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RIAs need to get over 'quotas' when it comes to sales and growth, or end up being owned by an RIA that knows how to impose them

To achieve growth, investment advisors need to stop avoiding a 'sales culture' and achieve clear organic growth goals by, cough... selling

Tuesday, September 22, 2020 – 4:31 AM by Guest Columnist Amy Parvaneh
Amy Parvaneh: [Success] comes to me from Wall Street training but also from the hard knocks of immigrating to the US when I was 12 years old

Brooke's Note: Nothing sounds sweeter than hearing that an RIA has 20% organic asset growth. We all want it and believe it should happen as a matter of course for great firms performing a great wealth management service. But clients -- even referred ones -- don't sign themselves up. And referrals can take you only so far. So that leaves the necessity of making sales, which RIA culture regards as next to evil, at worst, and and a necessary evil, at best -- and always extremely difficult for the cerebral fee-based advisor crowd. In this column,  Amy Parvaneh, founder and CEO of Select Advisors Institute, offers a refreshing, take-no-prisoners view of sales. She simply refuses to buy into the idea that sales are either evil or necessarily all that difficult. She also sees little purpose in a "sales" program without something even more detested than sales -- the sales quota. She makes a case at a growth level for embracing sales and the inherent quota but goes one further. If you won't sell, somebody else probably will and they may end up owning your firm some day and make a quota mandatory on more draconian terms.

RIAs who have left the wirehouses to set up shop often cite fiduciary reasons for doing so.  They escape sales pressure, but many times they stop making sales altogether.

Next thing they know, they have no organic growth (aside from their original clients’ referrals) and may reluctantly need to sell themselves back to a giant institution.

At the center of the advisor sales dilemma is a dreaded word --  quota. Professionals know it as an inflexible performance metric applied to a task where technically we have no control over the outcome. See: How an ex-Goldman superstar asset gatherer in LA is bringing her bazooka to the RIA knife fight

The prospective client holds the signing power, the assets and the ability not to respond to voicemail messages.

What we know of quotas is that their rigid nature can force a broker's hand -- leading to deception, intimidation or even the opening fake accounts. Totally get that.  

But a fear and disgust of quotas is counterproductive. Just because athletes want to win so badly they take steroids, doesn't mean we toss athletic competition.

A quota is simply a measure of accountability.  

It is the key ingredient for sales and growth-- that “number” that you have to achieve in sales by a certain date.  

That quota is what keeps every sales person on target, focused on the prize and many times up at night.  As dreaded as it is, it works and it's unlikely that most firms can find an alternative. 

Live by the book

Large wirehouses are extremely familiar with the concept of quotas.  Underperforming a quota is how many wirehouses shed a certain percentage of their advisors on an annual basis.  

At many such firms, compensation is reduced if an advisor does not reach their quota.  If your “book” isn't growing, you’re a target for the chopping block!  

Quotas also lead to many positive status levels. I’ve been invited to and spoken at several lavish destination offsites for wirehouses where guests were the top 1% or 5% of advisors that overachieved their quotas.  

They came to get continuing education while their kids jumped in one of the 10 resort pools, and their spouses shopped in the hotel. 

They are what promotions are based on.  Quotas also result in better people, such as more advanced administrative assistants and support staff.  

I didn’t say quotas are pretty!  

They can certainly be a recipe for high blood pressure, bring out the A type in every person and cause a Darwinian-like environment.  

It creates a fierce and competitive person out of even the meekest employee.  Why?  Because their job is always in jeopardy, AND they would like the upside.  It is a recipe for success and growth.  

'Dirty, deceptive'

For firms with long sales cycles, a quota isn’t always just about sales and how much AUM came in.  There are some firms that base quotas on activity that leads to sales.  

They literally track the number of emails and calls made to new prospects, number of times traveled to meet warm prospects, how many letters have been sent and more, using CRM systems such as Salesforce.  

Outbound email templates are created, and the professional simply needs to make the time to do the activity in their quota.

However, in the RIA world, the word "quota" is many times considered taboo.  It is looked down upon.  It gives many RIA’s who were formerly wirehouse advisors PTSD.  

It reminds them of the movie Wall Street.  It makes them feel dirty, like a used car salesman.  Creating a black-and-white quota for the team is the worst thing you can do to your people.  

Their imagination goes from a place of importance to how “dirty and deceptive” this concept of quotas can go.

So in the absence of quotas, what do RIAs substitute? 

They try to apply the analytical skills and bedside manner. That makes them good planners and investors to the selling process. It often results in analysis paralysis, prospect cherry-picking and soft-selling that lead to few closes.

Quota mindset

So if quotas are not instituted properly, how do some firms in the RIA side even get to that multi-billion-dollar range, you ask?

If you actually look under the hood of many of those RIAs, you will realize the majority of the assets are still being brought in by that same rainmaking CEO or founding team who had that quota mindset instilled in them.  

Yet these seasoned salespeople are often reluctant to impose a quota mindset on younger advisors, maybe especially their children, or their client service managers, many of whom never knew that pressure-cooker culture at home or work.

I’ve worked with many RIA’s where I’ve been astounded by this phenomena.  I once worked for a multi-billion[-dollar RIA in the Midwest.  The CEO was “dumbfounded” in his own words about why his people weren’t doing more business development and sales.

So he’d called me in to coach the advisors to bring in more business.

As someone who has been on the wirehouse side and relishes the dynamic sales process, I need goals to thrive under sink-or-swim pressure.

I like harnessing that pressure to invent workable strategies until sales momentum can take over. Yes, it comes to me from Wall Street training but also from the hard knocks of immigrating to the US when I was 12 years old.  

Nothing got handed down to me, so I’ve always set goals for myself, and each time, have mostly achieved them.

Larger challenge

But I have seen firsthand how hard it is to implement quotas at RIAs where none have existed before -- despite my attempts to impose a measure of fear in people when I start coaching them.

After doing my due diligence on 10 individuals I was hired to coach at a Midwest RIA, I created what to me was a paint-by-number grid for sales success.

Each advisor got a Google sheet with "x" number of social media actions, "y" number of prospect dinners, "z" number of cold-call connections, etc.

I even wrote for them what to write to each person they were reaching out to, how to express their messaging and even how to structure their day to make time for all of this.

Two weeks later, I checked in.  The advisors completed only 5% of the assigned actions.  I checked in again in two weeks, same thing.

This is when I got concerned. I told the CEO what we could do to get the staff back on the sales track.

His response revealed a larger challenge:  “Leave them alone for now, they are tending to client activities since it’s our quarterly meeting time.”

Harnessing fear

Another client I was coaching, call him Bob, an advisor at a large wirehouse, explains why sales success -- and adherence to quotas -- begins at the top.

For Bob, the wirehouse advisor who wanted nothing more than making managing director, I created this same quota-based roadmap. 

By the very next day he had sent me eight different emails asking me how to reword an inmail he was going to write--what to write in the subject line, how he could find information on someone he was going to have dinner with and how he was going to double the task items I set for him.

Bob was managing the same amount of assets that the entire RIA in the Midwest was managing, with only four people on his team.

The result for Bob?  

He invited a group of 15 people to a dinner event he was hosting, one of them with $12 million in investments that he was looking for a financial advisor to manage.

What caused the difference?  One simple word: Fear. 

Not morbid fright but fear of failing to reach achievable quota.  The competitive spirit and hunger instilled in Bob at the wirehouse drove him to achieve his quota--or else.

The piano test

Meanwhile, the RIA wants badly to grow, but not if the price of growth is to experience a set of uncomfortable emotions or even to insist that younger staff do the work necessary to build a practice.

To someone who is a true salesperson (and remember, salespeople are not born, they are made), I equate that approach to the parent who wants their child to learn the piano.  

“Honey, I’d love for you to leave your video games and start learning Bach, if you have time.”  

What child on the planet is going to be self-motivated to learn the piano of their own free will so they can play Bach (one of the most complex composers in history)? 

Any parent out there who has tried to encourage their kids to learn piano knows exactly what I’m talking about; it requires consistent practice, giving up a lot of fun games and play time, until the skills has been developed,

Then it becomes enjoyable enough to create its own momentum.

Grinding it out

Similarly, getting new clients is a “should-do-it-because-it’s-important" task. But I am shocked by how many CEOs are confused when their salespeople say “I just didn’t have the time” to generate new assets.  

Similar to playing the piano, getting new clients is one of the most challenging tasks in the world.

For lack of better words, it’s dirty, vulnerable, grinding work full of emotional ups and downs and little work rhythm.  It often entails working on Sundays, entertaining at night, spending hours on social media, asking college classmates out for coffee and more. 

Sales quotas can absolutely seem to defeat the purpose of having jumped ship from the wirehouse to a Zen existence of analysis and magical referrals. 

Yet most advisors would agree that being Zen-challenged with dozens of big clients beats being peaced-out serving a smaller, less diverse and less profitable client base -- and knowing that brokers who took the trouble to make a sale were taking prospects who could have been your clients.

Quality and quantity

But what could be more existential than a world where larger RIAs are gobbling up smaller, weaker shops, not for a fiduciary reason, but the exact opposite--lack of growth. 

In this instance, the play for a Zen existence could have the opposite effect -- forcing you to possibly throw in the towel out of reluctance and have a larger institution with a salesier culture acquire your firm and impose quotas that you failed to impose on yourself, your team and your business.

Sales involve quality and quantity. You must be a quality person and communicate well, but you also have to take your chances playing a numbers game where the prospect is allowed to say "no."

But the odds are radically in favor of a good advisor in a world short of them, if they see a quota as the key to achieving sales and growth.

Amy Parvaneh is principal of Select Advisors Institute in Newport Beach, Calif. 


Jeff Spears

Jeff Spears

September 22, 2020 — 3:02 PM
Great article that combines Goldman and Parenting. Difficult,but we need to keep at it so we can keep our job and our kids attention.

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