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Do You Want a Business or a Practice?

Many authors and publications, such as Mark Tibergien, Forbes and FP Transitions’ David Grau, have written about the difference between a practice and a business.

We’ve been privy to the inner workings of many advisory firms so you might find it helpful to see the subject from My Virtual COO’s operations point of view. Our COO top 10 list of differences has helped advisory firm owners restore their business health or more quickly realize they would rather be a practice than a business.

The truth hurts, but here it is: owners with clarity manage a more profitable, enjoyable enterprise and attract the right staff. Owners lacking clarity are losing clients and AUM, quality staff and experiencing declining profit margins.

If you need proof, reach back to Top 100 Firm listings in 2010 and 2011 and compare their ADV statistics to now. Numbers don’t lie.

COO’S Top Ten Differences Between a Business and Practice

  • Practice is the repeated exercise in or performance of an activity or skill so as to acquire or maintain proficiency in it. A business is making one’s living by engaging in commerce
  • A business has systems. A practice does not.
  • A business treats staff and outside providers as one cohesive team. A practice does not.
  • A business works to automate and eliminate work. A practice does not and may even enjoy the busy work.
  • A business continuously improves the client experience to attract more clients with less effort. A practice does not.
  • A business actively monitors sales, gross revenue and net profits. A practice does not.
  • A business owner can take a vacation and the business continues with no slow down. A practice’s owner cannot take a vacation without slowing down business activity.
  • A business has a higher valuation. A practice has a lower valuation and might not have a value at all.
  • A business calibrates the staff as the business evolves. A practice does not.
  • A business continually invests in systems and people. A practice does not.

Clarity Trumps Reality
While our list of differences may seem harsh or full of generalizations, the list comes from our years of experience working with many advisory firms. While we will never share specifics of any firm, we can assure you that we have seen the inner workings of firms that look grand, yet are floundering due to lack of clarity.

Don’t flounder. Don’t scorn those that give you a reality check. Instead, answer this one question with conviction and enjoy the success that clarity brings: what do you want—a business or practice?

Jennifer Goldman

 

Jennifer Goldman
Founder
My Virtual COO
Boston, MA

Editor’s Note: FPA members receive a $500 member discount on a My Virtual COO consulting engagement. You can find more information here

 


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Embrace Investor Decision-Making Preferences

The respondents to the 2016 Fidelity® Millionaire Outlook Study’s hit the bull’s eye for what most advisers would consider to be ideal client characteristics: entrepreneurs; $1,750,000 in median investable wealth; $125,000 in median income; 62 percent debt free. Although the study’s theme emphasized the worthy goal of making clients loyal advocates (see my Journal of Financial Planning article, “How to Deliver Empathetic Client Service and Gain Client Loyalty”), a significant strategic implication sat unattended.

When clients engage an adviser in this market, they are focused on an advisory relationship that shares decisions instead of the adviser taking the full-on discretionary lead. What’s even more threatening is that self-directed investors (i.e. do-it-yourself) represent the biggest segment.

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Advice, Yes; Control, No
There are three important conclusions to make from these segments:

  1. Advice is desired across all segments. Expertise is needed and valued, but the key issue is: where does it come from, an adviser, online or both?
  1. Investor involvement drives the go-forward market. The relationship model wherein a family would turn over their investments on a fully discretionary basis is extinct for all but an adviser’s oldest clients (i.e. the “delegators”). With much at stake, many threats, and still-fresh bad investing memories, investors want to be involved and watchful.
  1. The toughest advice competitor is no adviser. A plurality believes “I can do it better myself,” and this is difficult to argue against in rising markets when combined with many online services encouraging self-sufficiency.

Building Bridges to Joint Decision Making

If 42 percent of the market (“validators with a digital adviser” and “self-directed”) is adviser resistant and 25 percent are mostly locked into existing adviser relationships (“delegators), it seems that “validators with an adviser” is the only segment through which an advisory business can grow. Or, what does this suggest about a firm’s growth prospects if 67 percent of the market is structurally resistant to a fee on AUM model?

Market segments shift, sometimes quite dramatically. For example, the 39 percent “self-directed” may be in a very different mood for help when the next marketing downturn occurs and/or as life becomes more complicated. Or, as the “delegators” transfer wealth, the recipients of that wealth—millennials and gen Xers—will find the prospect of managing a lot of money more complex and the failure risk more daunting.

Any business seeking growth must commit to establishing as many marketing relationships as possible. Flexibility, when market shifts occur, guides business sustainability.

Planting Seeds for Long-Term Sustainability
An integrated marketing program applies the expensive resources—an adviser’s time—to prospective clients in the decision-making mode; what would right now be the “validators with an adviser” segment. Scalable marketing resources (i.e. low cost per relationship) such as website content, webinars, seminars, educational material and editorial outreach are used to seed the other segments for a later harvest.

Here is a marketing game plan to position an adviser for long-term business success.

Be an Expert Resource. Few “self-directed” investors are wealth planning and investment experts. Instead, these investors search out expertise and, upon acquiring sufficient knowledge, act upon it themselves.

Distribute educational material via the firm’s website, centers of influence, local gatherings and local publications. Tip: A well-designed and written document carries gravitas and promotes itself; consider an advice subscription service.

Price Services for Involvement. Even with a desire for self-sufficiency, there are certain topics too complicated, time consuming and/or important for surface-level learning.

Be willing to engage in short-term projects by offering a one-time consulting fee for complex planning or second opinions; at a minimum, the adviser is able to demonstrate capabilities that can turn into a referral source.

Tip: Illustrate the dollar benefits received not just the project fee in the proposal, and show the ramifications if self-directed execution were to fail (see my blog “Clients Buy Benefits not Features”).

Distribute Advice through Technology. Call it what you want, but technology-delivered advice is happening and the market wants it.

Commit to a robo solution that provides for an adviser’s advice and investment choices in portfolio design (i.e. don’t outsource investment advice, an adviser’s core differentiation). Tip: Minimize business risks by using robo offerings with low breakeven costs.

Listen to the Market and Respond
Sustainable businesses adapt to a market’s dynamics. For high net worth investors, the shared and independent decision-making models are currently the preferred engagement methods. An advisory firm able to generate revenue from these segments—even if it means doing things differently—gains long-term sustainability.

Kirk LouryKirk Loury
President
Wealth Planning Consulting Inc.
Princeton Junction, New Jersey


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There’s Work to Be Done, says Cybersecurity Report

FPA_2016Cybersecurity_Report_R7.inddA day doesn’t go by when there’s not some attempt to hack personal information, Bryan Baas, the managing director of risk oversight and control for TD Ameritrade Institutional said at press conference at FPA BE 2016.

Baas was speaking on the results of the “Is Your Data Safe? The 2016 Financial Adviser Cybersecurity Assessment” study conducted by the FPA Research and Practice Institute™ and sponsored by TD Ameritrade Institutional.

Advisers are well aware of the issue and 81 percent of those surveyed say it is a high priority for them. But despite this, less than half of the advisers surveyed don’t understand the risks and how to mitigate them.

“Cybersecurity is with us every, single day,” Dan Skiles, president of Shareholders Service Group and a member of the FPA Board of Directors said. “It is something advisers need to worry about today, tomorrow, 10 years from now.”

The report found that there are several areas where advisers can improve in terms of establishing and implementing documented policies and procedures.

When it came to governance and risk assessment, 57 percent of the 1,015 survey participants had documented policies and procedures in place; 59 percent had them in place for access rights and prevention; 58 percent had them for data loss prevention; 51 percent had them for vendor management; and 43 percent had them for incident response.

Simply becoming aware that there is work to be done is an important first step.

untitled-7041What Can Planners Do Now
It doesn’t have to be so complicated, said Brian Edelman, CEO of Financial Computer Services, Inc.

Become aware. Become aware of what components you need to be looking at. Take an inventory of your data and do some risk assessment, which is similar to what you do with your clients.

Know that if there is a breach, you are responsible for notification. It’s embarrassing and distracting to have to tell all your clients there has been a breach, but the rule is clear that you must be the one to notify the clients.

If you have plans in place, practice them once. Ensure that your team is aware of what to do in each type of event that could possibly occur.

Give your clients tips to stay safe. Oftentimes, a breach that happens to you happens because one of your clients was hacked. So give them tips to employ tools like dual-factor authentication on their Gmail accounts.

Vet your vendors. You’re trusting these third-party technology companies with your information, so ensure that they are safe themselves. Visit their offices and see how they work and ensure they’re doing all they need to do to keep you safe.

These things might be a pain, but they’re necessary steps to ensure yours and your clients safety.

“What is an inconvenience to you is most likely a roadblock to the bad guy,” Baas said.

Three upcoming whitepapers will be released by The FPA Research and Practice Institute™ and TD Ameritrade Institutional that will give advisers information on the following topics: how advisers are communicating with clients regarding cybersecurity; how advisers are training their teams on issues related to cybersecurity; and what tools and technology (and its associated costs) advisers are using to protect their business.

For the full study, visit www.onefpa.org/Cybersecurity.

AnaHeadshot

 

Ana Trujillo
Associate Editor
Journal of Financial Planning
Denver, Colo.


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The Art of the Referral

You will hear this your entire career: increasing your ability to gather referrals will make your practice more successful. Establishing referrals early in our career is even more important. But the reality is that many of us don’t put a lot of emphasis on referrals and do not learn this early in our career. How great is a warm referral from a credible source like a client or another professional?

There are two reasons why we lack successful referral methods. First, there is risk in the referral—there is risk for you and there is risk for the person making the referral. Second, it can be awkward asking for it because people feel the sales aspect of it. As great as it sounds it is simply not that easy.

How do we present a more effective referral? First, we can focus on who it is coming from. Work on developing a professional relationship with a person who can provide consistent dependable referrals that fit your perfect client profile—that may be a CPA or estate planning attorney. Identify that person and develop the relationship with the emphasis on what you provide compared to another adviser. Attention to detail, technology in your practice or an advantage you will bring to that professional. This type of relationship, and referrals from these types of professionals, are invaluable.

Take the sales feeling out of the asking for the referral. Don’t use the typical cliché “is there anyone else you know who could benefit from my service or our relationship?” This has been used hundreds of times. Put your asking for the referral into context so the client doesn’t feel it as a sales ploy but a real offer to help.

Try this: ask the client if they are the beneficiary of someone’s estate. Ask them if they understand how the estate is set up to transfer—most think they do but really don’t. Ask them if the beneficiaries are clear on the transfer of their estate. There are many things they may not be aware of but need to understand. Now instead of saying “Great, please refer me to them so I can help,” say, “Let’s bring them together so we can make sure it is crystal clear and nothing is left for interpretation.” This will bring the referral right to you in a no risk opportunity. A review of information for your client with the referral in the room to help facilitate that explanation will show the true value of your detail and help you gather more referrals. This is a unique approach that many advisers don’t take advantage of.

Building a successful referral method will take time, but if you start to perfect this early on in your career it will be promising and fruitful from the start.
scott-huff

Scott Huff
CEO of Yourefolio and an IAR of JK Investment Group
Cleveland, Ohio

 

Editor’s note: FPA members receive $200 off Yourefolio software, plus a money back guarantee. 


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Top Ten Tips to Implement CRM

Everyone would like to maximize the use of their customer relationship management (CRM) software to reduce the workload, track the progress on servicing and sales and ensure staff is productive. The best way to maximize the use of any CRM is to implement it properly from day 1. Here are our top ten recommendations to successfully implement and maximize the use of your CRM.

  1. Plan the migration. Plan out the migration of data into new CRM thoroughly with the vendor. Know which data is moving, where it is moving to (what fields), when it will move and how long you should allocate for auditing and cleaning up the data. There is nothing worse than being surprised at how long it takes to migrate, to find out data is missing months after you moved to the new CRM or that data was placed in the wrong fields.
  1. Map out integrations. List the types of software that you want to integrate with your CRM to reduce data entry. Examples of types of software could be: form filling, financial planning, email, dictation, custodian AUM data feeds, portfolio accounting system, client portal, robo, online questionnaire, document storage and more. Then ask your CRM and other software vendors if the specific types of integrations exist, how they work to save you time and what are the implementation steps.
  1. Assign only one cook. Assign one staff person to implement and maintain the CRM. Too many cooks in the kitchen causes a huge mess within a CRM. Having one project manager will control the quality and integrity of the data.
  1. Sell, sell and sell. Before implementing the CRM, someone on your team needs to champion the change and sell the benefits to the staff. Change is difficult so staff need to be shown the benefits. Utilize the vendor to sell the system. Utilize a staff person to also show and sell it (use a demo license to show it to other staff). And send a few emails listing all the benefits of the new CRM BEFORE you implement the software.
  1. Categorize. Categorize all your contacts in the old CRM before migrating to a new CRM. Any CRM will allow you to pull up a report of all contacts within a certain category; this ability makes cleanup and use of the data 10 times faster.
  1. Merge, merge, merge. Create mail merge and email templates for all the documents and emails you send out frequently. There is no need to waste time typing in names, addresses or creating the same message repeatedly, from scratch.
  1. KISS (keep it simple). When you build out your drop down lists for fields, keep the number of items to a minimum. The more choices you provide in a drop down list, the less likely your staff will take the time to choose the right item.
  1. Flows are key. Create at least two to three workflows immediately. Building custom workflows is a long process and an art, not a science. By building a few workflows immediately, such as opening a new account, you will get comfortable with building workflows quickly. This is important as workflows are the biggest time saver. They identify your bottlenecks and eliminate wasted time spent on communicating or tracking a repeatable set of tasks.
  1. Limbo land. There is a time period between using the old and new CRM—we call this limbo land. You will want to communicate a policy for where to document contact changes, new additions, task changes, new tasks and so forth while in limbo land. Any change or new item should not be placed in the old CRM after the data is backed up and sent to the new CRM. And you do NOT want staff adding changes and new items to the new CRM until the project manager has audited the data and confirmed it doesn’t need to erased and migrated again.
  1. Sell, sell and sell. After implementing the CRM, provide best practices training every few weeks for at least two months to continue selling the benefits of the CRM. Allow the staff to share tips they have learned and have the project manager or champion train everyone on the proper use and shortcuts within the CRM.

Planning the implementation of the new CRM, or any new software, is the hard work. If the planning is done properly, the implementation and adoption is easier and produces a greater ROI and high adoption.

Jennifer Goldman

 

Jennifer Goldman
Founder
My Virtual COO
Boston, MA

Editor’s Note: FPA members receive a $500 member discount on a My Virtual COO consulting engagement. You can find more information here

 


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What’s Your Referral Conversion Rate?

If you are like most successful advisers, most of your new asset growth comes from referrals, either from existing clients or from your professional network. If you have been building a book of business for more than five years, chances are that a significant portion of your new growth will come from satisfied clients and centers of influence.

What is a Referral Conversion Rate, and Why Does it Matter?
In most cases you will only know of the referrals that actually reach out to you. The reality is that some people are often “on the fence” when it comes to connecting with an adviser to whom they’ve been referred, and may not do it at all. So if you’ve been contacted by ten referrals in the past month, it’s possible that there were several more that never followed up.

Why Are You Missing Out?
According to research conducted by Deloitte Consulting, 73 percent of US respondents report that they conduct online research before making offline decisions. Furthermore, in a report published by PwC, one in three US consumers are influenced by social media in their purchases. At GuideVine, an online platform that provides education about financial planning topics and matches consumers with right-fit financial advisers, we have collected data on thousands of consumers who are looking for financial advisers, and our experience is consistent with much of the industry research: consumers are doing their homework before reaching out to advisers. When it comes to high-end professional services, consumers tend to frequent multiple online sources to form a preliminary opinion as to whether it makes sense to connect with, in this case, the financial adviser.Khalid Usmani 3

Typically, someone looking for an adviser will leverage his personal network for references, maybe receiving two or more names.  The next step is probably a simple Google search to learn more. Based on the results, it’s likely the individual would visit the adviser’s website, view his LinkedIn profile, find press mentions and view any other sites/platforms (e.g., Twitter, Facebook) where the adviser and his firm have a presence.

How can You Ensure Your Referrals Become Prospects?
The key to ensuring that you are well positioned is to have a strong, comprehensive digital footprint that not only informs, but also elicits actions from referrals. Perhaps you have an updated website, but does it have clear calls to action? Is your LinkedIn profile up-to-date? Maybe you created it three years ago – have you checked recently to be sure that the information is still accurate and includes a professional  (current) profile picture? Did you create a verified Google listing for your office so that your location can be easily found using Google Maps? Does the verbiage you use across multiple digital platforms reinforce your brand and your firm’s core principles? While there are a myriad of steps you can take when it comes to building your digital footprint, it is important to get the basics right, so that the referrals that are “on the fence” feel comfortable engaging with you.

Investing in Digital Presence Leads to Growth
According to a recent study conducted by American Century Investments, 43 percent of advisers that have used new digital marketing methods (e.g., social media) have been able to attribute a direct return on investment. Not only are advisers benefiting from net new client assets, but many have reported increased engagement and share of wallet from existing clients as they felt more connected and engaged with the adviser through the content shared via new digital marketing initiatives.

Khalid Usmani

What’s After Mastering the Basics?
One word: content. Having a website or a LinkedIn profile with a basic description about your firm is table stakes. In order to differentiate yourself from the pack, you and your firm need to thoughtfully review your content strategy to drive engagement (learn more about content strategy from this video). One powerful way to create engaging content is to have a compelling video introduction about yourself and the services you can offer prospective clients.

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Videos are proven to be extremely effective in communicating information and spurring action. Visuals are processed 60,000 times faster in the brain than text, according to the 3M Corporation. Forty-six percent of users take some sort of action after viewing an ad, according to the Online Publishers Association. According to Forester Research, it is 50 times easier to achieve a page one ranking on Google with a video.  Furthermore, videos can be easily shared across multiple mediums including websites, LinkedIn profiles, email marketing campaigns and more.

Over the past several years, my team and I have worked with hundreds of advisers on strengthening their digital footprint and have developed thousands of videos that have been viewed millions of times. In order to ensure your firm is on a path of consistent, sustainable growth, you must diversify your marketing approach and improve your existing practices to align with new technology and consumer preferences. Since referrals may be your largest driver of growth, it is essential that you protect and grow this asset.


Khalid Usmani Headshot

Khalid Usmani
Head of Advisor Success
GuideVine
New York, N.Y.


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Put Me In, Coach: How to Improve Like An Athlete

Being a financial adviser is a lot like being an athlete. If you have ever played on a team you can probably relate to the feeling of anticipation while waiting to play and all you wanted to say was, “Put me in, coach!” Once you got in the game it was up to you to make the most of the moment and shine.

One example of using this analogy is Amy, a ten-year veteran adviser who wanted to succeed and she needed my help to do it. As her business coach, I helped her determine what her goals were and what actions it would take to work smarter rather than harder. Next, we practiced by role-playing so she could get back to actually prospecting. However, it didn’t take long for her to realize that she was not applying what she had learned because her fears where getting in her way and thus she would rather sit on the sidelines than risk losing the game.

Let’s look at the steps I utilized with Amy to create her amazing comeback:

Step 1: Be All-In
What Amy was experiencing is very common for veteran and rookie advisers alike. It’s easy to want to win but it’s not always easy to risk the possibility of defeat. Many advisers choose not to even try. In other words, it’s like asking the coach to put you into the game but you choosing not to be all-in and not playing the best you could once you were in because you didn’t want to make a mistake and contribute to a loss.

The first step with Amy was to get her to commit to taking action and being dedicated to being all-in when it came to her own success. So, I had her make a list of reasons why she wanted to get to the next level and what would happen in one, three, five and even ten years from now if she continued not prospecting. After realizing the pleasure she would have by being a top producer and the pain that she could have by being a low level one, she committed to getting back to prospecting!

Step 2: Think on Your Feet
All athletes know that sometimes plays don’t go as planned. You may practice the play over-and-over again but on game day anything can happen. So too is practicing for an appointment and realizing the conversation isn’t going in the direction that you want it to. That’s why you must be able to think on your feet.

Amy realized that setting appointments with new prospects was getting easier but from time to time she was getting caught off guard with specific objections. I assured her that this is natural and all we needed to do was to increase the tools, techniques, strategies and solutions to handle any objection that came her way. It’s not about memorizing what to say but understanding the formula of how to say it. Once we did this, she could easily adapt to any conversation path.

Step 3: Assess Your Actions and Results
All great coaches know that the best way to take their players to a higher level is to help them assess their actions and results. Most teams watch game films so they can duplicate their successes and learn from their errors.

Within weeks, Amy was excited to tell me that her pipeline was full. She had eight appointments set for the week and had already turned a few prospects into clients since our last session.

Wanting to Win
Amy knew that just getting into the game wasn’t enough. Instead, she had to focus on her desire to win. If you take a page out her playbook you too can create this level of success.

If this blog resonates with you and you would like to have a free consultation with Dan Finley, email Melissa Denham director of client servicing for Advisor Solutions at melissa@advisorsolutionsinc.com.

Dan FinleyDaniel C. Finley
President
Advisor Solutions
St. Paul, Minn.