A Step By Step Guide to Building, Managing and Growing an Advisory Practice
A Step By Step Guide to Building, Managing and Growing an Advisory Practice
Starting and running a financial advisory business can be hard. If you’re like me, it can seem like you spend much more time focusing your attention on the planning and management of your business than you do developing and implementing financial plans for your clients. Is that the reason you became an advisor in the first place? I doubt it. Now, more than ever, we’re forced to wear multiple hats. If some of the daily task of running your business isn’t something you enjoy, rest assured, you’re not alone.
Planning, nurturing and growing a team isn’t easy and sometimes these tasks can take on a life of their own. Have you ever had a day that you never even left your office, but got home in the evening mentally and physically exhausted? I have. Spending too much time on practice and team management can exhaust all of your time and energy – especially if you don’t enjoy it. Worse yet, it can prevent you from doing the things you really enjoy and the core activities that drive revenue for your business.
The good news is, you don’t have to be born an amazing business manager to have a great practice. After all, no one taught us how to be a manager in the traditional advisor training programs. Chances are, if you made it this far, it’s because you’re good at other things – the technical aspects of financial planning, business development (a.k.a. prospecting) and delivering exceptional client service. If that’s the case, there are tools, systems and resources you can use to help manage, grow and plan for your practice.
I want to share a few areas that have helped my team and me build a multimillion dollar firm without sacrificing our commitment to our clients or to our families. Implementing the systems, processes and tools helped us manage our team, spur growth in our practice and regain an enormous amount of our time to do what we do best – spend time with our clients and find new ones.
Developing A Basic Business Plan
If you read my bio somewhere, it would likely say that I have a degree in Education. Truth is, I majored in Elementary Education, meaning I colored really well and could make a great science project (I have blue ribbons to prove it.) When I became an advisor, after teaching for years, I had no clue how to run a business. In my training class we practiced cold calling and mutual fund research. My only business plan was to find enough clients to support a young family before my salary ran out! Times have changed, our industry has evolved and a plan is more crucial now than ever.
Whether you’re a solo practitioner or an ensemble practice you need a business plan. There’s no one-size-fits-all template to use, but it’s important that you take the time to write or type it out. Whether you use Jim Horan’s “One Page Business Plan” or develop a form of your own, pick something and get started.
When developing your business plan it’s important to begin with the end in mind. I like to treat the business plan much like the client’s financial plan. Some key big picture questions should include: Where are we today? Where do we want to be? When do we want to get there? And, what steps must we take to be on time and on target?
Of course, an actionable plan requires more than just a big picture view. While it’s important to have a vision and mission statement, your business plan should be focused on what you will do to fulfill your vision and accomplish your mission. What are your key metrics? Be specific, because what doesn’t get measured, doesn’t get done. Begin with the end in mind – set a time limit on your goal. Whether it’s 1, 3 or 5 years, pick a time frame to help focus your plan and develop your tactics.
You will have lots of details to fill in before your plan is done. Write down your goals (I’d recommend three) and then work backward to determine your action steps. For example, if one goal is to add $10 million in new assets under management in 2018, what’s the household size of your typical prospect? If it’s $400,000, then you need 25 (about two a month) for the coming year. Once you run your numbers, instead of focusing on the $10 million goal and you can concentrate on finding and on boarding 2 new clients a month.
Determine Your Service Standards
For any advisor, bringing in new clients is an important task. I’d argue for established advisors, developing proactive service standards is equally important. Regardless of where you set your standard, it’s imperative that you have one. If you don’t establish a standard, how will you, your team or your clients know what to expect? How do you plan your work and determine what your team should look like? Proactive service standards are the key to efficiency and profitability and ensure you are doing things intentionally rather than accidentally.
An important component of developing proactive service standards is to spend some time choosing how you segment your clients. I’ve known advisors who wanted to have one standard for all of their clients, while others have multiple client segments. This is part of building your ideal practice, so choose a structure that works for you.
After you’ve determined the number of client segments you’ll have (we use three,) you should determine what the service schedule for each segment should be. Keep in mind, this is the minimum level of proactive service that you’ll provide for each segment – there will always be reactive work and things that require your attention. In my opinion, it’s better to have a simple standard that you and your team can commit to executing well, rather than a complex schedule that is poorly implemented.
I recommend starting with your lowest client tier (the one who will receive the least amount of proactive service) and determine three things: How many face-to-face reviews will you offer each year? How many proactive review calls will you offer each year and how many proactive “touching base” calls (just checking in to see if they need anything) will they receive? Once you’ve determined how many of each activity you’ll have and determined who will be responsible for each contact, you have a basic proactive client service schedule for that segment. Repeat these steps for each segment to complete your overall team schedule.
If you’ve already done this exercise, kudos. I’d simply suggest that you check with your team to make sure you’re executing on the schedule you’ve set. If there’s something you’re falling short on consistently – make sure you both commit to specific improvement and determine steps to accomplish that or remove it from your standard. Either way, make a conscious choice about what you’ll include.
If you’re an advisor who thinks that this will require too much time and energy, let me assure you that it will save you stress, time and money.
You will not have to worry about whether or not you’re contacting a client enough and they won’t have to wonder if they’ll only hear from you in November so that you can make enough commissions to pay for your family’s presents (I actually had a prospect tell me he thought that about his advisor.) This type of schedule will allow you to focus on your client calls and meetings, because you can determine what types of reports or collateral material you’d like for each. Above all, you’ll eventually save money – because this type of calendar system allows you to calculate exactly how many proactive service hours are required by each member of your team to meet your standards.
A little time on the front end will allow you to make better decisions on your team structure and determine where and how much help you need. I use this information to determine each team members capacity utilization ratio (how much of their time is required to provide exceptional proactive service) so that I can determine whether or not we need to reassign responsibilities or hire new team members.
Determine your Ideal Team Structure
With a service standard in place, you can turn your focus to the structure of your team. The goal is to make sure that you’ve built a team that allows each member to focus on what they do best. Senior Advisors should spend the majority of their time on client facing tasks, whether reviews or calls, and finding new clients. Associate Advisors, if you have them on your team, can focus on plan or review preparation and proactive client service, while Client Service Associates make sure that all of the clients’ administrative needs are met thoroughly and professionally.
Our current team structure focuses on Service Teams, comprised of two Senior Advisors, an Associate Advisor and a Client Service Associate (all supported by a core group of specialists who help with plan design and portfolio management.) Based on our service standards, we’ve found this to be an incredibly efficient structure that allows each of the team members to focus on the highest and best use of their time – not to mention, it’s cost efficient.
There are as many team structures as there are advisory firms, but the factors that should determine them are typically: the total number of clients, the types of services provided, the client segmentation and proactive service schedule for each segment. This information combined with your utilization ratio will let you know if you have enough support, while reviewing your team members’ roles and responsibilities (and comparing them to their strengths and talents) will help you determine whether or not you have the right kind of support.
Establish Roles and Responsibilities
Have you ever created an organizational chart for your team? I drafted my first one fifteen years ago after reading “The E Myth” by Michael Gerber and it’s changed the course of our business. It gave me a clear understanding of all of the positions that would be needed to accomplish my long term objective of building an enterprise organization, even though at the time there were only four people on my team and we were each in multiple “jobs” on the chart. Over the years, using this vision, we’ve been able to systematically add team members to “replace ourselves” in certain roles – I’m hopeful that someday soon we’ll each only have one! If you were outlining your ideal practice, what positions would you need?
Using an organizational chart as a guide, take each position and write a job description – even if you have a limited team or you’re doing them all right now. As you grow, you can ideally begin to hire people to handle less complicated tasks and this guide will help you and your team members gain clarity as you’re able replace yourself in less complicated tasks. Clear roles and responsibilities, partnered with good systems, will have your practice running like a well-oiled machine.
Determine How Your Team Members Will Grow
A recent survey by the Society for Human Resource Management identified 18 workplace conditions that companies must have in order to have team members who are engaged at work. While I wasn’t surprised to see that the team members polled listed career growth and development near the top of the list, it was disappointing to see that that they were actually ranked near the bottom of employers’ lists. I believe there’s a clear disconnect here and it represents a real opportunity for forward-thinking advisors.
A growth plan is essential for a modern advisory practice. Early in my career, the growth plan was get more clients as fast as you can, regardless of whether or not there was a good fit with our practice. Given the current legal landscape, changes at the Department of Labor (regardless of when or in what form they come,) and a focus on operating an efficient business, that’s no longer a viable plan. Things have changed. What hasn’t changed is human nature.
Since the beginning of time, people have continuously wanted to do better – whether that’s better than previous generations, better than their friends and neighbors or just better than last year. Just as we want our businesses to grow, many of our team members want to grow personally and professionally too. Are you providing a path to do that and can they see where their path is headed?
A few years ago, we began using an Advisor Growth Path. The Growth Path outlines how new advisors progress toward being a Senior Advisor. If you haven’t done this exercise, you simply list any job categories you have on your progression toward Senior Advisor and list the pay scale available (whatever your compensations structure is for each,) jobs skills expected and the approximate amount of tenure required to qualify for each. You can certainly provide ranges to allow for the fact that some folks will progress faster than others, but it’s important to help you team understand that moving up doesn’t require moving out to another firm.
The Growth Path shouldn’t be reserved only for advisors. Our service professionals are crucial to our team and, as we’ve grown, it’s been important to have an operations and administration path, as well. A great byproduct of this process has been the ability to continually recruit higher levels of talent to our organization at every position.
Consistency Is Important
Consistency is key for any business, but especially a financial advisory business. From a management perspective, developing consistency allows your team to know what to expect from you, from one another and from the company. It also lets you know what you can expect from them. Developing some simple systems and structures and sticking to them will create a culture that your team can depend on, which will make them more engaged and more productive.
I believe that the need for consistency is even more important to providing a great client experience. When it comes to building a personal reputation or a brand, consistency is crucial. When you go to Starbucks and order a Skinny Vanilla Latte or a Venti Blonde Roast Coffee, anywhere in the world, you get the same product every single time. If you’re traveling on business and see the “Hot Now” sign on in a Krispy Kreme window, you know that you can stop and get a donut that you like without any concern. My guess is there are other places, though, that you don’t quite trust to deliver the same product every time. That’s the difference between a business that’s consistent and one that’s not.
Do your clients know what to expect from you? Do you deliver the same product each time? If they talk with one of your team members, would they receive the same advice? Just like Starbucks, you can develop a system on how you do things (whether it’s planning, portfolio management or scheduling appointments) to make sure that you and your team are consistently delivering your best work – no matter who the client encounters.
Consistency is developed intentionally. You’ve mapped out your team structure, roles and responsibilities and proactive service – this is just a measure of delivering it every single time. When you meet and exceed expectations and deliver a product that your clients trust, your reputation and overall refer ability will soar.
Checklists make delivering a consistent experience much easier. Have you ever witnessed the process a pilot goes through before taking off for a flight? No matter how many times they’ve flown, they always go through the same pre-flight checklist. Why? Because everything on that list is important to make sure their flight is as safe as possible.
If you’re doing something more than two time, it’s easier to make a checklist of the steps, plain and simple – to make sure you don’t forget anything. I’m embarrassed to tell you, but I’ve come to appreciate checklists so much that I keep two checklists on my refrigerator. My wife and I have four sons and that means, as you can imagine, we keep a lot going on every week. One of my checklists gets reviewed every weekend to make sure that we’re ready for the coming week. The other checklist covers all of the things I need to make sure are done before the next morning to start our day off right (medications ready, school papers signed, etc.) and the things that have to be accomplished before they leave for school (packing bookbags, lunchboxes, among other things.) Keep in mind, I don’t necessarily do all of these things, I just make sure they’re all done.
I think we can agree that coming up with all of the things that have to be done, for any given task or process, is the hard part. The benefit of checklists is that that they help us leverage our time by allowing us to think about these things one time, document it and never have to come up with the list again. The next time we need the task done, we can review the checklist and do it, or in many cases, give the checklist to a team member to complete. If we’ve taken the time to identify and organize the required steps, we can minimize the amount of creative thought required needed each time the task needs to be done.
For most people, the idea of developing lots of checklists is either overwhelming or boring. You’re starting to think you might need a checklist for your checklists, right? I get it. You don’t have to sit down and come up with several at a time – just one. The next time you’re preparing to do something that you know you’ll do repeatedly, like prepare a client review, write down each step in the process as you complete it. That’s it. Once you’re done, you have a checklist of tasks that need to be completed to prepare a client review. Whether you type it up and save it or give it to your team, the next time review preparation is needed, you won’t have to think about it – just complete the checklist one step at a time.
Regularly Scheduled – But Brief – Team Meetings Are Important
One way to help deliver on your promises is to make sure your team remains on the same page in terms of client service. We do this by having weekly service team meetings. Before I say any more, let me make one point abundantly clear – I do not like meetings for meetings sake. Meetings without a purpose or agenda are a waste of time. The purpose of meetings is not simply to convey information (you can do that via email). The purpose of any meeting is to create an action necessary to continue moving your practice forward – whether it’s related to client service, marketing or anything else.
There are countless types of meetings you can have, including daily huddles, committee or department meetings and meetings of your entire team. After experimenting with lots of different meeting strategies, we’ve settled on three primary types for our team: a weekly service meeting, a monthly team meeting and an annual planning meeting. We chose these types, as I would hope you would, by clearly defining the goal of the meeting from the outset.
Our weekly service team meetings are pretty self-explanatory. Each of our service teams – which include one or two Senior Advisors, an Associate Advisor, a Client Service Associate, and our receptionist (who takes notes to stay involved with what’s coming up on our collective calendar) – meets every Monday Morning. We block an hour on the calendar for these meetings, but it’s rare that they take more than half that – it’s amazing how much less there is to go over when you meet regularly to keep things moving. These meetings have a set agenda which includes client updates from the previous week, a review of what’s on the calendar for this week, any compliance or operational issues to be addressed among other things. This year our Associate Advisors became responsible for presiding over these meetings, because we wanted them to begin learning to lead the process in anticipation that they will eventually lead their own team or office.
Our monthly team meeting is held over lunch on the first Friday each month, which allows our entire team to spend time together. We cover upcoming events for the month, celebrate successes, review our monthly scorecard and address any strategic initiatives that we’re working on. These meeting not only help keep us on track to meet our goals, but they also help build our culture. We actually like one another.
Once a year, typically in November, we have our annual strategic planning meeting. In this meeting we update our SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) from the previous year. We include every team member, not just advisors, because we want a comprehensive view of the practice from every vantage point. Often we use the SWOT analysis to recognize and develop themes, which in turn drive our new strategic initiatives. These meetings have led to a multiple improvements over the years, from simple changes in our service structure to the create of a bionic solution for delivering advice that’s taken almost two years to fully develop and implement. The focus on this meeting, like all of the others is to drive our future productivity.
Create More Time For Your Team
Before you build systems in to manage and run your practice, you have to determine what tasks need to be done in the first place. Tim Ferris, the popular author of “The 4 Hour Work Week” and several other great books has said, “Never automate something that can be eliminated, and never delegate something that can be automated or streamlined. Otherwise, you waste someone else’s time.” I couldn’t agree more. I recommend the process of reviewing your practice with the intent to eliminate, automate and delegate on at least a quarterly basis.
The first step in the process, which can be done by any team member, is to take a look at repetitive tasks that are being done. This can be accomplished by either doing a “brain dump” of everything that you can think of (in which case your calendar can help,) reviewing existing processes and procedures or both. I recommend both.
Several years ago, while going through this exercise with my calendar, I realized that I was spending 6 hours per month in wholesaler meetings that were focused investment products. My focus isn’t on portfolio management, so I quit going. Simple as that. I got 6 hours of my life back, I’m pretty sure the wholesalers didn’t really miss me and we did the same amount of business as we would’ve if I’d been there – that’s a win, win in my book. More recently, there was a report that I was using for client reviews that I noticed none of my client paid any particular attention to, so we don’t print it anymore. The same can be accomplished by reviewing any of your current processes and removing as many steps as possible, provided the result or output is the same. It’s amazing the time and resources you can save if you’ll simply stop doing things that don’t need to be done.
My bet is that after you’ve eliminated nonessential tasks, your “to do” list is a lot shorter. Next, you’ll want to filter the list for tasks that can be automated. Automation is simply delegating to technology the things that don’t require active decision making. Automation serves as a multiplier for your team, because investing an hour initially on an automated process will save you your team countless hours going forward. Many of the repetitive tasks that used to require repeated manual input can now be automated such as distributing client funds, processing routine transactions or posting on social media. I’ve even recently automated a lot of my scheduling – allowing my clients to set their appointment times via email. They seem to really like it and my team doesn’t have to coordinate calendars. There are countless things that need to be done, but once they’re set up automated systems can do them for you.
After you eliminate things that don’t need to be done and automate everything you can, your next question should be, “Should this task be done by me?” Returning client calls about their whether or not their dividends have been direct deposited is certainly important, but it’s unlikely that the Senior Advisor is the person who should be making the call. Busyness isn’t productivity and effective delegation can help move you from busy to productive. Delegation allows you to focus on your most profitable activities. You want to make sure the right thing is done by the right person at the right time and your team will thank you for it.
Know Your Niche
As an avid fan of Michael Kitces of kitces.com, I can’t count the number of times I‘ve heard him proclaim, “The riches are in the niches.” When it comes to building a successful practice, there’s no doubt that developing a niche can help you grow. Regardless of the niche you choose, there are several universal benefits.
My oldest son recently had surgery to repair a torn ACL. We didn’t go to a general surgeon for help – we went to a specialist who doesn’t just do surgery, he does knee surgery. Ultimately, clients come to a financial advisor for one thing, to solve a problem. Given a choice, they’d want to deal with someone who has experience in solving the exact problem they’re having.
I once worked with an advisor who had chosen physicians as his niche. Almost all of his clients were physicians, most of whom practiced at the same hospital, and everyone knew it. He marketed by being active on the board at the local hospital and participating in doctor’s day activities. He knew every potential pain point that a local physician might have and had tons of references of people he’d helped.
Another advisor I know has a client base that’s comprised of female technology executives. She markets by participating in Facebook groups with her prospective clients (she used to work in technology too) and adding value where she’s able – just sharing free resources. When someone in her niche has a question, she’s easy to find and there are plenty of folks to introduce her.
Choosing a niche doesn’t mean you’ll never take on other types of clients from time to time. It does, however, mean you’ll focus your service and marketing efforts toward one group. This type of focus can be good for you, your team and your clients.
Develop Understandable Models and Packages
What do you do for your clients? Is it easy for you to explain and for them to understand? Can you team articulate it if someone asked them?
We live in a world filled with noise and complexity. Clients come to us to cut through all of that, not add to it. One of the ways to do that is to create packages (what services you offer and for whom) and models (how you perform your services.) These two concepts can turn a complicated, boring process into an easily understandable story.
I’ve shared some of our models with you already, like our proactive service model and our model for team composition. We also have a process for developing client financial plans and portfolio models that are aligned with our process. They’re easy to explain, easy to understand and they work seamlessly together.
How do your prospective clients pay for your services? For years, we gave planning away as a loss leader. If I’m being honest, part of the reason is we thought charging a fee would prevent a prospective client from completing the planning and cost us the opportunity to work with them. I came to understand that the other reason was we didn’t have a clear way to articulate what was included, particularly if we were charging a fee for it.
This year we’ve implemented planning packages. In conversations with our team and other advisors, I’ve jokingly referred to them as “combos” like at a quick serve restaurant. I’m not comparing the value of financial planning to something you get in a drive thru, but the restaurants figured out how to make ordering simple for the consumer. We’ve done the same thing.
If you want to create your own packages, the simplest place to start is with a modular plan – just one issue – like helping a young couple with college planning. Next, consider what’s included in your standard financial plan – social security analysis, a review of employer benefits, stock options, etc. Each of these is part of a retirement planning package. Is there a difference between what you do for a single client versus a couple or between a retiree and someone just starting out? Those could be four separate packages, each with the difference services that the client needs at their current stage and each with a different cost.
If you’re like many advisors, you’ve had models and packages for years, but you haven’t viewed them that way. Chances are you’ve given them away for free too. If you adopt this method, I’ll promise one of two things will happen, either you’ll make more money or you’ll be freed from unpaid work. Either way you’re better off.
Create A Performance Scorecard
When my boys were younger, they all played t-ball at our local YMCA. In the early years, every child got to bat every inning and there wasn’t a scoreboard. After one game, I noticed marks in the dirt in the corner of our dugout. When I asked my son what the marks were he said, “Dad, what’s the point of playing if you don’t keep score?”
You have to measure whether or not the effort that you and your team invest every day is actually moving the needle. The only way to do that is to keep score. For many practices, the score is simple – money. As important as gross revenue is, it’s a lagging indicator. It can tell you what’s happened, but it has minimal predictive value.
Instead of focusing solely on revenue, focus on activity instead. Are there activities in your business that can predictably generate more business or referrals? If so, what are they and do you measure them? You should. In our practice, one part of our scorecard comes from our proactive service schedule. How did each member do in completing all of their proactive work for the month? Proactive service creates happy clients and increases referrals, so we measure whether or not we’re delivering.
Another scorecard component involves new client plans initiated. We have data to support that initiating new client plans (whether they are plans for existing clients who’ve never done one or for new prospects) has a positive impact on revenue. It’s a leading indicator – if we do more new plans, revenue goes up. Focusing on activities that have proven to drive results allows us to control what we can – our effort – and the results take care of themselves.
Put It All Together
Running a successful advisory practice can be a lot of work, but it doesn’t have to be. There are more resources available today than ever before to make the process easier. I’d encourage you to pick a few things and do them really well. Once you can execute on them, pick a few more.
For some advisors, though, running their practice isn’t something they enjoy. The curse of entrepreneurship, if there is one is this – you have the flexibility to do anything, but you can’t do everything. I’ve been one of the people who tried to do everything and it almost killed me. Don’t let that happen to you.
At Signature Wealth, we’ve created a platform of shared services designed to reduce the burdens of running a practice. It’s designed by financial advisors who’ve made the leap to independence who want to remove the fear and reduce the stress of making the transition. Our team is focused on helping advisors do what they do best – focus on spending time with clients and finding new ones. If managing your practice isn’t something you enjoy or if you’ve wondered about the freedom and flexibility that come with independence, we’d love to chat.
What is your definition of a successful business? Are you struggling to move forward with running a business that feels good? Something is missing. Take this quick assessment to see how your practice stacks up.
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