t like it, but your family will.

“Can I be candid?” I asked.  “You really don’t want to attend this meeting.  By the time you drive home, you will have laid off half your staff, changed dramatically the way you market and sell, and will be filled with anger that you hadn’t figured this all out sooner.”

He agreed.