Assessing your business is a mandatory analysis you must make to achieve success. The assessment needs to address where you are today, where you want to be at some point in the not-too-distant future (perhaps three years) and the gaps between the two. From the gaps you must develop strategies, tactics and action plans to get to your desired state. Planning your future with specific actions is imperative.
You need to examine the practice you have built over the years from at least six vantage points:
Step 1: Processes
From a process perspective, six common and core client-facing processes can and will enhance your effectiveness and efficiency:
• The intake process
• The financial planning process
• The risk management process
• The investment planning and management process
• The client service process
• The client planning and review process
Step 2: Organization
From an organization perspective, you need a structure for:
• Roles and responsibilities
• Having the right skills in the right places, especially given the limited amount of administrative support available to many financial advisers
• Having certifications appropriate for your marketplace
• Knowing your team's weaknesses as well as its strengths and skills including business acumen, business development capabilities, product and services knowledge, technology and presentation skills, time management skills, business tracking capabilities and business planning skills, among many areas
Step 3: Technology
From a technology perspective, we see a need primarily for a:
• CRM tool
• Financial planning tool
• An investment planning and management tool, especially for discretionary accounts
• Office services such as Word, Excel and PowerPoint
• Specialized tools where appropriate, such as an automated investment policy statement generator
• Information-based tools, either internal or external, such as Forefield's Foremost Advisor
Step 4: Financials
From a financial perspective, needs change based on your business — whether you're independent or work at a wirehouse — and your payout. Leaving the basic needs for offices and overhead, we see a need for a marketing budget in a number of areas including client marketing expenses and business marketing expenses, whether for collateral material, education, consulting services, etc. We often find the latter expenses unbudgeted.
Step 5: Competition
As competition is such a huge area, we cannot possibly do it justice in this blog post. Suffice it to say that competition is numerous, including RIAs, wirehouses, and, of course, DIY-ers. The latter are likely the most challenging. William Bernstein says, “I expect no more than 10% of the population passes muster on each of four key points … to succeed you need to string all four together. Thus, in a state of nature, just 0.01% of investors have what it takes.” The fact that you have the interests, facilities, knowledge and discipline — and time — can be a differentiating factor. Note that Dalbar studies all show DIY-ers are typically poor performers relative to indexes.
Step 6: Clients
The last assessment area is the client, your book of business. Let's have a look:
• Who is really important to your business and why? Do they give high-value referrals? Are they on a fantastic business track? Are they a potential center of influence?
• Who is rewarding your efforts both from a revenue and ROA perspective as well as a workload perspective?
• What is the quality and value of your relationships? Who likes you and whom do you like? Who is a referral source?
• What acquisition methods work/have worked for you? If it worked before, keep doing it.
• How well do you know or not know the client? How can you leverage/improve relationships? Can you leverage the client's profession, place of business, hobbies and interests, organizations, etc.?
Assessing your business regularly from these six vantage points will help you to stay on track for success.
In addition to the assessment, don't forget to hold yourself accountable to the outcome and the steps needed to improve. Accountability is the acknowledgment and assumption of responsibility for actions. It promotes sustainable development. As you are responsible for actions, establish a detailed set of accountability action metrics to enable you to determine if you are taking the correct actions or need to make course corrections over time.
Eric Sheikowitz and Michael Silver are the founders and senior managing partners at Focus Partners, which provides advisers and financial services firms with practice management tools and resources.
David Leo, strategic partner and senior coach at Focus Partners, contributed to this article.