From the June 2006 issue of Investment Advisor • Subscribe!

June 1, 2006

The Vision Thing

An advisor's vision statement is like an IPS for clients

Many advisors have a vision for their business, but that vision often gets blurred by the cataracts of competing priorities and short-term fixes. A common distraction is the temptation to over-diversify when one's approach or market or branding begins to sour. While this may work at a Fortune 500 company, most small businesses (such as advisory practices) do not have sufficient resources to open another front successfully--it's like trying to diversify a $1,000 investment.

Diversification is at its core a defensive strategy: We use it to manage risk. Long term, however, you can't grow by hedging your bets. Eventually, you have to commit to an offensive strategy.

Enter the vision statement. It differs from a mission statement in that it's designed solely for internal use, serving as a framework for making critical decisions about your business. Conversely, a mission statement is more often a concise phrase used in marketing materials. It may be an excerpt from the vision statement, or a rallying cry, but by itself a mission statement is not an adequate guide to building your business. That's because strategy encompasses more than marketing considerations; it includes human capital, technology, operations, financial management, delivery processes, client service, and other management disciplines.

A vision statement should be a relatively lengthy, well-written document that identifies your priorities and expresses where you want the business to be long-term. It provides a framework to both management and staff for whom you serve, what you provide, what culture you are trying to create, what your values are, and what initiatives you will focus on. It should guide your priorities when allocating your time, money, management, and energy. The vision statement is a filter for every key decision in your business, including what type of staff to add, when to merge or acquire another firm, which clients to take, how much to invest in which technology, and even in selecting the right custodian or broker/dealer.

By example, take a look at the sample statement on the next page. These advisors begin their vision with what they want to be known for--superior client service--and define what that phrase means. They support this statement with the type of organization they wish to create, the optimal type of client they wish to serve, and the geographic region in which they want to focus.

You don't necessarily need to follow this sequence since every firm's strategy depends on its own core capabilities, market, competition, and definition of success. In our work with advisors, we find there are nine leading strategic drivers (see my February 2006 column). When created properly, the vision statement should crystallize what you consider important and what you envision your business becoming long-term. It should be clear enough to have practical application in how you manage your business.

Using the sample statement, it's clear that the principals know what they should and shouldn't do to achieve their vision:

Priority 1: Invest in creating a superior client service experience and develop metrics and a quality control process to ensure this occurs.

Priority 2: Build a deep organizational structure that is designed to support this strategy and under which teamwork and cooperation is promoted.

Priority 3: Create a brand so that the practice is recognized as an expert in dealing with business owner clients.

Priority 4: Achieve and maintain a position of being the leading wealth manager to business owners in northeastern Ohio.

Applying the Vision

So how would they apply the statement to the management of their business? Let's say that they are approached by an advisor at another firm who is a huge rainmaker but also has an abrasive personality. He has always excelled at bringing in assets to be managed but has also suffered from high client turnover. He has eschewed financial planning as an unprofitable service offering. But he sure can sell. Should they hire this person? Will he reinforce the goal of creating a superior client service experience? Would he be disposed to embrace the philosophy and positioning of this firm, and would he contribute to the culture they are trying to create?

Or let's say that one of their large clients is on the board of a public company and urges them to take on the management of that firm's retirement plan. Should they pursue it? Would they have the right technology, processes, and people in place to handle such a divergence from their core business? Could it be priced to ensure their margins remain intact? Is it consistent with their providing-wealth-management-to-business-owners offering?

If they applied their vision statement, the answer would be obvious because it clearly states that they want to focus on the closely-held business owner market. A conscious pursuit of a different type of client with a product/service offering that isn't core to their strategy to build a superior financial planning process would be a drain and a dilution of limited resources.

These days, advisory firms often become distracted by offers to consolidate. If a firm in Indianapolis approached the leaders of this practice to merge, should they even consider it? The question is whether such a decision moves them closer to their vision or detracts from it. Clearly, such a decision would take them off their game and out of their market. It's an easy decision that shouldn't take more than a minute to decide because the leaders of this practice had already decided that their vision was to become dominant in northeastern Ohio, not anywhere else.

I can just hear the opportunists arguing: "Why not look at that other firm? It could be a great business in a great market?" All true, but it's not a part of this firm's strategy. Any effort to go outside its strategic framework would take resources away from the firm's primary vision.

As consultants, we recognize that a big shadow often falls between an idea and reality. It's difficult for people who are so focused on getting and serving clients to take the time to manage their practice. Because doing so can be overwhelming, people often postpone the actions required to be effective at it. This is the value of a well-crafted vision statement: it helps you to articulate where you want to be long term and how you intend to achieve it, ahead of time, so when issues come up, solutions can be quickly reached.

We recommend the vision statement be given to every person in the firm and placed on everybody's computer. It should be the one document that everyone is required to bring to every meeting. So when a new idea is floated, each participant in this meeting can look at the vision statement and ask: Will the idea move us closer to achieving our vision or will it distract us? It will also force everybody to evaluate what progress the business is making toward achieving their dream.

Mark Tibergien, a principal in Moss Adams LLP, is chairman of the firm's Securities & Insurance niche. A nationally-known consultant to financial advisors, he is the co-author of Practice Made Perfect, available through the IA Bookstore. E-mail him at mark.tibergien@mossadams.com.

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