Practice Management

3 missteps that could stunt financial advisers' growth

In some cases, thoughtfulness is more important than quick actions when you're looking to expand

May 1, 2017 @ 12:47 pm

By Joni Youngwirth

Growth ambitions can easily cloud smart judgment calls. Sometimes advisers forget to look before they leap when they want to land a new deal or venture. And what happens next can result in wasted expenditures, hidden costs and ineffective results. Let's look deeper at a few mistakes firms make that could keep them from growing.

SKIPPING OUT ON A MARKETING OPPORTUNITY BECAUSE OF FEAR

Going outside our comfort zone can be an essential element for growth. Yet sometimes if we stretch ourselves beyond the limit of what feels natural, we risk coming across as inauthentic and finding the effort wasn't worth it. For example, say an adviser is quite introverted in group settings. But he goes to a conference and learns about a marketing strategy that worked beautifully for another adviser. She's been delivering a value-added workshop for clients on the softer side (i.e., non-financial) of retirement planning. She has received great feedback, and these workshops have connected her with client referrals.

Our introverted adviser gets excited about the idea of carrying out a similar strategy at his firm. But how could he possibly pull it off? If only he was an exceptional speaker who loved working a crowd and could devote time to creating and delivering a top-notch presentation. But remember, our adviser is an introvert, so investing time and effort into creating content on a new topic and practicing his delivery to make it world-class might not be an effective approach for him.

Instead of giving up, though, he could try an entirely different tactic. If you have a topic you want to share with your clients on a broad scale but you're shying away from being the messenger, consider working with a third party to deliver the message, while you play the role of information sponsor.

(More: 10 steps to establishing a social media presence)

TAKING ON ANYONE AS NEW CLIENTS

When new prospects land on your doorstep, it can be tempting to add them to your practice without fully assessing whether they are a good fit. You may rationalize that you didn't have to work to get them — they want your help — and that makes you feel good. Plus, it may be easier to take them on as opposed to interviewing them, discovering the lack of fit, and then potentially having to sever the relationship. This is especially true if they were referred by a client.

But what if the prospect:

• Has worked her way through five advisers and sued two of them?

• Wants only to pick your brain, not take your advice?

• Has chronically increasing debt eating away at the little investment she has?

• Has a serious gambling problem?

• Is simply not pleasant to work with?

You can't ferret out problematic prospects 100% of the time. But for sure, you can't ferret them out at all if you don't go through the discovery process. Taking on these types of clients can be a long-term drain on the time and energy of both adviser and staff, so be sure to do your due diligence as you would for any investment.

(More: 10 signs you need to fire your client)

THINKING BUYING ANOTHER PRACTICE WILL SOLVE EVERYTHING

Buying a practice is a great growth strategy if you can find a great practice to acquire. It's often viewed as an easy way to grow — and there is something of an industry-wide buying frenzy going on at the moment.

But buyers should tread carefully. In haste, many advisers overlook what in retrospect are almost obvious telltale signs of a mistake. If you had been running a relaxed lifestyle practice, how can you transition to a practice that has doubled in size overnight? The ROI (depending on the deal) of the purchase may not show up for a couple of years. You may have to handle dramatically different products and fee structures as well as a vastly different expectations from newly acquired clients.

Growth is always a good thing, in my opinion. I endorse the reality that if you're not growing you're dying. But jumping straight into the deep end of a growth strategy without thinking things through could actually do your firm more harm than good.

Joni Youngwirth is managing principal of practice management at Commonwealth Financial Network.

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