Henry Ford and the Need for Flexibility
In the early 1900’s, Henry Ford said, “I will build a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be low in price that no man making a good salary will be unable to own one—and enjoy with his family the blessing of hours of pleasure in God’s great open spaces.” This could have been his mission statement, if he had one.
Henry launched the Model T in 1908 and sold it for $825. The price was reduced each year until 1916, when it sold for $360. He also paid his workers a handsome wage far above the average which drew the best mechanics in Detroit to Ford Motor. By 1918, half of all cars in America were Model Ts and things were good. For years, the Model T was available in only one color, black. Ford Motor Company produced 15,007,034 Model T’s in 1927, a record that stood for 45 years. Henry was focused, determined, and unwavering. He eventually found out that being focused and determined were preferable to unwavering. You see, the competition was now offering a more modern auto AND with payment plans. Even though his son Edsel, who was now running the company, urged his father to change, Henry did not waiver. In the mid 1920s, sales of the Model T began to decline. Henry finally relented and in the late 20s made the Model A. During the next decade he finally offered financing.
This is just one example of what can happen when we refuse to change. Had Henry not adapted to the changes in the marketplace, he likely would have gone out of business.
We have all heard that the only certainty is change. There are significant changes occurring in our industry as we speak. During the 1970s and 80s, cold calling was the primary method of gaining new prospects. In the 90s, financial planning began to take root and by the end of the century, it was ranked as the number one profession to be in. Large firms quickly (quickly is a relative term) adopted this as their mantra and the race for the gold was on. As the pendulum swings back and forth, one cannot deny the trend toward the RIA platform.
If you’re stuck in the wirehouse world and have never tasted independence, through either the RIA or independent B/D model, I can say this for sure: Once you’ve tasted it, you’ll never go back
Amen to that!
- I have spent the last nine months converting my old brokerage clients into RIA clients. We are about $60 million into the $100 million client base and still chugging along. John Henry McDonald, one of the pioneer’s in this profession once told me that given my experience, expertise, and asset base I only lacked one thing, and that was to sell my house. As we changed from brokerage to RIA I did indeed sell my house and have moved into one less than half the size, with about a third the house payment. Why? Because my personal income is about one quarter what I was earning as a broker.
A client asked me today why I would do that; voluntarily reduce my compensation by that amount. I answered her by asking why small farmers who often have to hold down a regular job to make ends meet keep on farming. She immediately understood and replied, “You much love what you do.” I do.
The satisfaction of being able to look my clients in the face and state without reservation that I am providing them with the best allocation, the best managers, and the least cost they could find anywhere in the world is deeply satisfying. Another good part of this change is that instead of looking for new clients so that I could earn the commissions necessary to keep serving the earlier clients, I am now trying to figure out how to find the time to get to all the people who want me to manage their portfolios!
I am satisfied that I will probably never earn in any year the amount I once earned as a very successful broker, but I am also delighted to know that all I have to do to live at a comfortable standard of living is to take good care of the clients I already have.
Jeff McClure