Click Here To Listen To The Perfect RIA Podcast

What You'll Learn In Today's Episode:

  • The importance of knowing—and then executing on—what works.
  • Why you need to learn from those around you.
  • How to determine how effective you are.
  • What the power factor is and how to apply it to your practice.
  • Why mid-year reviews are crucial.
  • The benefit of being transparent with your clients and colleagues.

Resources In Today's Episode:

Read the Transcript Below:

This is The Perfect RIA, in case you didn’t know. Bringing you all the strategies to help your business grow. Are you happy? Are you satisfied? Are you hanging on the edge of your seat? Sit back and listen in while you feel the beat. Another myth bites the dust…

Micah Shilanski:  Welcome back TPR nation, waiting for another amazing episode of the Perfect RIA podcast. I’m your cohost Micah Shilanski and with me as usual, the legendary Matthew Jarvis. What’s going on, Jarvis?

Matthew Jarvis:   Micah, just another day in paradise, though I have to confess since our listeners are only listeners and they can’t see us, you as always are back on the road with your family and I am actually in my office today because here in the Northwest as we’re recording this, we’re having some kind of killer heat wave and we don’t have air conditioning in our house, but we do at the office. So here I am. I’ll check an office day off and yeah, use the air conditioning.

Micah Shilanski:  It’s 110 degrees, wife and kids, you stay home. You’re fine. I’m going to the office where there’s air conditioning.

Matthew Jarvis:   I invited him to come to the office at work. I said, “We have great news. We have some newsletters that need to be folded, we have some things that need to be organized if you guys want to come in. You’re always welcome to do that.”

Micah Shilanski:  A little child labor is a beautiful thing.

Matthew Jarvis:   It’s perfect. That’s perfect. Well, Micah, really excited for this podcast, excited for every podcast, these are a lot of fun for our regular listeners. Which are now tens of thousands a month, you know that a few weeks ago, we talked about the importance of doing a mid-year review. We also talked about what we’re going to now call the Power Factors, some key measurements in your practice. What we did not necessarily talk about then, and what we want to talk about now is what do you do with that information? So you know that, “Hey, my prospecting is a little weak or my profitability is a little low, or I’ve got this personnel issue.” Okay. Knowing is great, but what are we going to do with that information?

Micah Shilanski:  Yeah, that’s something that we talked about. We jokingly say, knowing is half the battle and that’s just a bunch of BS because how often in life do we actually just use willpower or do we actually just move forward? And then we figure things out? If we wait to have the perfect answer, and this is the reason I want to bring this up now, because sometimes we get caught in this paralysis by analysis. I want the perfect answer. I want the perfect solution, and then we never make a step forward and move. This is the reason we distilled the Power Factor down to four simple things, because we can quickly, easily look at it. We can evaluate it and say, “Great. Where do I have the most room to improve? This is what I need to focus on.”

Once you get that generic area, then you need a plan and you need to take action. Again, this is the importance of everything we preach about in the Perfect RIA extreme accountability, this is importance of Masterminds, it’s the person about really the importance about working with people that have been there before and it’s not theoretical information.

Matthew Jarvis:   Yeah. It reminds me of two of the four rules of success, Micah. One of the rules is do what works, not just what works for you, though, that’s important, but what has been proven to work for other people. Of course that reminder that willpower is not enough. So if you looked at your practice, you saw that weak area, and if you’re being honest with yourself, it’s been a weak area for weeks, months, years, possibly your entire career, we need to be honest with ourselves and say, “Hey, listen, if willpower was enough, this wouldn’t be an issue. It’s not enough therefore I need to figure out what I’m going to do differently or who is going to help me do this differently so that I can move the needle.”

Micah Shilanski:  All right, so let’s run over real quick what the Power Factor was again for our listeners. Now, if you have not got your Power Factor number, this is going to be key. Jarvis and I are going to keep bringing this up again and again, and we’re going to be tying this into our podcast about saying, “Boom, here’s how we’re going to increase this quadrant of your Power Factor,” so in order to get that jump on our website. Why do it from our website versus calculate it? Simple, because now you’re going to benchmark yourself against other successful advisors and as we compile this information, we’re going to then share it out with you. It says, “Perfect. Here’s how you rank compared to all of the advisors in the TPR nation.” This is really, really important. Number one, you can jump on our website, theperfectria.com. You can find the Power Factor button, jump on there and get it.

Now, the first thing it’s going to ask you for is it’s going to go through your effectiveness. Now, effectiveness, Jarvis, is key. This is what we talk about all the time. It’s not about playing office. It’s not about spending so much time in the office, that’s not where you’re making any progress. It’s about how effective are you during the day. This can be a little bit hard to quantify. How do we quantify someone’s effectiveness? We’re going to take a gross stab at it and say, “Awesome. What is your gross income?” That means what is the total debited from the client account, the absolute gross that was there divided by the days you spend working. How many days do you spend in the office and guess what? We measure value based on dollars so that’s where that gross income’s going to come from and how much time are you in the office? That’s how effective you are based on your income.

Matthew Jarvis:   Now for this measurement and for the other three that we’re going to talk about we need you to, when you’re using the tool, upload a screenshot of where this number came from. What we run into, whether it’s the Power Factor or fishing stories or gambling stories or investment returns, everybody remembers, even if they’re trying to be honest, they remember a number that’s not exactly reality. Micah, as you pointed out, that gross income number for me in my office, I can take that easily out of QuickBooks because nobody takes a cut out of our gross, so I can just look gross income in QuickBooks for Jarvis Financial. There’s my gross number, so that’s what I would screenshot. If you’re getting paid out of a grid, perfect. Get the screenshot of the very top line number and upload that in so we all know that we’re looking at the same number.

Micah Shilanski:  Yeah and this is the importance as we build this out, being consistent. You know what? It’s not about a comparison tool to really show how big you are. This is an honesty tool to say, “Great, where do I need to improve?” This is what we love about the Power Factor is, because now I can look around and I can go to, boom, see another advisor at a conference or a Mastermind. I can look as Power Factors says, “Oh my gosh, you are crushing it in value to clients. How do you do that?” I can learn from someone who is successful. Again, following our four rules of, and one of them is really key, just do what works and this is how we’re going to evaluate what works.

Matthew Jarvis:   Yeah, Micah, it also helps on the other side. For advisors listening to this, and we have a lot of very experienced, very successful advisors as part of the TPR nation, as we’re mentoring other advisors, to know what their Power Factor is, is very helpful. I can look at an advisor and say, “Oh, if your effectiveness is X, that probably means you’re facing these issues. Whereas if you’re effectiveness is 10 X, wow, Dave, you’re facing an entirely different set of issues.” Like a golf handicap or anything else, I want to know, hey, where are we starting from? Whether I’m mentoring someone else or I’m looking to be mentored myself.

Micah Shilanski:  Yeah, absolutely, absolutely. All right. Jarvis went into effectiveness first and then what is our second Power Factor that we need to look at?

Matthew Jarvis:   Yeah. Number two, value to clients and Micah, as you pointed out with effectiveness, some of this stuff can be hard to measure and endless time has been spent trying to determine what it means to provide value to clients. We’re just going to go again with dollar and cents, something that’s easy to measure. We’re going to divide that gross income, again from the Power Factor, the previous Power Factor, gross income divided by total household. To give an example of that, just for my own practice last year, our gross revenue was about 1.5 million. For those of you in the Backstage Pass and Victus members, you’ll be able to see these exact numbers. 1.5 million divided by 160 households, that comes out to about $9,375. That would be my, value to client would be $9,375. Again, we could debate this, but as I’m looking to talk to other advisors, boy, if I talk to somebody in their Power Factor for the value to clients is double mine, I want to learn how you’re doing that. How are you delivering so much value to clients that you’re comfortable charging a Power Factor value client’s double mine.

Micah Shilanski:  Yeah. These are absolutely great things. If you’ve missed these Power Factors, so we’re going to highlight them real fast because we’ve already talked about this, I think it was at episode 118, you can go check that one out. We really want to focus on quick little review of what these are then we’re going to be moving into what you need to do with these Power Factors.

All right, the next one is going to be prospecting. Prospecting, the way we’re going to gauge this is year over year growth. What have you done to consistently grow your practice year over year? What we really want to see in the Perfect RA is at least a 20% per year growth rate year over year. Yes, it’s going to be up and down at different times, but what’s that average for that last five years? How are you doing?

Matthew Jarvis:   I love that and so, again Micah, we’re looking at really just the growth of your gross revenue from one year to the next. I get it, the markets move, but we’re all in that same boat. That’s why this is a comparison number. It’s not necessarily a who had the highest percentage in one year, though I am always curious to see that, but yeah, we’ll all have when the markets are down all of our year over year growth numbers are going to be different than when markets are up. But again, it gives us a number that we can look at like your pulse, like your blood pressure. Hey, what’s going on here? What are the trends good or bad?

Micah Shilanski:  Awesome. The last one is EVOC profitability. This is a big thing that we’re focused on again and again. Reason we focus so much on profitability is it’s a very good gauge to see how effective you are at running your practice. Other things are like time value to clients, prospecting, et cetera, but this is really going to get into how can you run your practice effectively as well? This is what EVOC tells us. How good are you at delegating? How good are you at managing your time? All of these things come into the Power Factor and when it comes to the EVOC, the net is super important so we’re comparing real things.

For example, if you have a million dollar shop, but you’re bringing home $50,000 a year, guess what? You’re not being super effective in these areas, you really need to improve it. Versus you have a $2 million shop and you’re bringing in 1.9 million, you know what? Maybe you need to learn to delegate because I bet you’re effective. Isn’t that great, you’re working so much in time. This is really what these numbers, it’s not just one number that defines us, it’s the combination of these. This is the reason it’s the Power Factor in these different quadrants so we can really see where you need to grow at.

Matthew Jarvis:   Yeah, and Micah, since launching the Perfect RIA podcast a few years ago now we’ve had the opportunity to look at hundreds, probably over a thousand different practice, and it’s really boiled down to these four Power Factors that let us know at a glance where a practice needs the most help. By cutting straight to this, I think normally in industry circles and a lot of coaching programs, et cetera, there’s kind of a lot of beating around the bush about where your practice is at.

Micah, I remember for me, I remember early in my career, I sat down with a well-known industry coach whose name will remain nameless and he said, “Well, Jarvis, how many prospects are you meeting with?”

I say, “Ah, I’m meeting with 10 or 15 a month.”

He says, “Perfect. How many of those are becoming clients?”

“Almost all of them.”

“Perfect, Jarvis. How much money did you make last year?”

“Basically nothing.”

“Oh, all right. Well, somewhere the numbers are off.”

Then I go back and look like, I honestly go back and look, I’m like, “Oh, I met with like one prospect a month and they all said no.” This was early in my career, but it’s easy to get if we’re just talking, if we’re just shooting the breeze, I caught every fish, I shot every deer, whatever it is. These give us real brass tacks, perfect, Micah, tell me your Power Factor now we know where you need to get from here.

Micah Shilanski:  Yeah. Real, measurable statistics. This is objective, not subjective. It’s not just our opinions because we all have a tendency to imagine a little bit more than what actually happened. The reason this is important and again, 118 talks about so much of this Power Factor get more depth, but let’s talk about applying this Power Factor in different ways and why this is so important. We’re using this in Masterminds. When we’re grouping people in Masterminds, we need to see what your Power Factor is and making sure we’re putting the right type of people together so everyone is going to grow and it doesn’t become teaching for the entire time or it doesn’t become, you’re so far behind these other people there’s no way you’re really adding value to that group and vice versa. We’re really looking at this and saying, “Great. Where do we want to go?”

For me and for Matt personally, I’m going to be looking at these Power Factors when I’m hiring coaches, when I’m going to these other things and saying, “Great. Where do you really develop value inside of there?” If I have a great coach, but you know what, what they’re really good at is getting someone from maybe that 150 to 250,000 in gross revenue that’s not the coach that I need. I need someone at a different level. I want to what the Power Factor is of them and the people that they work with so I can really decide, “Is this someone who’s going to help me move the needle or not?”

Matthew Jarvis:   Yeah, Micah, that reminds me of an example. You and I spoke to a coach a few months ago who actually turned us down. At first we thought like, “Hey, this is your sales pitch. You’re just trying to get us.”

Micah Shilanski:  Right.

Matthew Jarvis:   But we had talked about, we had these very ambitious growth goals and he says, “You know what, guys? That’s really not what I do. I’m not about helping people double and double and double and double again. I’m about these other things.” He was one of the first coaches I’d ever talked to. Who said, “Hey, listen, what you’re trying to do is not what we do.”

What usually happens with coaches and coaching programs and consultants is, “Oh yeah, that’s exactly what we do. Perfect.”

Micah, to your point, just let me talk to two or three advisors whose Power Factor is better than mine in whatever area I’m trying to improve, and I’ll ask them how it went. I don’t need your assurances that you can approve my Power Factor. I need to know that either you have a better Power Factor or the people that you’re working with have a better Power Factor in the area that I’m trying to improve, otherwise we can just stop this discussion right now.

Micah Shilanski:  This is like a testimonial reference on steroids. That’s what this is because it’s not just Bob saying, “Yeah, he was great.” Well, you know what? Bob had a problem with delegation. Well, I don’t have a problem with delegation. This really dives into these different areas, which is outstanding.

I want to pivot this a little bit more and say another reason this Power Factor is so important is it really focuses on your DMVing. How are you delivering massive value? Again, this isn’t just about getting help, it’s also about you helping your clients and the Power Factor can go back through and say, “Wow, am I really delivering value?” Because guess what, in our society, we value dollars with money. That’s value right there. We get to compare this and we say, “Great. Is there another advisor that is crushing the value out there so much that their client’s awesome? How do I learn from that? How do I grow so I can really help my clients more? It’s not just about increasing my fee. It’s about delivering more value to my clients and how do I measurably find that?”

Matthew Jarvis:   Yeah, an example of that, Micah, outside our industry that I go back to all the time. You can buy coffee from your grocery store and make it yourself for 20 cents a cup or you can drive down to Starbucks and pay $5 or $7 for it. Why is there such a price disparity? What value is Starbucks providing its customers that they’re willing to pay 10 times the actual cost of those materials? That’s again, Micah, like you said, for an advisor. We run into this by the way, not to rant on this because we don’t like doing that on a negative way. There’s advisors that have come after us and said, “Wait, you guys charge way too much. You can’t possibly deliver that much value,” but let’s take a step back instead of looking at it from the negative, say, “All right, what are Matt and Micah doing or other high Power Factor practices, what are they possibly doing that deliver that much value?” Look at it from the lens of curiosity, not from the lens of, “Hey, there must be something wrong here.”

Micah Shilanski:  Perfect. Another one that we can really focus on this is go back to your mid-year review because we talked about that at the beginning of July. You were supposed to do a mid-year review and if you haven’t done that, man, you absolutely have to do that. Really go and look at your numbers and apply this Power Factor to where you are now and where do you want to be? There’s two ways you can do the Power Factor. One of course is with your current numbers, but another way to slice it is what do you want your numbers to be at the end of the year and then how does that math work?

The reason I like this, Jarvis, let’s pivot this analogy just a little bit and let’s say we’re looking at it from a competitive sport environment. If we were on a competition for speed, what we would do is we’d look at everything that we were doing and say, “Great. What can I do a little bit to improve my speed? Where do I have the most gains to make?” We wouldn’t just say, “Run faster.” It’d be, “How do I get off the block faster? How do I listen for the start of the gun? How do I listen for all of these other things to move faster or move sooner to get something done?” Okay, perfect. Measure your Power Factor and where you want to be, measure factor where you currently are and say, “Great. Out of the quadrants, which is the one that I have the most improvement to make?” and focus on that. I want to focus on where I have a 20% improvement, not where I have a 0.2% improvement.

Matthew Jarvis:   Yeah. If your delegation is already spot on or your effectiveness is already spot on, perfect. Let’s pivot Micah, like you said. If your marketing is weak, if your prospecting is weak, let’s put our focus there.

Micah, one other thought I want to throw out on the Power Factor is as it relates to Masterminds. The Power Factor can be a great tool for finding people to be in your Mastermind but I got to tell you having done a lot of these Masterminds where it’s the most effective is when you sit down in that Mastermind together and everybody writes up on the wall and the giant post-it notes, what their Power Factor is and puts their real dollars out. That level of transparency, now, by the way, I would have some NDAs in place for that and I would make sure that we’re all have integrity here, that this isn’t going to get shared, but having that level of transparency with your peers who can call you out and who can say, “Hey, Matt, I see that your Power Factor number three, your value to clients, that number has not moved in two years. What’s going on here?” That is where real value comes out of the Masterminds. That is where practices get transformed and that’s where real, I want to say even just friendships, professional friendships, are really cemented, having that level of transparency because it doesn’t exist anywhere else.

Micah Shilanski:  I’m so glad you said that because in the Masterminds that we’ve done that and we’ve done them both. We did it, then we went to a larger Mastermind where we didn’t do that event with the live, and we had several people that the previous one that came up and said, “Hey, we really missed out by not doing this event and it was so uncomfortable but the very first thing we do is financially undress and you don’t have time to think about it. You just put your numbers down, but it is such a powerful move. You really have to do that.”

I got to say, Jarvis, as I was sitting on the opposite side years and years ago, I’d probably be saying, “BS, that doesn’t matter. What do you mean with this financially undressed and getting vulnerable?” This is a bunch of crap, kumbaya, sitting around a circle. I want to actually improve my practice.” I would not have believed it. But going through the experience, I got to say, take a little bit of a leap of faith here, do it in your Mastermind group. It is amazing what you’re going to see.

Matthew Jarvis:   Yeah, I remember, Micah, the first time that we had this in one of our Masterminds, one of our very first ones. If you want to know the details that you’re going to have to get us a beer or two, but Micah, we were always joking about something and you mentioned what one of your numbers were. Everybody stopped and we’re like, “Wait. Micah just said what his real number is on something. No one has spoken their real numbers.” There was an audible silence across the room, the five of us or so, somebody shared a real number and I think that was a real turning point where our Mastermind went from a couple of advisors sitting around, shooting the breeze to all right, we’re really going to get into this stuff. We’re really going to talk about where our practices are doing well and where they’re struggling and where willpower hasn’t been enough. It was a real turning point. I agree with you, Micah. I’m an endless skeptic and endless cynic. I’d say, “Hey, that doesn’t matter. That’s kumbaya.” I promise you that will make the biggest difference in your Mastermind. That and a hot tub. All Masterminds need a hot tub, but that’s a story for a little bit.

Micah Shilanski:  Alcohol, hot tub, and transparency. That’s what I heard. That’s a recipe for a solid Mastermind.

Matthew Jarvis:   Now you know why we don’t do co-ed Masterminds. It’s really, it’s not anything personal to anyone.

Micah Shilanski:  That’s exactly right.

Matthew Jarvis:   Perfect. Well, on that happy note of hot tubs, alcohol, and transparency, let’s jump into some action items because of course that’s where things happen. Knowing doesn’t count, doing is all that counts.

Micah Shilanski:  Amen. One of the things you absolutely have to do is determine your Power Factor. Jump on our website, theperfectria.com, figure out your Power Factor. Don’t just do it yourself. Again, throw it in there. Why? Because we want these stats to go out to the entire nation to start linking people up to say, “Hey, how do you connect?”

We have a goal, Jarvis and I, we want to make an impact in over 10,000 advisors’ lives in order to dramatically improve their practice. In order to have that impact, we need your help to get this information, to go out there, to make a meaningful difference in our advisor community.

Matthew Jarvis:   Yep. Once you have done that and by the way, for Invictus members, if you haven’t already had your call with me, we will have a call to go through your Power Factor and map that out. Once you’ve done your Power Factor, I would then write it on a post-it note and put it on your computer monitor and then I would also next to that, put what you want your Power Factor to be. Micah, to your point, I would probably only focus on one or two at a time. All four will move, by the way.

If you move one, the others will move but I would again say, “Hey, I’m going to focus on this one and I’m going to watch it move.” Post-it note on your laptop, on your computer screen, on your bathroom mirror. “Here’s my Power Factor. Here’s what I want it to be.”

Micah Shilanski:  Absolutely. The other thing that we need to think about is when you’re going out and talking to other people, ask them what their Power Factor is. If they don’t know great. Give them the little sheet, grab their phone, send them to the Perfect RIA and have them do their Power Factor right then, let’s find out what these numbers are so you can really, again, go back to that honesty and transparency have these conversations. I’ll give you a little bit of a hint that’s going to be there. When Jarvis and I know someone who’s going to make up their numbers and we ask them what their Power Factor is, ask them what their gross income is, they pause or say, “Well, I really don’t have access to that information.”

I’m like, “Whoa, whoa, whoa, BS. Every single one of us knows pretty darn well what our gross income is.” I am sure I am off, I’ll even give myself a 10% margin of error, I am not off that much, but all of us really know what these numbers are and we can come really, really close on the spot. If you’re working with somebody and they don’t know, quote, what those numbers are, that means they’re making it up, that means they’re scared about their numbers, et cetera. We all know what these numbers are.

Matthew Jarvis:   Yeah. Micah and I are quite a duo when we run into people because while Micah is asking the questions, I’m pulling up their ADV on my phone or just Googling it. I’m like, “Oh, so interesting.”

Micah Shilanski:  “What you reported last year, huh? Fascinating.”

Matthew Jarvis:   “Yeah, you must, you must have brought on a lot of assets this year cause last year your number was not that good, but congratulations.”

Micah Shilanski:  “congratulations.” That’s great.

Matthew Jarvis:   Perfect. Well, thank you so much for being part of the TPR nation. Always glad to have you and until next time happy planning.

Hold on before we go. Something that you need to know. This isn’t tax, legal, or investment advice. That isn’t our intent. Information designed to change lives. Financial planning can make you thrive. Start today. Don’t think twice. Be a better husband, father, mother, and wife. The Perfect RIA. The Perfect RIA.

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