Growth Is Good, Efficiency Is Essential for Advisors Who Want To Thrive

By Cynthia Stephens, VP of Marketing, ByAllAccounts on Tuesday, June 26th, 2012

Everyone in the industry knows they need to bring in new assets and new accounts, but it takes more than bolted-on AUM to take a viable business to the next level. We asked thousands of financial advisors for the keys to success and you told us: efficiency is king.

According to ByAllAccounts data, firms of all sizes—whether they’re under $25 million in AUM or $1 billion or more—cite the need to grow AUM and strengthen client acquisition as their most important priorities.

No surprises there. But what’s striking is what’s cited next on the wish list: maximum operational efficiency and on the other side of the coin, an end to the headaches of manual data entry.

Our data tells us that on average, the bigger the firm, the greater the perceived need for operational efficiency.

Firms with $700 million in AUM stress operational efficiency more than firms with $300 million in AUM, who in turn rank it higher than firms with $100 million.

This correlation holds true for firms of all sizes up to $1 billion at AUM, at which point the importance of operational efficiency seems to level off.

Three conclusions we can draw from this data set:

1. Growth requires scalability, and all too often, that’s lacking.

Business growth brings its own unique set of challenges. With manual data entry, for example, you can get by on a smaller scale—but once volume increases, you’re saddled with an inefficient and potentially error-prone process that is not inherently scalable.

So many human hours required to enter data, but so little time to actually do it!

Thus, the bigger a firm becomes, the more urgently its advisors cry out for scalable solutions that meet operational requirements for timely, error-free data reconciliation, performance reporting and the full range of back-office functions. (For additional information on how to overcome the limitations of manual data entry, see our Operational Efficiency eBook.)

2. As firms grow, their principals confront hard questions about efficiency, productivity and accuracy.

The stated need for operational efficiency suggests that advisors are keenly aware of the limitations of manual data entry—and are asking the tough questions that go hand in hand with it:

What’s my time worth? And the time of my colleagues and staff? How many hours do I really want anyone at our firm spending on inefficient operations when, instead, they could be servicing our valued clients? What are the costs of incorrect or delayed information being given to these clients? And how does that impact our ability to meet clients’ expectations for the excellent client service they deserve?

Perhaps these questions sound familiar. If so, you’re dealing head-on with issues of operational efficiency, even if you haven’t formally put it at the top of your list of pertinent issues that require attention.

3. Pent-up demand for efficiency-enhancing solutions is finally being answered

For the past several years, with uncertain financial markets, some firms have held off on investing in the people and technology that can help them improve operational efficiency.

Now, with growth topping the list of business needs, this trend appears to be reversing as more and more firms gear up and re-commit themselves to building their human and technological infrastructures.

At ByAllAccounts, this has created even greater demand for our account aggregation solutions. Advisory firms rely on us to electronically aggregate billions of dollars of account balance, holding and transactional information from thousands of financial institutions on a daily basis.

Each of these advisory firms receives a single, consistent feed to their back office operation and gains easy access to hard-to-reach accounts like 401(k)s, 529s and variable annuities.

This enables them to efficiently provide clients with a complete investment picture—and provide holistic investment advice—while eliminating the need for making point-to-point connections with multiple custodians and going through the laborious process of manual data entry.

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