"Yep, that’s the best word for it", concedes Phil McGann.

Phil is struggling to describe the reaction of fellow financial planners when he explains how things work at the Hudson Institute.

"When they find out that our financial planners perform 8-9 consultations a day … that these consultations are all conducted over the telephone … that our small team in Brisbane services 8,000 members all over Australia … and that almost all of these members have paid upwards of $1,500 just to access this service … well, they just don’t believe it!

Phil goes on to explain why this doesn’t make sense to a traditional financial planner.

"Even the busiest of traditional financial planners has time to conduct only one or two consultations a day. The rest of his day is consumed with clients’ portfolio planning, research and administrative activities.

"Even if this financial planner had time to conduct more consultations than this, he’d have no one to talk to. The fact is, when practice growth is dependent upon word of mouth, it takes years for a planner to build a decent clientele."

Phil concludes by ruefully admitting that if convincing a traditional financial planner that it’s possible to perform 160 appointments a month isn’t hard enough, his next challenge is all but impossible.

"Financial planners assume that, at these volumes, customer service suffers. But, I’ve seen both environments, and the Hudson quality of service is far superior!

"The fact is, our low cost structure enables us to provide a level of service that a traditional financial planner simply couldn’t afford."

Phil’s dilemma provides a tremendous introduction to the Hudson Institute — a truly incredible business.

In turn, the Hudson Institute provides a great case study of the successful application of our Relationship-centric Marketing methodology.

From publishing company to full-service financial planner

It’s generally accepted that paradigm shifts emerge from the fringes of particular industries — and not from the well-established incumbents.

The Hudson Institute may well be evidence of this phenomenon.

Hudson started life ten years ago, not as a traditional financial planning firm, but as a publishing company.

Its First Class Ticket program was a budgeting and do-it-yourself investment toolkit.

To add value to its original paper and ink products, Hudson allowed members to access a telephone support service, as well as regular capital city investment workshops.

Over time, Hudson realised that members were placing more value in these services than they were in their printed publications. As a result, Hudson increased the frequency and the quality of its events, and replaced its unqualified budgeting coaches with a team of fully qualified financial advisors.

To fund the cost of these additional services, Hudson gradually increased the price of its First Class Ticket program from an initial $395 to $3,995. It acquired members by selling tickets to introductory seminars.

In its first eight years, over 100,000 people attended these seminars. Eight thousand subsequently become First Class Ticket members.

Three years ago, Hudson’s sales process began to suffer from rapidly diminishing returns. A number of other financial services providers had begun promoting public seminars (many inspired by Hudson’s very obvious success).

Hudson realised that it could no longer regard the sale of First Class Ticket memberships as its core business. It had to find an alternative source of primary revenue.

The transition to a full-service financial planning firm was the obvious direction to take. Although Hudson had initially felt that independence was its key point of difference, many members actually resented the fact that they had to visit other providers to purchase financial services.

To make the transition, Hudson suspended its public seminar program and set about compiling a suite of financial services. Today, these services include managed funds, finance, direct property and personal insurance (general insurance is outsourced).

Hudson’s marketing manager, Noeline Packham, explains that sales of these new services came thick and fast. "When we mentioned in our newsletter that we could now provide financial services, our phones started ringing off the hook.

"We never had time to consider selling via face-to-face appointments. Members were asking for our financial services in their telephone consultations — and they were quite happy to purchase by remote control.

"The interesting thing is that, from our advisors’ perspectives, nothing much changed. Now, instead of referring members to outside service providers, they simply transfer them to our in-house specialists."

It’s taken Hudson just over two years to make the transition from publishing company to one of Australia’s most productive financial planning firms. In the process, they’ve built a sales process that we hold up as best practice in Relationship-centric Marketing.

Relationships precede sales opportunities

If you ask any financial planner where his sales opportunities come from, he’ll explain that relationships are by far the most lucrative source.

In this respect, Hudson does not differ from any other financial planning firm.

Where Hudson stands apart from its peers is in its scientific approach to the acquisition and management of relationships.

It’s Noeline Packham’s job to generate around 448 sales opportunities a month. These sales opportunities will translate into 1,120 appointments (2.5 per sales opportunity) — enough to keep Hudson’s team of seven financial advisors fully utilised.

Noeline sources every one of these 448 sales opportunities from one location — Hudson’s database of 8,000 First Class Ticket members.

The greater majority of these sales opportunities are inbound — stimulated by Hudson’s automated communication program. The balance are outbound opportunities — customer service appointments, set by one of Hudson’s two member services staff — Aimee and Matt.

Hudson’s communication program consists of a weekly e-mail newsletter The Hudson Report and a program of specialist investment seminars (quarterly evening seminars in capital cities, and twice-yearly, one-day workshops in regional areas).

The communication program also includes occasional special promotions, consisting of offers relating to specific investment opportunities.

Cause and effect

Unlike many organisations, Hudson knows what the key drivers of inbound sales opportunities are. The first is the content of its weekly newsletter. The second is changes in the financial environment.

Tanya Nicholson is the editor of The Hudson Report. It’s her responsibility to monitor the relationship between the content of this newsletter and the volume (and type) of inbound sales opportunities.

When pressed to disclose what content is most likely to make the phone ring, she reveals that, "Specificity sells."

"It’s not so much the subject of an article," she explains. "It’s more how it’s articulated.

"If we present facts and figures and practical guidance, the phone rings.

"Our members do love case studies," she admits. "They love to hear what other members are doing. And currently insurance and property stories are working well."

Right now, Hudson is stimulating readership of The Hudson Report (and accordingly, sales opportunities) with The Hudson Challenge — a competition that asks members to answer questions relating to each issue of their newsletter, for a chance to win a $5,000 managed fund portfolio.

Acquiring relationships

Hudson is not currently running any relationship-acquisition campaigns. It’s having no trouble generating the sales opportunities it needs from its existing member base.

However, it does realise that its continuing growth will require the recommencement of these activities at some stage in the future.

Hudson has two classes of relationship: subscribers and members.

Subscribers are individuals who have subscribed to The Hudson Report (and possibly attended events) but have not purchased a First Class Ticket membership.

First Class Ticket members have unrestricted access to events and, more importantly, to Hudson’s team of advisors.

When Hudson does recommence its relationship-acquisition activities, its first objective will be to convert existing subscribers into members. (Each month, a number of subscribers already discover the benefits of membership from the Hudson Website and become members of their own volition.)

Its next objective will be to acquire subscribers to The Hudson Report. It’s likely to do this via strategic alliances and the re-release of its popular book, How to start with no savings and get rich safely.

In the meantime, Noeline is about to launch an associate membership program. This will enable existing members to add family and friends to their memberships at a steeply discounted rate.

Converting sales opportunities into sales

It’s 8:00am and Scott Adams is reading the Financial Review and sipping a cup of fresh coffee.

His six colleagues are doing the same. Their relaxed demeanour and good-natured banter convey a sense of the calm before the storm.

At exactly 8:45 am, Scott and his colleagues will plug in their headsets and telephone those members who have been scheduled for the day’s first appointments.

At least by way of age, education and character, Scott is representative of a typical Hudson advisor.

He’s 31 years of age. He’s intelligent and well educated. (His qualifications include a Bachelor of Commerce, a Bachelor of Arts, a Graduate Diploma in Applied Finance and Investment, and a Graduate Diploma in Financial Planning.)

And, as is the case with all Hudson advisors, Scott is a member of the Securities Institute of Australia.

Scott is passionate about wealth creation. Like his colleagues, he reads, thinks and talks about little else. And he derives an obvious satisfaction from counselling Hudson members on the formation and execution of their wealth creation strategies.

Prior to these calls, each advisor will have spent 15-minutes engaged in what Hudson calls pre-call planning. Pre-call planning is a rigidly structured planning session that precedes each appointment. Advisors review members’ investment strategies, their histories, and their current financial situations, looking to identify problem areas or opportunities for improvement.

This planning process is streamlined by Hudson’s custom-designed computer system — which presents this information in easy-to-interpret reports — and by Megan Armour.

Megan is a para-planner. It’s her job to maximise the productivity of Hudson’s team of advisors. She does this by confirming that members’ financial information is updated (if necessary) prior to their appointments. Megan also takes responsibility for the routine paperwork, literature fulfilment requests and follow-up generated by advisors’ appointments — as well as for the project-management of the transactions specified by advisors.

At 9:30, Scott saves his contact notes and completes his first appointment for the day. His next appointment is scheduled for 9:45, allowing him the 15 minutes he needs for pre-call planning. With the exception of lunch and occasional stretch breaks, Scott and his colleagues have appointments scheduled back-to-back for the rest of the day.

Operate the process constraint at 100% capacity

"Our constraint is our team of advisors," explains David. "My first priority is to provide our people with the resources they need to keep our advisors 100% utilised. If our advisors are not on the phones, we’re not making money."

David Heffernan is Hudson’s financial controller. But he doesn’t talk like a normal financial controller!

That’s because David manages Hudson’s accounts using throughput- (as opposed to conventional cost-accounting) principles. (Throughput accounting is a derivative of Goldratt’s Theory of Constraints.)

"Fortunately, I studied throughput accounting at university," continues David. "When I got here I recognised that there was no way I could apply traditional cost-accounting thinking.

"If I attempted to manage this business for local efficiencies, I could save money by cutting the excess capacity from the functions that support our team of advisors. But I soon realised that this would be a Pyrrhic victory. Without this spare capacity, any unexpected incident would result in unfilled appointment slots in our advisors’ diaries. And the opportunity cost of these unfilled slots is far greater than the possible savings from these local efficiency improvements.

David devotes much of his time to looking for ways to increase the capacity of the team of advisors (or to elevate the constraint, to use TOC terminology).

"On average, each appointment is worth $255 to us in gross profit," David explains. "The key to making this business more profitable is simply to conduct more appointments.

"We can do that by recruiting more advisors — and we’re doing that now — but there are many other opportunities to increase throughput."

David explains that the appointment of Megan (Hudson’s para-planner) and of Aimee and Matt (their member services staff) were two such initiatives.

He also details a recent discovery that has added another $355,000 a year to the bottom-line.

"We always knew that the advisors had occasional no-shows. Just four a week, on average. We never worried about these lost appointments, until we calculated their opportunity cost. We realised that four no-shows per advisor is actually 28 lost appointments a week, at a total cost of $355,000 a year!

"We now maintain a safety buffer of members who have agreed to go on stand-by (just like the airlines do). These members benefit, because they have the opportunity to speak to an advisor sooner — and we benefit because we no longer have empty appointment slots."

Lessons from Hudson’s sales process

We can all learn a number of lessons from Hudson’s sales process.

Process means process!

The most obvious one is that Hudson has a formal sales process, as opposed to a loose assortment of ad hoc and unsynchronised marketing activities.

As a result, Hudson can measure the cause and effect relationship between the deployment of organisational resources (money and time), and the resulting impact on bottom-line profitability.

This unusual level of accountability is reflected in Hudson’s culture. Without exception, every person I interviewed at Hudson understood the organisation’s key profit driver (their team of advisors). And, everyone understood the direct contribution that his or her activities made to this team’s throughput.

Create an environment that fosters consultative selling

In considering the relevance of Hudson’s sales process to that of a typical organisation, it’s helpful to substitute the word advisor for salesperson.

Even though Hudson’s advisors would no doubt bristle at such a comparison, they provide a fine example of the types of individuals that are well suited to a relationship-centric sales process.

Hudson’s advisors’ key competencies are their product knowledge and their communication skills. They are consultative in their approach — and comfortable to see each point of contact as an investment in a developing (and profitable) relationship.

While they are certainly ambitious, they are not the kind of opportunistic, short-term thinkers that are attracted to a typical sales environment.

Of course, Hudson’s relationship-centric sales process provides the kind of environment where such an individual can flourish.

Advisors do not have to prospect relentlessly. (All of their appointments are provided for them.)

They do not have to be opportunistic, self-starters. (The constancy of their work volume, coupled with salary-based compensation packages, provides the perception of job security that all employees expect.)

It’s also worth mentioning that Hudson goes to some effort to provide all staff with a rewarding work environment. Any job-related education is fully funded by Hudson, and some benefits that are not specifically job related are 50% funded. The latter includes gym memberships and fortnightly massages!

Subordinate all management decisions to the constraint

You don’t have to spend long at Hudson to realise that every individual views himself or herself as part of the advisors’ support team. It conjures up images of a Formula One team, where everyone is fixated on assisting the driver to win the big race.

Marketing personnel see it as their responsibility to maintain what they call the opportunity buffer. The opportunity buffer is an inventory of sales opportunities, established to ensure that advisors never have an empty appointment slot.

Operational personnel see it as their responsibility to maximise the efficiency of the advisors. They do this by setting their appointments, ensuring all members’ financial information is current prior to appointments, preparing all necessary paperwork and project-managing all transactions.

Contrast this with a typical sales process, where salespeople are left to fend for themselves — operating, as a result, at a fraction of their possible productivity. When you consider that a salesperson is almost certainly a sales process’s most expensive and highest-leverage resource, it’s a lunacy to allow salespeople to operate at anything other than 100% of their possible productivity.

To use Theory of Constraints terminology, your salespeople should most likely be your process constraint. This means that everyone else in your sales process should focus on keeping your salespeople fully (and productively) utilised. It also means that all management decisions should be made with respect to their impact on your salespeople’s throughput — and not with respect to local efficiency measures.

Recognise the true source of sales opportunities

In most organisations, sales process output is constrained by a scarcity of sales opportunities, rather than by salespeople’s capacity.


Most organisations’ attempts at generating sales opportunities are hampered by a failure to recognise their optimal source.

Hudson understands that it is counter productive to expect salespeople to generate sales opportunities (their time is better invested selling). It also understands that it is restrictive to rely solely upon clients as a source of sales opportunities (this results in a self-limiting system — where future sales are dependent upon past sales).


As discussed, Hudson appreciates that relationships under management are its most lucrative source of sales opportunities. As a result, Hudson manages relationships with the sole intent of generating sales opportunities (now and in the future). It also understands that its future growth will ultimately be driven by the acquisition of new relationships.

More than an effective sales process: a sustainable competitive advantage

Hudson’s sales process provides more than just an efficient source of revenue. It’s at the heart of a business model that provides Hudson with a competitive advantage over traditional financial planning firms.

The incredulous response of typical financial planners to this business model provides a clue as to the sustainability of Hudson’s competitive advantage.

Another clue is the reaction of Hudson’s members.

Even though the Hudson model doesn’t enable members to have face-to-face contact with advisors, it does provide far more frequent access than is provided by traditional firms. Hudson advisors talk to members a minimum of two times a year — although, more active members consult with their advisors, on average, six times annually. This accessibility is the service attribute most praised by members in Hudson’s annual member satisfaction survey.

I’m sure you’ll agree that it’s likely that your sales process could benefit from the emulation of some of these relationship-centric principles.

But this case study raises the possibility that this approach could provide you with more than just a more efficient sales process. The relationship-centric methodology, when implemented in its entirety, might well contribute to your organisation’s sustainable competitive advantage — just as it has Hudson’s.