Financial advisers are looking toward 2014 as the year to make their businesses run like well-oiled machines.
At industry events and cocktail parties, they sound determined to find ways of making their firms more efficient.
They're talking about plans to examine workflows and create systematic processes that offer a repeatable client experience. Many also are looking at whether being part of an advisory team would be more cost-effective, and are considering mergers.
“Advisers are saying they want to make sure that they're more efficient instead of just pursuing growth for growth's sake,” said John Anderson, head of practice management for SEI Advisor Network, which recently polled 800 financial advisers.
Having benefited the past few years from stock market growth — the S&P 500 is up 30% so far in 2013 — advisers are skeptical about it's continuing and are looking at other ways to shore up their practices. Most already face shrinking profit margins due to increases in the cost of personnel, compliance and technology, Mr. Anderson said.
The Financial Planning Association recognizes advisers' keen interest in cost savings and making the best use of their time. Next year, it will issue a series of practice management reports, and the first will focus on time management, according to Valerie Porter, the FPA's director of practitioner services.
I agree advisers should be focusing on these core business practices … however, there's more to the story.
Advisers should also be looking to do more in 2014 to bring on younger clients — and that's not something that ever seems to land high on advisers' list of resolutions.
About two-thirds of advisers' clients are 50 and up, and 30% are 65 and older, according to the FPA's inaugural practice management adviser survey out last week. Surprisingly, only 45% of advisers are actively targeting new clients.
Since older clients are more likely to be drawing down on their assets instead of accumulating them, it seems to be in an adviser's best interests — I dare say it should be a business priority — to round up some clients who will be adding to the pot for another 20 years.
Some firms have been successful in recent years at hiring younger advisers to concentrate on forming a relationship with their clients' children and reaching out to younger clients. Mr. Anderson points out that a 60-year-old adviser talking with a 30-year-old prospect just won't have that similarity of experience that a 30- to 40-year-old adviser can establish with a younger individual.
In 2014, I will be looking for new ways advisers are reaching out to younger clients and how they are using technology and new business models to provide them services in a cost-effective way. Please send me any new ideas on this that you come across or put into action next year.
Meanwhile, another business issue lurks that advisers don't appear interested in addressing — succession planning.
The FPA survey found that only about a quarter of advisers have a succession plan, even though 40% of advisers plan to retire in the next 14 years.
Most advisers I spoke with are content to put off thinking about that difficult issue until 2015.