Recently, Bachrach & Associates, Inc. (BAI), a professional development firm for financial professionals, took a close look at the business results of their advisor-clients. Those results revealed statistical confirmation that BAI’s professional development programs for implementing Values-Based Financial Planning™, BAI’s distinctive programs and philosophy, yield legitimate, compelling returns on investment (ROI). Recognizing the importance of reliable, actual return on training investment, BAI decided these results should be shared with professionals who continue to strive for reportable, tangible results for their training and professional development dollars.
BAI was founded 20 years ago by Bill Bachrach as Bachrach & Associates, Inc., with the intent of developing a system – the Mastery System - for financial professionals (financial planners, CPAs, insurance agents, etc.) seeking to dependably and ethically acquire new clients. In the past 2 years, BAI has transformed its initial learning materials into true training instruments, continued to improve its programs and services, and refined measurement tools for its own and its advisor-clients’ results. The outcome of the latter is the legitimate finding that BAI’s philosophy and professional development programs do create a genuine return on investment; results large enough to surprise BAI and its advisor-clients.
To understand BAI’s enthusiasm, let’s look at real business examples from some of our current advisor-clients. We examined the results of advisor-clients who participate in BAI’s Being Done™ Study Group (BDSG). This is a group of advisors who enroll in a year-long program consisting of bi-weekly conference calls, daily activity reporting and bi-weekly, individual accountability coaching calls. These participants are voluntarily held to a very high level of accountability. It is called the “Being Done™” group to illustrate one of our viewpoints: choose a specific target date when you no longer have to acquire new clients; your annual, predictable, recurring revenue meets all of your financial needs; and you have the time to deliver the quality of service that will establish intense client loyalty. You only serve clients who fit your Ideal Client Profile (i.e., who have the economic and personality characteristics that you most appreciate and enjoy serving), and you are “done” with promotional activities. The date you achieve this is known in our vernacular as your Being Done™ Date (BDD.)
To discern the effects of implementing VBFP and learn how else we could continue to improve our offerings, we looked back at one full year of data. Each member of BDSG independently enters multiple data points in a Daily Report that is submitted to BAI daily (Monday – Friday) for weekly and annual compilation. They each share the number of client appointments – of several types – scheduled and kept, the number of phone calls made and appointments scheduled and kept with referrals, and the number of supportive activities completed to engage referrals. They also report their current Ideal Client count. The information is compiled each day. This is the compilation from which we extrapolated the data that prompted this report.
We removed the extreme high and low results in order to get a more realistic picture. We added demographic information and progress measures including participants’ desired annual income and their BDD.
We also asked them to tell us their desired predictable, minimum annually-recurring revenue (PMARR) per Client – an indicator of the type of clients they choose to serve. A higher PMARR indicates a higher annual fee for service, and likely more affluent Clients. The averages of those data came out as follows:
• Desired annual Income - $403,000
• BDD – 11/15/2012
• PMARR - $3,860 per Client
Then, we calculated the number of clients they would need to serve to achieve that income. Dividing the income desired by the PMARR per Client, an advisor needs 105 clients to achieve that annual income. (This equation varies, of course, depending upon the desired annual income, how many clients an advisor wishes to serve, the expenses the advisor incurs, and the desired predictable annual revenue. We’ve seen client communities as small as 50 and as large as 225, with most advisors choosing 100 to 125.)
To calculate the ROI over the life of the business for this example, we completed a very conservative projection with a sale date of the business in November 2017, in 9.5 years (five years after reaching the BDD). Note that the revenue listed is only what was generated from implementing Values-Based Financial Planning™ – nothing from the current business revenues at the time of engaging in VBFP.
Multiply 105 Clients by $3,860 over 9.5 years (114 months) and you learn that the business would generate $3.7 million - $2.9 million plus $808,000 from the sale of the business. (That $808,000 comes from multiplying the annual income [~ $404,000] times two, a conservative way to estimate the value of a business for sale.) During those 9.5 years, the Advisor would have invested a total of a little over $108,000 in BAI’s programs, resources, and services, plus incidental costs (such as travel to programs, referral resources, etc.) as part of implementing Values-Based Financial Planning™. Based upon research conducted in 2006 on the ROI of investing just over $107,000 in a 4-year college education, one can expect to earn about $1.1 million more than a high school graduate can over a 40 year career. Compare that result to the VBFP results: an investment of virtually that same amount - a little over $108,000 - and a payoff of almost $3.8 million in 9.5 years versus 40 years. Calculated in percent, the ROI is 3000%.
Additional pieces of data:
• Payback period is seven months
• Internal Rate of Return is 499.7%
• Positive cash flow begins after 4 months
We reworked the numbers for a 14-year period of staying in the business, doubling the length to the Being Done™ date (from 4.5 years to 9 years), not the length of staying in business once that date was achieved (5 additional years). The following factors did not change in this second example:
• Desired income
• PMARR
• Number of ideal clients needed
• Sale of the business five years after reaching the Being Done date
Both the total investments and the revenue increase in accordance with this longer timetable.
Results of the 14-year timetable:
• Payback period is 12 months
• 2,477% ROI
• IRR is 214%
• Cash flow turns positive in month 7
This is obviously a compelling case for investing in Values-Based Financial Planning™. Here are the caveats:
1. The advisors in our sample group are committed to implementing VBFP and only VBFP in their practices. They invest in few – if any - other training programs for client acquisition and client services.
2. They participate in nearly every program, invest in the recommended resources and consistently use most of BAI’s services. (Details on BAI’s programs, resources and services are available at www.BAIVBFP.com.)
For the most part, the best results are achieved by participants who take advantage of accountability coaching every week, either in a group or individually, and they follow the guidance and advice offered by their Accountability Coach (professional consultants within BAI who are assigned to assist advisors in making constant progress toward achieving their goals).
