Charlie Munger, Weeding and Model Portfolios

Charlie Munger, weeding and model portfolios hold the keys to building the advisory business you’ve always dreamed of.

You may wonder where I’m going with this, but stick with me.

When we moved to South Carolina, we landscaped our backyard. We paid a lot of money for nice trees and shrubbery, and we enjoyed the view, for a while. I totally underestimated, however, what the South Carolina heat does for weeds. And these weeds grew! They grew and proliferated! Before long, it actually looked like I had a multitude of extra shrubs, but they were actually weeds.

I really wanted to take care of it. Now I’m no avid gardener, but I knew I needed to take care and responsibility for my backyard and look after it. So I needed to address the weeds. All I did was set a simple, short time block every other day of 20 to 30 minutes. where I went out and started pulling weeds, winning my backyard back to where we could actually sit and enjoy the view without having to look at it and think, “Yeah, it would be much nicer if the weeds weren’t there.”

It’s exactly the same with our businesses.

Charlie Munger said, “Take a simple idea and take it seriously.” He’s Warren Buffett’s right-hand guy, and it’s a great quote. It talks about just starting with a simple idea but taking it seriously and growing it — spending small amounts of time incrementally, frequently and developing it.

Think about our business, as advisors. Maybe you would like to streamline your business, but the idea of segmenting your clients based upon revenue is just a daunting task. You might have 500 or 600 clients, and the thought of taking 500, 600 clients and segmenting them is just paralyzing.

Take it bit by bit. Set aside a time block a couple of times a week and just start attacking the list. Setting up model portfolios might seem incredibly daunting when you don’t have a single one to start from, but start the first one, and take it bit by bit. Eventually, as you do this — just like weeding — you’re going to not only build a habit for what you’re developing, you’re going to look forward to spending time further developing this because you can see something taking shape. All of a sudden, where you had 500 clients with no model portfolios, now you’re down to 300, then you’re down to 200. Then, slowly, every new client coming on board is going right into those models, and it becomes enjoyable. You can sit back and look at your business and know that it’s weed-free.

In a garden, the weeds suck up vital nutrients. They might look like they’re growing together with the plants, but they’re really depleting the nutrients the plants are pulling in from the soil, rain and sunshine. It’s been amazing as I have ripped out all these weeds (and as you can tell, I now enjoy doing it) to see how quickly the plants take on a new vibrancy. They come to life because 100% of the nutrients are now going to the plant. It’s the same with your business — you want 100% of your effort and the efforts of your team going into what’s most productive. So,

  1. Start with a simple idea, whether it’s segmenting your book As to Ds based upon net revenue generated per client, whether it’s establishing model portfolios, whether it’s moving your clients to a discretionary trading basis. Regardless of what you want to do, start with a single idea.

  2. Commit to it. Don’t put it in the too-hard basket. Take it seriously, and imagine how you’re going to feel once you’ve actually achieved that particular project.

  3. Dedicate consistent time to it. Set up a consistent time block — maybe Monday, Wednesday, Friday — when you commit just 30 minutes to moving those clients where they need to be. Don’t be overawed or daunted by moving 500 clients, because you’re not going to move 500 clients at once. You’re going to gradually transition maybe five clients, maybe ten clients, a week or even a month, but eventually you’ll get there.

So it’s taking a simple idea and taking it seriously and committing time to it. Eventually you’ll have this down cold, and you’ll be closer to having the fantastic operation, the financial services business that you dreamed of originally.

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