5 Ways Advisors Can Spring into Action and Grow



Waiting for the school bus is one of my favorite things. The boys and I typically find some game to play, story to tell, or ball to throw until we hear the rumbling of the bus straining to come up the hill towards our house. Today, after they jumped on the bus, I stopped to enjoy the blooming flowers and the swaths of new grass. Spring is definitely here – everything is growing.

A lot of the posts on this blog are about growth – the most popular ones are about referrals or creating a value proposition. We spend a lot of time talking about differentiating your services for clients and prospects in order to grow. But to me, there are two types of growth – top line and bottom line – and an advisor has to pay attention to both.

Stuck on top?
Top-line growth is easy to measure. Typically, when I hear from advisors about growth, it is all about the top line. They discuss things like new clients or additional assets under management. Some will try to differentiate by telling me about full planning clients vs. limited planning and investment focused clients, but for the most part, the conversation is about adding new business to their firm. Rarely do I hear about the bottom line, which is just as, if not more, important that the top.  Case in point: the IN Research Performance Study of Advisory Firms for 2015 showed that the median operating margins for top performing firms was 41.3%, versus only 16.6% for all other firms in the study. I would bet that while those top performing firms were growing their top lines, they were focused on exactly what new business would do to their bottom line, as well. No one maintains over 40% margins without having put some thought into it and what it can mean to a business – especially in a volatile market.

For some advisor firms, margins are an afterthought – they think, “I can make it up with growth or volume.” That concept works great in an up market like we have had over the last few years, but the concept takes a hit as soon as we see a correction or (worse) another recession. Back in 2008 and 2009 when markets were reeling, I remember having discussions with firms focused on client communication, hand holding and riding out the storm – and firms that were wondering how they were going to make payroll. Guess which ones maintained the higher margins? Unfortunately, over the last few years, it has been easy to get complacent, add expenses and add both unprofitable accounts and services.

Top to bottom
I can’t tell you when the markets will correct. I don’t do market predictions, but I can tell you that it will, and when it does, you won’t want to be focused on your financial statements, you want to be focused on your clients. So, do it now – look at your books, look at your business, look at your operating model.
  1. Know the number and set the goal. Do you know your operating margin? While many advisors do, it amazes me how many don’t – it’s one of the most important metrics out there.
  2. Look at fees vs. commissions. The Pricemetrix study showed the average advisor’s book of business was only 35% fee based. Is there an opportunity to increase revenue by converting to a more fee based (or advice based) business model?
  3. Look at efficiencies (or lack thereof) in your office. Clutter kills productivity and efficiency – and I don’t mean paper or a messy desk. I mean clutter in your business. Multiple custodians or direct-to-fund company relationships, different paperwork, and a lack of workflows can create more work and thus requires more people – probably your biggest expense. How clutter free can you get your office? How can you get your staff to do only revenue- generating activities?
  4. Know your client. A focused client base (or niche business) by nature is going to be more efficient and likely have higher margins. The more focused you are on a particular type of client, the more you know about the needs and concerns of that client. Don’t have a focus yet? Create a persona to get you started.
  5. Get out the accounting visor and reading glasses. The best advice is to look at your books. I mean really look at them. Are there costs that can be reduced? Are there expenses that aren’t really needed? Do people need to be reassigned? Are there opportunities to maximize revenue? Advisors who are focused on the margins will be able to find ways to increase those margins.
Why do it now? Because now is always the best time. Look at your business when things are relatively calm and clients are relatively happy – you won’t have the time when things aren’t so good. Spring is all about growth – but winter is (always) coming. Make sense to be prepared, right?

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