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13 The Challenger Sale with Ben Alge

Steve Seid & Kurt Dupuis
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The Whole Truth Podcast Episode 13

Steve Seid:
Hey, everyone. Welcome to The Whole Truth. Great show for you today. Our guest is Ben Alge. Ben is going to be with us for multiple segments. First, we're going to discuss The Challenger Sale, authored by Matthew Dixon and Brent Adamson of CEB, which is one of the most consequential academic studies on selling that has come out in a long time. Ben also hung around for the mailbag. We had a lot of fun there. And finally, we'll conclude as always with Costanza Corner, where we'll answer the question, can you print a house? I have no idea what that means.

Disclosure:
The views expressed herein are those of the participants and not those of Touchdown Investments.

Kurt Dupuis:
And just a little bit more about Ben's background, because he's going to be a frequent guest with us on the show because he's awesome, he is a sales executive at our shop. He has his MBA from Notre Dame. He's a CFA charter holder, and he's also has experience in business consulting. So he spent many years in an executive leadership program at our parent company.

Steve Seid:
Kurt, I don't know if you know this about Ben and I, and I'm releasing this for the first time in this intro. Do you know that Ben and I had an investment fund together called The Seid-Alge Fund where we picked stocks. Did you know that?

Kurt Dupuis:
Well, you're still doing your day job, so I'm guessing it wasn't wildly successful.

Steve Seid:
It was a two to four stock ... Actually, it was really good. We had just finished our CFA program and we invest-

Kurt Dupuis:
So you’re the smartest people in the world.

Steve Seid:
Just geniuses of course, have to be. Two to four stocks in the portfolio and it went really well. But here's the problem, something got in the way. Ben had to buy an engagement ring. So just destroyed. We would be on the cover of Barron's today.

Kurt Dupuis:
And just a few other points, to learn more about us and listen to past episodes, visit touchstoneinvestments.com/thewholetruth. And as we're really starting to get into a flow for releasing episodes, you can expect a new episode from us, at least every other Tuesday. And as always, you can reach out to us at thewholetruth@touchstonefunds.com for any reason, including getting added to our distribution list. If you haven't already, please consider subscribing on Spotify, Apple Podcast, Stitcher, or wherever you get your podcasts. And without further ado, here's our chat about The Challenger Sale with Ben Alge.

Steve Seid:
And we are very pleased to have our good friend, Ben Alge, join the podcast. Ben, welcome to The Whole Truth.

Ben Alge:
Thank you. Honored to be here.

Steve Seid:
If you could see us all right now, you'd noticed two bums that are sitting in their house. Although, Kurt, you look kind of nice. But me, I'm in my hat and my tee shirt, and Ben had to get dressed up in a suit and tie to go to our home office to do this interview. How kind of you.

Kurt Dupuis:
That's pretty amazing.

Ben Alge:
I go above and beyond for you guys. But yeah, it's tough putting the tie back on after four, five months here of just sitting in golf shirts and khakis enjoying myself.

Steve Seid:
It's got to be weird.

Ben Alge:
It's very weird. I had to polish up the shoes I haven't worn in four months, make sure there are no moth holes in them suits, but I don't know, it feels different, but it's good to be back in a way. But I'm ready to get back to work from home here as soon as we're done with this interview.

Kurt Dupuis:
The great irony is this is probably how a lot of our clients see us when we come in in a suit and tie and they're wearing like a golf polo.

Ben Alge:
For sure.

Kurt Dupuis:
Like look at this idiot.

Ben Alge:
Look at these clowns all dressed up. Exactly.

Kurt Dupuis:
No one knows why we still wear ties. No one really knows because, I mean, you just stand out. You're like, oh, there's the wholesaler coming down? Why do we do ... I don't know.

Steve Seid:
I think its also attorneys, and it's basically “the uniform”. You see somebody in like a navy blue suit, here comes the wholesaler walking down the street.

Steve Seid:
What's funny about how you described your outfit is you described when you were at home, it was ... What did you say? Khakis and collared shirts. That's what you're wearing. So I'm more of like, I'm in sweat pants all day, but you seem to be dressing like a Gap catalog walking around your house.

Kurt Dupuis:
The West coast is a little more laid back.

Steve Seid:
A little bit more laid back.

Ben Alge:
Here in the Midwest, we keep it a little classier.

Steve Seid:
You keep the classy. Well, audience members should really get used to Ben. And I mean this honestly, Ben. We were really looking forward to having you on, but not just this time, many times. You are welcome on here anytime you'd like, and that's because Kurt and I have both known Ben for a lot of years. The dude is - he's awesome. He's got some great insights for our firm. He runs our Eastern division, but he has a pretty extensive background. He's got a CFA charter, background in management, consulting, and MBA. So just a really, really great guy to have on the show. So, you're welcome any time, Ben.

Ben Alge:
I appreciate it. And I love what you guys are doing. I've listened to all the episodes thus far, and I'm an avid fan, and honored to be a part of it and to get to participate a little more. So I appreciate it.

Kurt Dupuis:
Hey, a little peel behind the onion. What most of us call Ben, not that he's not his own person on his own, but he's really Steve Seid 2.0.

Steve Seid:
Is that right? That's a thing?

Kurt Dupuis:
A lot of good things that Steve brought to the organization, Ben has just taken them to a whole nother level. So we'd like to give Ben a lot more credit than we would do Seid.

Ben Alge:
I appreciate that.

Kurt Dupuis:
Welcome, Steve 2.0.

Ben Alge:
I appreciate that. It's like when you got ... I have an older sister and I always tell her, "You try your best, but then once you've perfected it the second time, you just stop having kids." And so once we've perfected Steve the second time, there's no Steve 3.0 out there.

Steve Seid:
It is really funny that Ben and I were both in this executive leadership program with the parent company out of MBA School, and so Ben and I have collaborated a lot. And then he came to Touchstone afterwards. And it is interesting that there were several times where I've started something and then Ben took it over and quite frankly made it a whole lot better. And I sort of reflect and I'm like, how does that ...

Steve Seid:
Maybe it's a bit like, Ben, you tell me if this resonates with you, it's like you've got this entrepreneur and he's got this great idea. And then at some point, when it gets traction and catches on. And then the board of directors come in and say, "Okay, it's fine. But it's time for you to go. We need a real manager to take over." Like when Elon Musk starts getting on Joe Rogan and doing that whole thing like, maybe it's time to exit slow. I don't know how you look about it. I'm curious how you see that.

Ben Alge:
Yeah, yeah…It's certainly not that extreme where they move you out, but there's definitely elements where I see people like you and Kurt who are so strong on the innovation side, who can take an idea that isn't even recognized yet and solve a problem that isn't known that it's out there. And then there's other folks that I think I fall in the latter camp where it's optimizing what exists.

So taking an idea that's really good and saying, how do we actually execute on this going forward? And I think that's where I've fallen and found my niche in this organization. But it takes both to make the world spin. And I look at the things that you all do on the creative side and it makes my head hurt because I don't see that side. But once there's an idea in front of me, then it's a little easier for me to grapple with it.

Steve Seid:
Right back at you. As an ideas guy and a non-optimizer, if I had a dollar for every time I've called Ben to help optimize a spreadsheet that I had broken or an idea that I had that he actually came, got, and brought it to life on a spreadsheet, I'd be doing all right.

Ben Alge:
This is going to haunt me someday though. I'm sure in a job interview at some point in 20 years, they're going to ask me if I'm innovative and they're like, "Well, on a podcast back in 2020, you said you weren't very innovative." You got to be careful, people can search all this stuff.

Kurt Dupuis:
I know. This is all on the permanent domain now.

Steve Seid:
We'll have you back on to start your counter narrative next time, so don't worry about it.

Ben Alge:
A special on innovation.

Steve Seid:
Yeah. So what we're going to do with Ben is we're going to keep him on the whole episode, which is rare. We're not going to do that with many guests, but Ben will be one of those rare people we'll do that with. We want to go through a specific topic with him, which is The Challenger Sale. Really, really insightful topic. It's useful to anyone who has sales in their roles and responsibilities, or even sales adjacent. It's kind of paradigm changing in terms of how it looks at it. So we're looking forward to going through that with Ben. And then we're also going to keep Ben around for our mailbag segment. So we'll read some questions, we'll all go through it. That sound good to you, Ben?

Ben Alge:
That sounds great.

Steve Seid:
Okay. So Kurt and I both did a half decent job about introducing you, but tell us about your background, where you're coming from.

Ben Alge:
Thanks, Steve. So I did my MBA work over at the University of Notre Dame over in Indiana, and right out of there, joined Western & Southern Financial Group here in Cincinnati, Ohio. I'm a Midwestern kid, wanted to stay close to home. And I didn't know exactly what I wanted to do, and so rotational programs were in vogue at the time. So I thought, well, I'll get a chance to do a lot of different jobs and see which one appeals. Went through that program, and then wanted to stay close to asset management.

Ben Alge:
So I joined Touchstone Investments a better part of a decade ago, and worked on the product side. And actually, came to sales a little differently than most as head of product management investment strategy here at Touchstone. And then with the topic we’re assessing today, The Challenger Sale among other things was brought over to the sales side to try to bring a bit of a paradigm shift, as you mentioned, to how we approach the sales process.

Kurt Dupuis:
And how's that going? Were you given a golden nugget or were you given a different color nugget when you took over on the sales side?

Ben Alge:
The gold needed some polish with what we're doing, but the turnout has been great. It's a great organization. There's great products behind us and there's great people. And you put those pieces together, it doesn't take a genius to drive that ship. 

Kurt Dupuis:
Very modest of you. Very modest. That's good background on you. Let's talk about the background of The Challenger Sale. How did this book, how did this paradigm changer, this way of thinking become part of the culture really and the organization at Touchstone?

Ben Alge:
So we were introduced to it the better part of five years ago. And the book was brought to the organization. And I will say upfront, I was very skeptical. And here's the reason why. I love to read books. And maybe that might be an over-step. I love to listen to books, a big audio book guy. But I really dislike or take a skeptical eye towards books that oversimplify things, like the seven steps that will make you sell more. If it was that simple, I think everybody would be doing it. And so when I get those kinds of books, I prefer to read a biography of somebody who is successful and determine what made them successful myself and try to implement those things. So when I got a book like The Challenger Sale, it was immediate skepticism of if it's this simple-

Kurt Dupuis:
I don't think you're alone with that.

Ben Alge:
I don't think I was either. But it's one of the few books in that genre that really changed my perspective. And so the concept is the most successful salespeople are those that can identify problems and opportunities that the client isn't already aware of. So instead of going in and being entirely consultative and saying, what do you need me to help you with, or what are the problems you're facing, you can go in and say, here's a problem you didn't know you have and solve it for them. And that changed the dynamic on a number of different levels, and makes the salesperson really take charge of the conversation.

Kurt Dupuis:
And one of the challenges that I had with it, not to overuse the word, was that it was so data-driven. And as a sales guy and a more intuitive kind of thinker, I immediately threw up my hands with that. I was like, what are these data nerds going to figure out about sales that salespeople themselves don't actually know? But it's pretty nuanced in how they get into personality types. And so I think that's a great differentiator in the book. What are some of those personality types that they talk to that really turns upside down how we think about salespeople?

Ben Alge:
If you ask the average salesperson who the best salesperson in their organization is, they'll give you a name and they'll almost always say, because they've got the best relationships. That's why they're the best. And so they go through the Relationship Builder as the one that kind of sticks out in my mind as the person who can get to know anybody and has a lot of friends in the industry. What they found is that's actually one of the least successful models. And we'll talk about why in just a moment. The others were the Problem Solver, the Hard Worker, the Lone Wolf, all of them pretty self explanatory about what that individual looks like.

Ben Alge:
Then there was a Challenger. And the biggest difference I see between the Relationship Builder and the challenger is the Relationship Builder is out there and doing their job to make people happy and build relationships. They don't want to create any tension, they don't want to disrupt the status quo, they want people to like them. The Challenger has relationships and has incredible relationships, but they're a result of how they sell, not the purpose of why they're trying to sell. So because as a Challenger they come in and they add value, they bring new ideas and solve problems that the client didn't know existed, that builds a relationship in the backend that leads to a stronger relationship long-term.

Steve Seid:
So we're getting down the path a little bit in these relationship types. And what we should have set up front is the foundation of The Challenger Sale was this study, was a very broad study. So talk a little bit about the study itself and what these people actually did.

Ben Alge:
Yes. They went out and studied top performers across a number of industries. And what they found was that 40% of top sales performers primarily use the Challenger style. And so that was the highest. But what I take from that is there's a lot of different ways to do this job successfully. I talk to my wholesalers and say, "There's 100 ways to do this job right. There's 1,000 ways to do it wrong. There's 100 ways to do it right." But the most successful was that of the Challenger. Only 7% of those top performers were those Relationship Builders. And so when you see that discrepancy, you've got to ask yourself, what's causing that big of a rift, and what are Challengers doing that the Relationship Builders aren't that's making them so successful?

Steve Seid:
It's not just what you're selling, it's how you sell. And that was really interesting to me because if you go to a company and you'd say, "Why do clients buy your product or your service?" They'll say, "Well, it's because our reputation is so wonderful and our pricing is on point. And we've got this bell and whistle, and these bells and whistles."

Kurt Dupuis:
We wear a suit and tie.

Steve Seid:
We wear a suit and tie in the office and look the part like Ben. But the truth is all that stuff is table stakes. And that gets you to the dance, so to speak, but that's not what's going to close the sale at all.

Ben Alge:
You're exactly right. And you look at the industry, we operate in, selling actively-managed mutual funds and SMAs. Having a good product is, to your point, table stakes. How many good large cap growth funds are there out there? And so in the absence of some other value add in the client experience, you're left competing just on price. And that's a dangerous place to play. We're seeing margin compression both on our side of the business and the financial professional side of the business. It can't always be it just gets cheaper. And so The Challenger Sale allows you to come in and add value to the client experience in a much different way and differentiate yourself as a value add partner, as opposed to just a vendor of products.

Steve Seid:
Relationship is the result of, not the cause of successful selling. So, that gets to the point that these Relationship Builders that we thought are the best salespeople in the world, that's why they're not necessarily the tops because those deep relationships come from the sales experience that you're delivering.

Ben Alge:
And think about the impact this should have on how we think about hiring. We look at hiring salespeople, and what's the first thing we ask? Who do you know? Who are your relationships? When all the research now is telling us that's not necessarily the driver, the question should be, how are you building relationships? How do you build those relationships and add value?

Steve Seid:
Yeah.

Kurt Dupuis:
We actually had a conversation with a behavioral psychologist as well, and he said that about the financial professionals that we serve as well, that he sees hiring really changing for that role in the coming years as an analytics, a strong financial background as someone who's empathetic, an emotional thinker, a problem solver, a complete 180 of the characteristics that historically, some of the big shops have looked for when they're hiring. And I don't think that's exactly the case on our side as well.

Ben Alge:
I completely agree.

Kurt Dupuis:
I also like to think that coming from a non-traditional background.

Steve Seid:
That's right.

Kurt Dupuis:
I have to think that.

Ben Alge:
It's all those emotional intelligence pieces that are so hard to teach. I mean, I can teach people how to do The Challenge Sale. I can't teach you to have empathy. So it's a lot more difficult, but when you get it right, all the more impactful.

Kurt Dupuis:
What are the characteristics of that person that can be learned that are involved with that approach?

Ben Alge:
So three big ones I would point out. One, they're comfortable debating and pushing their client. So they don't have a problem creating that kind of constructive tension that takes place in a meeting. They're comfortable saying, I think you're wrong in a respectful way, obviously, but having that conversation. They come prepared with a different worldview. So with The Challenger Sale, you've got to be exponentially more educated than having a consultative approach because if you think about what we're talking about and identifying problems that someone doesn't know exist, you're not going to have the same experience as going in and solving a problem they already know of.

Ben Alge:
So an advisor says to me, "I don't like EM," and I say, "I hate EM too," there's no pushback in there. If they come and say, "I don't like EM," and I tell them, "Well, I think it's the biggest growth opportunity that we're going to see for the next five to 10 years, and here's why," I better be able to defend that. So come up with a different worldview that is backed up by some data and evidence. And the last piece and the one that gets overlooked sometimes is they've got to understand the client's business and understand it to an extent even more so than the client does sometimes because we got to solve the problem that the client has, not the problem we think the client has.

Ben Alge:
And so you've really got to wrestle with, what are the true barricades or roadblocks that your clients facing? And not necessarily just the ones that they're going to tell you they have, but what is your research and data to show you that are true problems that they aren't aware of yet that we can help them with?

Steve Seid:
I watched the video, one of the two guys that did The Challenger Sale study, and he presented a little bit on this. And just echoing what you just said, he said, "Salespeople have been trained to come in there and ask open-ended questions and how ineffective that, that actually is nowadays." So someone comes in your office and says, "Ben, what keeps you up at night?" And the guy was like, "Well, what keeps me up at night is another sales guy coming in and asking what keeps me up at night?"

Steve Seid:
It's what should be keeping me up at night that I don't know. So if I can come in there, and this is the foundations of what we're doing with practice management, with PAR, with the podcast, is understanding these businesses well enough to know what their challenges are because we see the same thing over and over, and helping with those. And bringing a perspective that they're not getting elsewhere. And that's the basis of this whole thing, right?

Ben Alge:
You're exactly right. And so we've got the benefit. We've worked with over 2,000 teams across the country on practice management. We know what the problems are better than our clients do a lot of times because our clients have worked in one practice. And so bringing that sort of client data into these interactions completely changed the conversation. If I can sit across from an advisor and tell them the average advisor I work with has 325 different investments, and guess what, you're probably right in there with them, and talk about the amount of time and cost and risk associated with that, that is an eye-opening experience, and now I'm competing against one other person who knows that information.

Ben Alge:
If I go into that same meeting and say, "What are your problems?" And they say, "I need a large cap growth fund." I'm the 20th person that's asked that question, I'm the 20th fund they're going to look at, and I better be the cheapest because there's a lot of other good strategies out there. So it completely changed the conversation and changed the power in that conversation from the client back to you because you control where that conversation goes, because you control where you're going to challenge.

Kurt Dupuis:
So if you're bringing solid nuggets like that out the gate, it's only going to intrigue the other person like, well, what other little nuggets are they going to be able to drop on me along the way?

Ben Alge:
You're right. And you better have something else behind that too because if that's all you got, you're going to fall flat pretty quick. So it takes a deeper level of knowledge. It can be a narrower level of knowledge because you're not asking, where do you want to take this conversation? There aren't 100 responses to that. You're saying, here's what's important. Let me educate you on this. And so it can be narrow and deeper, but it needs to be a deep level of knowledge.

Steve Seid:
You introduced the concept of constructive tension. And I want you to talk about that yet again because I think that's a really integral part of The Challenger Sale.

Ben Alge:
It is. And it's actually one of my favorite concepts in the entire book. I don't know if you ever had this experience where you know something exists before you have a name for it, and then you learn what it is and then you look back and say, that's what I was experiencing for all those years. That happened to me with this. It's one of the biggest pitfalls I see with new salespeople and where you see these Relationship Builders go, is they hate discomfort. They immediately want to get discomfort out of the meeting. And the problem is tension creates a catalyst for change. Without tension, there is no catalyst.

Ben Alge:
Clients don't sit there thinking, I need to be sold something. You need to create that tension, there's a problem that exists, in order to create that catalyst for movement. So when we talk about the concept of productive tension, we want to highlight an issue, we want to highlight the impact it's going to have, whether it be financially, emotionally, whatever it is on the advisor, and then we want to be quiet and let it sit. And let the advisor or the client work out for themselves what the solution needs to be, because our natural response is oftentimes where at the end of a sale, you'll say, "When do you think you'll make a decision?" And you feel that productive tension.

Ben Alge:
And the younger salesperson says, "You don't need to decide today, just let me know what you think." And that eases the tension. But what you've done is ease the catalyst. And so creating that tension that a decision needs to be made, that there is discomfort, and letting the client resolve that discomfort is how we create these catalysts.

Steve Seid:
It's easy to see how productive tension could be useful for financial professionals as well. It's the same dynamic. You've got a client you're going after, they can have the same level of ... where they lack a catalyst to change?

Ben Alge:
Exactly. And it could be the catalyst to change advisors or just the catalyst to have a financial advisor. The same element works, and especially as you go further upstream. The small clients will be amazed that you can cite the S&P 500 returns. But those aren't the prospective clients we're all trying to go after. We're trying to go after multi-million dollar clients here. Those are the ones that you've got to come with problems that they aren't aware they have. And it gets back to the concept, and I know you guys have talked about this a lot with practice management of niche marketing, of knowing the niche you work in better than the people in that niche know themselves.

Ben Alge:
Knowing what problems they face, whether it be within their careers, their families, their organizations, all of those different things. If you can bring those elements up and say, you have this problem, how are you going to solve this problem without me? And then just wait, the answer is going to be the solution that you're providing them because it's not a problem they came to you and asked, they didn't know the problem existed. You're competing against yourself one-on-one, and that whatever solution you present is going to be the best solution they've heard.

Steve Seid:
So let's think of a specific example of that. So let's say I'm going after, I don’t know… a biotech niche. I'm throwing it out there. And you go to someone who's an executive or whomever at the firm, someone of importance. And you can go up to them and they treat it as a typical financial professional meeting, but you could say, "Listen, I've worked with 25 other biotech executives.

Here is what their challenges are." So you're telling them more about them, the stuff they don't know, the challenges that they may have ... And so think about how powerful that is, as opposed to just the run of the mill meeting where you're like, "I work for firm X, Y, and Z, and we build equity portfolios." I mean, think about the difference between those two experiences.

Ben Alge:
You're absolutely right.

Kurt Dupuis:
Well, the inverse of that is the person that enters the meeting and says, "We work with businesses, wealthy families, and entrepreneurs to help them reach their financial goals." And that says nothing.

Steve Seid:
Yeah. What did I learn from that?

Ben Alge:
Exactly. And if you take it a step farther, if you know the company well enough, you can say, "This is the way that your benefits company invests your pension." Or, "This is the way your benefits company handles retirement. How is your current financial advisor incorporating that into the investment plan they have for you and your long-term financial plan?"

Steve Seid:
They aren't.

Ben Alge:
I am. I raised that problem for you, created that tension. The solution is you need an advisor who knows this plan inside and out, and that is us, and for whatever reason that may be.

Kurt Dupuis:
So let's get into the meat of it and what this framework for The Challenger Sale actually is. What's the original framework and how can we simplify it, and how can our audience actually take these concepts and incorporate it into the conversations that they're going to have tomorrow?

Ben Alge:
So the original framework is six steps. And to be honest with you, that caused some challenges for us in implementation initially because people got hung up in the steps. We salespeople, six is a big number for us.

Kurt Dupuis:
Yeah, it is.

Ben Alge:
But if we go through the six initial steps, there's the “Warmer”, which is basically just setting up the conversation. The “Reframe”, which is the challenge, so reframing an issue in a way we hadn't thought of. “Rational Drowning” is supporting that then with data to show that it truly is the problem. Tying into the “Emotional Impact”, how's that going to make you feel? Providing a “New Way”, not necessarily your way, but a new way to solve that problem. And then finally, our own “Personal Solutions”. So those are the six steps.

Now, when I have met this myself with my team, I narrow that down to just three steps. “Challenge”, “Inform”, and “Solve”. Challenge them with a problem they don't know they have, inform them why it's a problem and how it's going to make them feel, and solve that problem with the solution.

Kurt Dupuis:
How do financial professionals implement this with their clients?

Ben Alge:
What are the issues those clients aren't aware that they have, whether it be related to their job, their family, the organizations they work with? They all know that they need retirement income. They all know they need an investment plan. That's not differentiating. But everybody's coming to them with those elements. And so at that point, you're negotiating on price. If everybody brings me a financial plan, everybody's brings me a retirement income, how much are you going to charge me to do it? If you're the cheapest, I'll probably go with you.

If we get away from that and say, I know you need all these things, but based on where you work, you have this problem associated with your retirement, or based on the structure of your family or the challenges your family has, you have these needs in retirement that you weren't aware of, now I can educate you on what those needs are, why they're relevant, and let you know what solution solves that, and nobody else is bringing those elements to the table. Now, as I mentioned before, you're competing against one of one. You're no longer one of many competing on price and things like that, you're the only solution to the problem that you've raised, and you've upped your chances of closing that business exponentially.

Steve Seid:
That's great. So let me see if I can sum up on this concept a little bit here. So The Challenger Sale is a book that came out that went through an exhaustive study of different salesperson types. The types of salespeople that we thought were most effective actually were not, and the type that was most effective was called the Challenger. 

If you're a listener to this podcast, reach out to us at thewholetruth@touchstonefunds.com. We're happy to get you a copy. We're also happy to help you with the technique. There are approaches that you can take that will allow you to be more effective in meetings and in front of clients. Would you add anything else, Ben, in terms of summing up that you want our audience to know about Challengers, or does that encapsulate what you would say?

Ben Alge:
That encapsulates it. The only piece I would add is that it's a much more fun way to sell. You enable yourself to add value in every interaction because you're coming with a different idea, and it challenges you to keep bringing fresh ideas to the table. But I enjoy the sales experience a lot more when we do it.

Steve Seid:
Yeah. And we're really happy to help you with it. We spend a lot of time on this, we train on it. So thanks, Ben, for this discussion on The Challenger Sale. We're going to get into the mailbag next. That should be fun, so stick with us. We'll be back with Ben Alge.

And welcome back. We're going to jump into the mailbag. But to start us off, I actually want to throw in a question that we get often on The Challenger Sale. So Ben, this is going to go to you. What about the pitfalls in the process? It's like anything else. All this sounds good. We want to take this approach because we know it works, we want to be more like a Challenger. What are some of the pitfalls that you've seen?

Ben Alge:
So the biggest one that I've come across and the one that we tripped over quite a bit with implementation was the Challenger does not replace your entire meeting. And most specifically, it doesn't replace the need for discovery questions up front to understand what's the client working with or wrestling with today? If you have your Challenger concept and you go in right out of the bat and say, "Great to see Mr. or Mrs. Client. Here's a problem you didn't know you had." And they respond, "Yeah, I saw that last week." You've kind of shot your shot.

So there still needs to be that lead up in a conversation at a very high level about what they're seeing, what their day-to-day is like, and it's the warmer, as they call it in The Challenger Sale, but you have to set the conversation and ensure you know that what you're talking about is news to them, because if you don't, you really take a lot of the wind out of your sales right off the get go and the meeting falls apart pretty quickly.

Steve Seid:
Have you found different personality types struggle more with this, or is this something this concept that can be taught to just about anyone?

Ben Alge:
I've seen it taught to just about anyone to be completely honest with you. It's very simple, it's not necessarily easy. So we talk about these three steps. That's very simple. The piece that's difficult is the emotional intelligence to know, when do I dial this up? When can I be more combative? And what personality types can I be combative with? And when is somebody just not going to respond well to being challenged in that way?

We all know clients who need to be the smartest person in the room, and challenging them on a concept isn't going to lead to good results. And you've just got to commiserate and you've got to go about it a different way. And that's fine. This isn't a one size fits all. But for most interactions and most people, they want value added. They want to hear new ideas. They want new concepts brought to the table. And so 80 or 90% of your interactions, I think this fits beautifully.

Kurt Dupuis:
And its like anything else that we said earlier, it's a good framework, but at the end of the day, you have to be intuitive enough to realize that if someone's not going to change their mind, if you're not going down a good road, abort the mission and find another path.

Ben Alge:
Exactly. When I first started managing, we were rolling this out, and one of my more experienced wholesalers who is more set in his ways, I was traveling with him and he did exactly what I mentioned, walked into a meeting and says, "Emerging Markets Growth is the best growth opportunity over the next 10 years, and if you're not looking at it, you're an idiot." And the client said, "Well, I've got a 15% allocation. Is that you're talking about?" And, "Yes. That's what I'm talking about. Where do you go from there?" So, that was lacking that emotional intelligence or that discovery up front to make the conversation relevant.

Kurt Dupuis:
That's a strong pitch right there.

Ben Alge:
Came out of the gates hot.

Steve Seid:
Came out hot. Yeah. I would also throw out, there's got to be substance there. It takes work. So for you to be able to be an effective Challenger, you really have to work really hard at knowing the business of the person that you're selling to. That takes effort. That takes work. The average salesperson is not going to do it. The average financial professional is not going to do it. But that creates this huge opportunity for those that are willing to do it.

Ben Alge:
Yeah. And also, Richard Weylman quote, "The average advisor reads two books a year. Why? Because they're average." The average advisor isn't putting in that work to do that. And that's such an easy way to differentiate yourself, especially if you mean narrowly-focused. As we mentioned with the niche marketing, you don't need to be all things to all people. Be really, really good at a really small subset, and it's going to change everything you do.

Steve Seid:
Think about how much better you can be than the average financial professional if you just have that focus and that effort. All right. So let's jump into the mailbag listener questions. This comes from Jeff S out in the Sacramento area, Rocklin specifically. What does our industry look like in 10 years? And he's asking us in terms of asset management. Ben, I'd be interested in your take on this question.

Ben Alge:
Oh man, I got to be careful how I answer this.

Steve Seid:
Don't be careful.

Ben Alge:
There's a lot of change coming. I think we're going to see more and more consolidation. For right or wrong, active management, specifically in our industry, has become commoditized. And I think the reason for that is that a lot of active management is a commodity because it behaves just like an index or an ETF. So I truly believe there is a place for passive investing in ETFs, I truly believe there's a place for truly active investing that behaves a lot different than a benchmark, but I think the stuff in between is going to get rationalized away and it's going to fall one way or the other, either going to become like the benchmark and just get ETFed away or it'll become more and more active.

Ben Alge:
And on that end of the spectrum, then we really see skill start to make a difference and stock picking ability. And that's where it gets interesting. So I think more consolidation in the industry and I think there'll be fewer asset managers. The big will probably get bigger and will get tougher for the smaller to survive, but those that do will truly come with a differentiated experience and differentiated outcomes that clients appreciate and will pay for.

Steve Seid:
Kurt, anything you want to add to that?

Kurt Dupuis:
I'd just be curious what you see from the asset management side with how technology and digital engagement has grown in the last several years and what you expect that to look like in the same time horizon in 10 years.

Ben Alge:
I wonder if we've seen a window into our future here with these last four or five months of working from home. And if it is, it's a bit of a scary future where I feel like I'm back to internal wholesaling days again, where it's just a lot of conference calls and Webexes. The truth is I don't think we had moved that direction enough as an industry prior to this, and we've probably gone too far by necessity because of it and the answer is somewhere in between. But at the end of the day, I firmly believe there's always going to be a place for face-to-face engagement, and that the relationships built in-person are inherently deeper than those built on a digital perspective.

Ben Alge:
That said, do I see myself back on a plane traveling 80% of the time ever again? I don't think that's reality. I think we talk about margin compression. Quick way to compress that margin is take my airline miles and cut them in half. And if I can do some of these meetings via Webex or Zoom or wherever it is, I think that becomes a reality here and not just in future. So definitely moving more digitally, I don't think we ever get to what some of the doomsday sayers are saying of all wholesaling is going to be now in this hybrid format. There's still a need for people to be there, be on the ground. But I think you see larger territories for people in our roles because we can have a larger reach with digital engagement.

Kurt Dupuis:
I'm fairly active on various social media platforms, and to see big name shops with tweets or LinkedIn posts and they get little to no engagement, I'm curious, first of all, why is that? Is the content that they're putting out absolute garbage, or has people's consumption habits not caught up with those platforms?

Kurt Dupuis:
I think that'll be really interesting to see because in some cases, a 60 second update from a portfolio manager on a video is in a lot of cases a lot more efficient than wholesalers running around, but behavior hasn't caught up to the technology.

Ben Alge:
Yeah, and I think we tend to be a slow moving industry. If you look at how most of our industry has approached social media, it's been take what we do, not in social media, and put it on social media. So here Twitter, here's a white paper we wrote about South American equities.

Kurt Dupuis:
That's 10 pages long.

Ben Alge:
And nobody goes to Twitter for a 10-page white paper on South American equities. But to your point, if we turn on its head and say, why are people on these different platforms, what are they trying to consume, and rework the knowledge that we have, I think it's absolutely a valuable outlet. It's just getting the industry to look at it differently. And then there's always the compliance hurdles that slow us down a little bit as well. But in 10 years, I mean, I think we're going to get left behind if we ignore that.

Kurt Dupuis:
You know these are all going to be platforms that people are going to gravitate to more and more as younger folks that are technology natives run more money, whether it's on the financial professional side or the asset management side. So you have to swim in those waters, but its just curious to see the ripples that will be created in those waters for the foreseeable future.

Ben Alge:
They always talk about the three Ps and the three ways you can add value, whether it be on a personal side, a product side, or a practice side. The ability to just rely on any one of those, I think is being brushed away. And you used to be able to just be a nice guy who knew everybody and you were everybody's friend, you remembered everybody's birthday, and you were the personal guy, or you were the product guy.

Ben Alge:
You had the big name behind you, so you'd come in and just do that. I think you've really got to be able to do all three of those now. And you've got to be able to connect on a personal level, you've got to bring a competitive product, and you've got to be able to help in their practice and identify problems in a client's practice that we can really help solve. And those that can't are going to get washed out. And the number of wholesalers isn't increasing out there. There's reports every day about different cuts that are happening. And so it's on all of us to make sure that those three elements are sharp.

Steve Seid:
Okay. So let's go to question two. This comes from my friend, Doug F, out in Oakland, and he sent some questions in related to our client service series. He has four different questions, so let's start with this Ben, how often should you segment clients? What do you think about that?

Ben Alge:
I advise the teams I work with to do it annually. Any more often than annually, you just don't see things change that often. And if your segmentation's leading to changes in client service, changing a client service model more than annually is pretty disruptive to the relationship. And so my response there would be on an annual basis, you should at least review it if not make changes.

Steve Seid:
That's exactly what I would say. Kurt, agree with that or anything you'd add there?

Kurt Dupuis:
Yeah, especially when you think about, if you make changes to the segmentation, how you're changing the service model, it's disruptive to the business, not just the relationships, but the daily business.

Steve Seid:
For sure.

Kurt Dupuis:
That's I think plenty.

Steve Seid:
Doug does it every two years, but I think the one to two year timeframe, I think that's about right. Should everyone on the team get a vote. I'm going to not pass this along to you, Ben, and answer it for you and just say, absolutely. We talked in that episode about scoring clients on relationship as being a key part of that. And a lot of times, it's the sales assistants that can help with that relationship score. Is that you’re guys' thoughts on that as well?

Ben Alge:
For sure. I mean, at the end of the day, if you can build consensus, all the better. Now, somebody has to be king or queen and have the final say. But the most plugged in people within any sort of advisory team are the assistants. They're the ones who interact on a day-to-day basis. We do an exercise a lot of times where we'll ask the team members and the assistants all the right their top three and bottom three clients for the practice. And I'm yet to see them align because what the assistants see is how they treat them, how efficient they are, if they respond. What the advisors typically see is the assets and revenue. And so you've got to bring in that qualitative side and that's what the assistants know best.

Kurt Dupuis:
I think that's a fairly obvious yes, everyone should get a vote, but should all votes be weighted equally?

Steve Seid:
Let's say a financial professional thinks that the relationship score is top of the top. And then you talk to the sales assistant and it's the complete opposite and they feel the exact opposite. How do you think about that?

Ben Alge:
I think you've got to weight the voice to the person who's running the business, I think. My point was not that it should be equal by any stretch, but that that voice needs to be heard and incorporated in. And so when we do exercises of client segmentation, we'll have the assistant do theirs separately. And then you bring them together and say, where are there discrepancies? Let's have a conversation about them.

Steve Seid:
Kurt, this next one I'm sending to you. And of course, Ben, we'll get your feedback as well. Should we expect referrals?

Kurt Dupuis:
Absolutely. So when we do ask for mailbag feedback, people are always asking about growth. And we always talk about the easiest pond to fish in, the easiest way to grow is from the referral base, your clients that you already have. And we could argue six ways to Sunday, I want the best approach for doing that is, is at the beginning of a meeting, at the end of the meeting, how do you phrase it? But the whole idea of what we talk about of segmenting, of servicing is expecting those referrals.

Ben Alge:
I would concur assuming you are referable.

Kurt Dupuis:
That's a good point.

Ben Alge:
I would ask a client. Take your best client and ask them, if somebody asked you, what do I do? What would you tell them? And if what you hear from them is some of that mishmash of, well, they helped me secure my retirement and they picked some investments, that's hard to be referable. If they were to say, well, they contact me every month, 12 months a year, we have four quarterly reviews, two of those are in-person, and any time that I reached out to them for help, they respond within an hour and give me a solution within 24 hours, that I think is very referable. So make sure that your COIs, your referral sources can clearly and concisely say what you do and what value you add, making the assumption that everyone's adding value, and then I think you should expect referrals from your top clients and top COIs.

Steve Seid:
Yeah, I would concur. I think it's the top part of the book that I'd be most interested in evaluating on that. And if the referrals weren't coming, again, I feel like I've said this on a prior episode, but I'll say it again, I would not necessarily go to those clients and try to have some script that pushes them a little bit. I'd say, what do we have to do to up the experience? I think referrals come naturally from a good client experience. That's what I think.

Let's go to the next question. Ben, I'll send this to you. Do we insist they consolidate all of their assets and liabilities with us? So you've got clients, you know they have outside assets. Again, this is part of Doug's question. Do you force the issue to make sure that all those assets are with you?

Ben Alge:
So I think insist is a strong word there. I would strongly encourage, and certainly you could leverage The Challenger Sale on this front, to say what the problems it presents for you not to have all assets in house. But if I've got a seven-figure client who isn't going to consolidate their assets with me, I'm not sure I'm going to move them out of my practice just for that reason. Asset consolidation is key and it does help paint a more complete picture, and I think you can help communicate that and show what the advantages are. I don't know that I'd go as far as to say insist.

Steve Seid:
So not quite the throat punch of The Challenger Sale on this one, huh?

Ben Alge:
Not quite the throat punch, yes. It depends on the client, for sure, but yeah, a little softer.

Kurt Dupuis:
Everyone's got a number for a size of client that they would be willing to take a ton of crap from to keep that client in the practice. So, yeah, I don't like the word insist, but you want to be the kind of practice that people want to aggregate their assets with.

Steve Seid:
All right, Ben, we're going to put you on the spot with this next one. You've now worked with FAs and wholesalers for many years. This is coming from Steve Seid in Marin County, California. I don't know. He's a real sharp one. So what makes the good ones and what makes the bad ones both at the wholesaler level and at the advisor level, some of those characteristics?

Ben Alge:
Sure, so I'm going to start with the wholesaler side. The biggest differentiator I've seen from the successful to those that aren't successful is that emotional intelligence component. And what's so frustrating is that's the hardest thing to teach. It's not the alphas and the betas, things like that. It's understanding what a client needs to hear, whether they need to be pushed, where you need to pull back, and how to manage a relationship that makes them so good.

Kurt Dupuis:
Do you think it is teachable? Or is that something that you screen out in interviewing?

Ben Alge:
So if you find out how to screen out an interview, let me know because I haven't figured it out yet. The most success I've had, and this may say more about me than it does about successful wholesalers, is getting out of an interview and just having dinner with somebody and seeing how they treat the waiter. How do they act after two cocktails? How do they treat the valet? Is there some wit or are they sharp when something goes aray? Somebody drops something, how do they respond? Those real life in-person engagements that you can't stage in an interview have been the best predictors for me of success in the wholesaling side, versus the individuals who came in and blew me away with their intelligence have often lacked that in the backend.

Ben Alge:
Now, the bad one, I mean, it's say those without emotional intelligence are the bad ones, but try and look at this from a different perspective. The ones that I've seen struggle are those that have an inability to add value on their own beyond just the product they bring to the table. The inability to connect in that personal product or practice level are those that have really struggled. And not having emotional intelligence certainly plays into that, but you've got to have your own brand.

And it's great to have a Touchstone besides you or whatever fund family you work for, but at the end of the day, these people are doing business with Steve Seid and Kurt Dupuis and Ben Alge. There's some credibility in the business, but you better have your own brand, you better bring something to the table every day, or else you fall into that pit of wholesalers who are people that you just don't want to see.

Steve Seid:
Now, talk about financial advisors, the good and the bad there.

Ben Alge:
So I was trying to do the math just in thinking about our conversation, how many advisors I've met with over the last decade, and it's thousands. It's thousands and thousands. And I've met with some incredible ones that I would just give all my wealth to, and I've met with some that you wonder where they got their first dollar. The common thread among those that I really appreciate having conversations with was that they were genuine.

They were upfront about what they could control and what they didn't control, and how they were going to try to help in a very genuine manner. The old phrase, mystery is margin. If you don't know what I do, I can charge you more for it because you can't replicate it. They kind of blow that out of the water and just say, listen, I can't control what the market does. I can position you as best possible for the risks that you have, and then we're going to monitor that going forward.

The ones that I've seen that I've connected with less or wouldn't trust with my family assets are those that have an answer for everything. It's just complete polish and they're not there to learn. I take the opinion that I can learn something from every person I meet. And that's the most fun part of our jobs, we get to meet so many people. And you can learn so many different things. When you shut that door and think you've learned everything, it's really hard to connect with people. And so that's where I've seen the biggest deficiency, I'd say on the advisor side.

Steve Seid:
That's a great answer. Okay. Next question is coming from Brandon, San Francisco, California. What is the ideal amount of clients per FA? Kurt, do you want to start and take a stab at this one?

Kurt Dupuis:
If we're speaking in averages, from outside sources and what we see into the data, it's about a buck and a quarter, I'd say. 125 per FA seems like, feels like, I think is a pretty reasonable number.

Steve Seid:
Ben, any comments on that?

Ben Alge:
Yeah. I think that's a good number. I would say almost universally, the answer is fewer than you have today. And I think that's maybe painted with too broad of a brush. But we work with teams around the country. There's so much time spent on the bottom of the book. And if you think about, for a typical client service model, your C-level clients are going to require about three hours of proactive client service a year, and your A-clients are going to require 11 hours.

Now, you can typically remove about 70 C-clients with about three A-clients. And we do the math in the amount of time you can save, it's incredible. And the discrepancy is incredible. So we've all seen practices where these are the people that started with me and they've been with me through my entire business, I can't move out of the practice. I get it, but if you're looking to grow, shrinking is typically the fastest way to grow in our business.

Steve Seid:
Just a couple of other points, I've seen some financial professionals who really could handle larger books well. They are very, very rare, but they happen. I've seen dynamo type financial professionals, one that listens to this show in particular, that can do 300 clients and it's her lifestyle, and she's a dynamo. But the average financial professional, that's not going to work for. So I think the number that they described as right is probably 100 to 150.

The other thing I would say is it depends on how your support staff and team are structured. If you have a team structure that allows you to be what I would call a “briefcase” financial professional, where the only thing that you do is meet with prospects and meet with clients and every other part of your operation is handled with the right support staff, if you got to that point, you could be at the upper end of that range.

On the flip side, if you're on your own and you have limited support staff, then you're at the lower end of that range, and I think even 80 to 100 is probably not unreasonable. But I think the importance in this business of client experience can not be overstated. Ben, let's say the financial professional who's listening to this is agreeing yeah, I probably have too many relationships, I'm a sole practitioner with 350, what steps would you suggest that they take to start to think through some of that?

Ben Alge:
So you've got to start with segmentation. Take a look at the practice, not just on an assets and revenue perspective, but look at it qualitatively and score those clients out. Do you enjoy working with them? Are they a referral source? Is there a potential upside or liquidity event coming up in the future? And get a sense of who really are your A, B and C clients. And then determine how much time those take. And what you're going to find is you've got a deficit of clients at that level. Unless you have 250 clients from discretionary accounts that are just being run on their own and you're only servicing 50, I can assure you there's things falling through the cracks.

So you segment them out, you determine what you want your client service model to be and what you want your brand to be, because your brand is about as good as the lowest level of client service that you're providing, and then you apply those two together. And from there, you end up with an amount of time you can spend on this. Typically, it's more than there is available in the year, and so then you got to make decisions. Do I reduce my client service, or do I reduce the number of clients? And I think more often than not, the better answer is reduce the number of clients.

Steve Seid:
Or add capacity.

Ben Alge:
Or add capacity.

Steve Seid:
Get a partner and-

Ben Alge:
Yup, or a very good assistant to your earlier point. If you've got a dynamo of a CSA, it can add a tremendous amount of capacity.

Steve Seid:
Awesome. Well, Ben, we're going to close up here, but it was a delight to have you on, my friend. Thank you for getting dressed up in the suit and the tie and going into our offices and joining us on this. I appreciate it.

Ben Alge:
Nothing but the best for the best. I really appreciate that you guys have me on and all the work you guys are doing.

Steve Seid:
So you guys all know out there, you can reach out to us at thewholetruthth@touchstonefunds.com. Ben, share your email address for folks that want to get in touch with you.

Ben Alge:
You can reach me at benjamin.alge, A-L-G-E, @touchstonefunds.com.

Steve Seid:
All right. Well, thanks to our friend Ben Alge. Costanza Corner is next, stick with us. Welcome back, everybody. We are in our Costanza Corner. And Kurt, I have a pretty good one for you today. I think you're going to like this.

Kurt Dupuis:
Well, I'll be the judge of that. Let's see.

Steve Seid:
That's good. So you know we are always doing these innovative, amazing things out here in California. This is kind of where it happens. The good weather, the tech, we've got it all going on here. Besides the state constantly being on fire, it's a great place.

Mighty Buildings is able to complete a home in just 24 hours with walls, floors, ceilings, because they 3D print them in a warehouse in Oakland.

Kurt Dupuis:
Okay. Hold on a second. I'm printing this in 24 hours, and because I'm doing it so quickly, to combat that, I have to call it mighty buildings? That's kind of reaching. How mighty are they actually?

Steve Seid:
Instead of appreciating what I just said, that they can 3D print a house, you're worried about the name. When I read that, that you can 3D print a house, by the way, there are multiple companies that are doing this now, I'm like, you can 3D print a house? This is incredible to me. It blew me away.

Kurt Dupuis:
That's cool.

Steve Seid:
Yeah. So customers can choose different sizes from one bedroom one bath, to three bedroom, et cetera. They're saying it's cheaper. So 350 square foot unit only costs 115,000. And they're doing an entire neighborhood down in Mexico. A different company is doing that. So I just think this is amazing. They're printing houses, man. They're printing them.

Kurt Dupuis:
So I have a couple of thoughts here. First of all, growing up in South Louisiana, I would be very curious of the hurricane status of said houses as the true test for how mighty a house is. But secondly, I've actually talked about this with buddies of buying one big property by a lake and then everyone having their own little tiny house. This could be a great solution for that.

Steve Seid:
You're going to start your own little, what are those, communes?

Kurt Dupuis:
Yeah, I'm going to have a lake house commune.

Steve Seid:
Wow. Kurt's Commune. That would be good.

Kurt Dupuis:
I'm having my own mighty house by a lake. That's how I'll know I've arrived.

Steve Seid:
You know, if you were planning on asking me, just wait for another 10 years when I'm burned out on being in corporate and all that stuff, I might join your commune. I have that inner hippie in me, Kurt. I want you to know that. It's there.

Kurt Dupuis:
We'll be open to your application.

Steve Seid:
Okay. Good.

Kurt Dupuis:
Barring a background study.

Steve Seid:
So thanks, everyone, for listening. We'll see you next time.

Kurt Dupuis:
You can find The Whole Truth and subscribe for free on Apple Podcasts, Spotify, or your favorite podcast app. We'd love it if you took the time to rate and review the show on Apple Podcasts. It helps others find the show. And for more episodes of The Whole Truth, go to www.touchstoneinvestments.com/thewholetruth. That's touchstoneinvestments.com/thewholetruth. All one word.

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