At one point or another most advisers wonder if the grass is greener—or the gross is greater—at other firms.
As a financial adviser, whether an employee or independent, at the end of the day the revenue generated is essentially the adviser's “revenue”.
The main question is how the revenue stream is reinvested. To find the answer, start with the math.
The Simple Equation
If an annual gross revenue of $1 million is generated as an employee, the firm determines how to allocate the majority of the revenue. For simplicity, assume the adviser nets $400,000-$450,000 in personal compensation. The key variable is where is the remaining $550,000-$600,000 going? Is it being reinvested in ways to help service clients and grow the adviser's practice?
Many firms wisely and judiciously re-allocate revenue into areas designed to support advisers who want to continually grow their businesses. However, some firms have advisers voicing concern over paying more in expenses but operating with considerably less sales support today than what was provided in the past.
Analyzing the financials, specifically payouts and expenses, as well as services and capabilities helps determine whether an opportunity with a different affiliation will foster growth and maximize margins.
4 Key Expenses and Re-Allocations to Consider
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Technology—Does the firm provide excellence in technology and embrace a philosophy of continual innovation?
From email to databases to operations, ideally the technology is seamless and easy to use with an integrated technology platform. Automated time-consuming processes—account opening and management, document imaging, transaction execution and account re-balancing improve efficiency and accuracy so the adviser can focus on growing.
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Compliance—Does the current affiliation provide flexible and responsive compliance?
In the ever-evolving regulatory environment, keeping on top of diverse and complex compliance requirements is a challenge. Integrating and automating compliance procedures, allows the adviser to focus on servicing current clients and prospecting for new, rather than on logistics.
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Marketing Support—Do existing marketing strategies attract fruitful relationships and differentiate the adviser in a busy marketplace?
Marketing focused intently on business growth employs good prospecting practices and a full range of expert communications. The more tools at an adviser's fingertips the better—from customizable, logo-ready brochures to letters and seminar invitations.
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Responsive Customer Service—Does a dedicated, committed customer service team provide back-office service and support?
Having enough staff in place to immediately answer any questions and provide customer service is vital to continued growth. From assistance with technology to answering questions on products, an accessible, knowledgeable customer service team enables the adviser to focus time and energy on clients.
Knowing the real cost of doing business may indicate it's time to make a change or it may reassure an adviser the grass isn't greener elsewhere.
Either way, it's important to have the numbers—and the answers—in hand.
Tom Daley, is the Founder and CEO of The Advisor Center, a comprehensive online community where financial advisers can objectively—as well as anonymously—research broker-dealers, RIA custodians, RIAs and branches.
