by Joni Youngwirth
Imagine a life where all you do is conduct meetings with clients. You savor the sweet fulfillment of applying your time and talent to helping them become financially positioned to live their dreams.
For many, being a financial adviser completely satisfies what they want from their careers. But for others, wanting to be in a position to call their own shots and control their own destiny also matters. These advisers are the ones who become independent business owners.
With the choice to become independent come the responsibilities of managing a practice, including leading a thriving organization, managing staff, creating efficiencies, marketing the firm, ensuring revenue growth and protecting the entity. All of this needs to be done while providing financial guidance to clients.
Shifting to Practice Management Control
Advisers who choose to take the independent route are sometimes referred to as "accidental entrepreneurs." For many of them, the thought of hiring staff, of enhancing efficiency, or of assuming the other responsibilities associated with practice management is more of a necessary evil than a calling.
Can such an adviser ever "be done" with practice management? Can he or she organize the business so well that it can run on autopilot? That sounds extreme. But by moving from reactive to proactive practice management, you can go a long way to shift from practice management chaos to practice management control.
Consider a few scenarios that indicate practice management chaos. Do any of these ring a bell?
- Your right-hand staff person suddenly gives notice. She is the only one who knows how operations work. There are no documented procedures.
- A client calls to say he is moving his money. You discover that he feels he should hear from you in some way between annual review meetings. He tells you that his neighbor hears from her adviser every month.
- You attend a conference and network with numerous advisers. In sharing information about your firm, you discover that most advisers have converted to an AUM fee-based platform and many charge for financial planning. You haven't thought about your fee structure in a long time. You had no idea you were so different. Now you feel behind.
In the first case, the firm needs documented processes. In the second, it needs to adopt a systematic approach to proactively touching clients between review meetings. And in the third, the adviser hasn't even considered strategic direction for at least five years. After all, he was busy seeing clients!
Using a Practice Management Manual and Calendar
A proactive approach to practice management can be boiled down to using a practice management manual to document processes and procedures, and a practice management calendar to schedule follow-through on these activities. Here are a few tips for getting started.
Typically, a practice management manual's table of contents would include the items listed in the sidebar below. No doubt others could be added, but think twice before stuffing a lot of extraneous information into the manual. It's better to include fewer documents that are up to date and actively used than to store documents describing ideas that will never be implemented.
Each document in the manual should begin with the phrase, "Last reviewed (date)." Each item must be reviewed and updated annually. Furthermore, everything in the manual should be kept in one file on the computer with subfolders for each section. You will also want to maintain a hard copy of the manual for easy reference.
The practice management calendar provides a structure for how the documents in the manual will be used by the adviser and the firm throughout the year. Time frames for reviewing and updating the documents may be blocked into the calendar, and the importance of following through on these activities should be placed on par in terms of importance with activities associated with meeting clients. That way, the manual is actively used, perpetuates itself and doesn't become outdated.
Here is an example of a hypothetical schedule for actions associated with proactive practice management.
- In the fourth quarter of the fiscal year, several items in the practice management manual are updated for the following year. These items include the business plan, marketing calendar and production goals.
- Other documents such as human resources, procedures and risk management documents should be reviewed annually to ensure they are up to date. The review process for each document can be scheduled throughout the year.
- Other items within the table of contents may have their own schedules. For example, written performance reviews for employees may be given twice a year, staff meetings may be held weekly and monthly activities may include reviewing progress on SMART business goals and marketing activities. Other monthly activities include reviewing progress on the firm's financials, including revenue, expenses and profit-and-loss data.
Imagine using the tools described above to start the year confident that you are proactively managing your business.
The Importance of Managing the Business
For most advisers who wear the two hats of financial adviser and business owner, when push comes to shove, one role consistently takes second place-managing the business. Yet over and over we hear that our industry is changing and that those who survive won't be the advisers who shine only at providing professional services to clients. With more mergers taking place and more multi-adviser firms evolving into bona fide enterprises, managing the business is considered more critical.
How would you measure your progress at managing your business? The sample practice management manual table of contents lists 24 items. How many does your business have in place? And who will do the work?
Here are some "what-if" scenarios for considering who should assume or oversee the practice management activities.
If you are a solo practitioner, your organization depends on your production. Let's say the firm generates $300,000 annually. In all likelihood, you would do both, that is, serve as practitioner and CEO/COO.
If you are a million-dollar producer who makes rain with more passion and success than you have for managing the business, perhaps it is time to hire a high-level vice president of operations to take on most of the practice management responsibilities.
If you are a multi-adviser firm operating as a cooperative or collective, you can either complete the practice management activities yourself or hire someone to take them on, depending on your production and passion for how you want to spend your time.
If you are an enterprise that generates millions in revenue with several advisers contributing equally to the top line, operate with a combined P&L statement, have standardized procedures so everyone does things in relatively the same way and are in the growth stage of your business's life cycle, then you may need the managing partner-or at least a high-level vice president-to fulfill the practice management responsibilities.
Ask yourself: if I didn't use my time for practice management and if someone else fulfilled those responsibilities, how would it affect my firm's revenue? Would revenue go up because someone else is doing the hiring, marketing and reviewing while I close the new business?
If the answer to the second question is yes, then delegate the practice management activities. If the answer is no, then it's more a question of lifestyle. If you don't want to fulfill the practice management responsibilities, are you willing to take home less profit because you hire a person to fulfill this role?
A proactive approach to practice management requires a practice management manual and a calendar of proactive activities. But, most important, it requires a commitment from the adviser to attend to the business of behaving like a business.
Joni Youngwirth is the managing principal of practice management at Commonwealth Financial Network and a frequent contributor to Practice Management Solutions magazine. Read her monthly blog posts at PracticeManagementBlog.FPAnet.org.
Sidebar
Your Practice Management Manual
Here are items to consider including in your practice management manual:
I. Leadership of a thriving entity
- Annual business plan
- Budget and P&L
- Fee schedule
II. Human resources
- Job descriptions for everyone,including the CEO
- Performance review template
- Employee handbook
- Organization chart
- Agenda for weekly staff meetings
III. Operational efficiency (include a checklist for at least the following)
- Client development process
- Preparing for a meeting
- Conducting a review meeting
- Following up after a review meeting
- Conducting service calls between meetings, specifically for addressing client requests for cash
- Process for determining asset allocation
- Client classification criteria
- Tiered service matrix outlining touches for each classification
IV. Marketing
- Realistic statements regarding the ideal targeted client, value proposition and positioning
- Calendar of projected marketing tactics
- Production enhancement
- Realistic revenue, AUM and new-client goals for the next year
- Stretch revenue, AUM and new-client goals for the next year
- System to track advisers' revenue-generating activity
V. Risk management
- Disaster recovery plan
- Succession plan for business owner(s)
-Joni Youngwirth
