Formal business plans portend adviser AUM growth, survey shows

Financial advisers who create and follow a written business plan are more likely to boost assets under management faster than those who do not, a new survey shows. Creating a documented business plan, however, has proved an elusive task for most financial planners. About 28% of advisers said they have a written strategic plan, according to a survey by the Financial Planning Association, which released a report on the results Monday. One-third of advisers said they have defined growth goals, but not a formal plan for their business. About a quarter of advisers said they exceeded their growth goals last year and 35% said they fell short. Of the advisers who exceeded their goals last year, 48% had a written business plan. About 18% of those who failed to meet their growth goals last year said they had a documented strategic plan, the survey of 434 financial advisers found. The advisers answered questions online in September and October 2014. Among advisers who are having the most success growing their business, 38% have a written formal business plan, the study found. About 21% of the advisers who have been most challenged to grow their firms had a written business strategy. “It is those advisers who think and plan strategically about their businesses who are succeeding in adding new clients and assets,” said Lauren Schadle, FPA's chief executive. Overall growth rates in assets under management varied widely for advisers last year. About 34% of advisers built their assets by less than 9%, 40% of advisers increased between 10% and 19% and 26% of advisers saw growth of more than 20%, according to the study. The study also found that advisory firms that grew the most last year were more likely to report that their team could communicate the firm's value proposition very effectively “Business planning, based on the business' value proposition, is what should be driving the growth tactics employed by advisers,” said Valerie Chaille, director of the FPA Research and Practice Institute. “It is no surprise that the advisers who are failing to plan are not reaching their desired goals.” Whether an adviser has an elevator pitch was another indicator of growth, according to the report. (More: See IN feature on top elevator pitches.) Three tactics associated with successful growth were working with centers of influence to generate professional referrals, using client events to add value for clients and to prospect for new ones, and building a personal brand using thought leadership and social media, the FPA report said. Among the advisers who were exceeding their growth goals, they were more likely than the other advisers to have a dedicated business development manager, according to the survey. The fastest-growing advisers also were more likely to have a defined niche market. (More: Ways to refine a niche) Julie Littlechild, founder of Advisor Impact, said there are probably two overriding reasons that advisers with written business plans succeed more often. Research has shown that simply by articulating and writing down a goal, one has a greater likelihood of achieving it, she said. The second reason has more to do with what an adviser does with his or her day. “For advisers with a plan, that plan drives how they spend their days; they work towards reaching for those goals,” she said. “Absent a plan, how you spend your time is what ultimately drives where you get to.” Ms. Littlechild, who collaborated on the FPA research, said it was interesting that even though only about 13% of advisers have used thought leadership as a way to attract new client assets, about one-third of advisers said they expect it will be critical or somewhat important to their growth strategy in the next five years.