Penny Wise, Pound Foolish?

Penny Wise and Pound Foolish is an old idiom that talks about the tendency that some advisors have to be over careful with trivial things and under careful about important ones. The literal image is of the person who fusses over small amounts of money to such an extent that they miss opportunities to make large amounts. After 30+ years of leading financial organizations I continue on a daily basis to be amazed at how many people let their penny wise, and pound foolish mentalities rob them of tremendous successes.

In some cases, this is as simple as the advisor who deliberates about hiring a $35,000 per year staff member. They decide against it and continue to do tasks that prevent them from doing what only they are uniquely qualified to do, thereby squandering enormous income opportunities in an effort to save the $35,000.

Regrettably however, I see many advisors who continue to focus on “payout rates” and not “revenue generation” as their main focus when selecting an FMO with whom to do business. Is this wise? I would submit that the mistaken belief that some advisors hold that payout rate and revenue generation is one in the same. They are not!

Let’s consider the case of Bill who is currently doing $2 million per year in FIA sales. He is evaluating Table Bay and other FMOs to partner with. One firm offers him 50 basis points more than he’s currently being paid at full street level commissions. The other FMO also talks about its ability to show him how to do seminars. Bill does not choose Table Bay but rather the other FMO believing that he will make more money in 2012 because they are willing to pay him 50 basis points more on his production.

So let’s look and see if this was wise or foolish? Because he chose an FMO who is willing to pay 50 basis points more on his production, Bill made an additional $10,000 on his $2 million of production. Because he did not choose Table Bay, he lost the opportunity to access our world-class cutting edge marketing and unsurpassed training ability, thereby losing the opportunity to increase his income between 200 and 500%. Had Bill joined Table Bay, he would have seen his $2 million in annuity sales grow to $5 million in the next 12 months. That represents an increase in his income of $210,000 in the next 12 months which is $200,000 more than he made with the other FMO. I would submit that Bill’s choice was penny wise and pound foolish.

The moral of the story – those that are willing to pay you a piece of their override probably have nothing worthwhile to offer you. If your goal is to increase your revenue, you need to be with the firm that can offer you world-class unique and proven marketing as well as an unsurpassed training system.