From the January 2009 issue of Investment Advisor • Subscribe!

January 1, 2009

Got Game?

Joni Youngwirth of Commonwealth Financial describes how a simple, four-page plan can keep you in the game regardless of the economic and financial weather

John Augustine of Augustine Financial in Brookfield, Wisconsin, has been in the industry for 10 years. He is deeply passionate about helping his clients grow, enjoy, and, as they see fit, share their wealth. Augustine loves to educate. His dream was--and is--to offer a wide menu of educational sessions to his clients and his community. A year ago, John relocated his office, moving into a space that has a "great room"--one large enough to seat 20 to 30 people easily and an ideal spot for holding client events.

His new office has served him especially well during this period of market turbulence and uncertainty. Last October, for example, Augustine held six "fireside chats," which included market updates, in his great room. All attendees came through existing clients who had invited friends to the events. As a direct result of these events, Augustine signed up nine new clients. Five of these new clients each had more than $1 million in assets to manage; the other four each brought in up to $750,000 in AUM.

Augustine's success is not a matter of luck. He knows precisely what he is absolutely passionate about. And he has built that passion into his game plan. When it came time for a physical change of office, his passion (and his plan) served him well. He selected an office that would: 1) give him the space he needed to turn his dream of educating the community about financial matters into reality; and 2) aid him in retaining business as he worked to secure new assets to manage.

Isn't it nice to know that during a time when the Dow is going up and down 300 points a day, there are success stories among hard-working advisors? Moreover, we might as well be prepared for an economic shift that could be with us for a long time. For small businesses like financial advisory practices, the impact of the economic downturn is keenly felt. Current economic conditions require advisors/business owners to plan like John and to rise to the challenge of leadership.

One of the most important business management habits at any time is the creation of a plan. But the phrase "business plan" may conjure up visions of a big, fat document that takes forever to write. Say the words "game plan," however, and a document right-sized and more appropriate for small business comes to mind. In fact, an effective plan can be drawn up in one to four pages.

After months of unrest and volatility, creating a game plan may be just the fresh start you need to move forward. In some respects, advisors are already brilliant at this. After all, don't you create financial plans and portfolios for clients so they can weather the ups and downs of the market?

Here's how to write a four-page game plan that will serve you well no matter how well--or poorly--the markets and the economy perform. More important, it can help you form an annual business planning habit. Whether you are a veteran planner or a novice, there will be a helpful nugget for you.

Getting Started

Begin with a little preliminary work.

1. Conduct an assessment of your practice.

a. A SWOT assessment guides you in brainstorming about internal Strengths, internal Weaknesses, external Opportunities, and external Threats.

b. A Practice Assessment can be extremely useful. One assessment tool asks 50 questions covering leadership, staffing, operational efficiency, marketing, revenue generation, and risk management. Simply completing this exercise promotes awareness.

2. Reflect on personal vision. Ensure that your business aligns with your personal vision and values. As Stephen Covey, author of The Seven Habits of Highly Effective People, has taught us, the big container is your personal vision for your life. If the business vision doesn't naturally fit inside, an opportunity for success and happiness is missed.

3. Be aware of your assumptions about the global economy, national and local politics, taxes, business partners, and personal issues (e.g., health). Thinking through assumptions helps to ground plans.

Once this groundwork is laid, you can start writing the plan.

The Process: Page One

The first page of your plan contains your business vision and mission, statements about the strategy for evolving the firm over the next three to five years, and a handful of goals.

Business vision. Business vision builds on personal vision--it helps you live out your personal vision. A sample vision would be "To create customers for life among clients who value our advice and with whom we have an integral relationship."

Another grounding statement is the mission statement, which answers questions such as:

What does your firm do?

For whom do you do it?

How is work accomplished?

What deliverables are provided?

How are you rewarded?

Strategy. Strategy statements provide the general direction to move your organization toward where your business is heading. Sir Winston Churchill said, "It is always wise to look ahead, but difficult to look further than you can see." A three- to five-year time frame works for most advisors. Bulleting strategy statement keeps you focused. For example:

Transition to nearly all fees

Focus on super-affluent clients

Decrease number of clients

Find a junior successor

Brand the company in the community

Build a mature ensemble

Goals. As contrasted with strategy, goals need to be specific and measurable. Five to seven goals a year are sufficient if they address what is most critical to the firm. One approach for establishing goals is a three-stage format:

Draw up a laundry list of goals with an emphasis on quantity. This helps you to think creatively about potential goals. Put the list aside for a couple of days.

From the list, select five to seven items that are absolutely critical for your firm for the next 12 months.

Reword each item to make it SMART (Specific, Measurable, Attainable, Realistic, Time-bounded). Break down each goal into the tasks necessary to complete that goal.

The Process: Page Two

On the second page, include the following:

Revenue. Estimate next year's revenue by anticipating recurring and new revenue from existing clients, as well as new revenue to be brought in from new clients. Alternatively, you can estimate future growth based on past annual growth, making adjustments as deemed appropriate. Many advisors find it useful to project a range for growth, given the variables that impact the top line in any given year. A revenue range also helps bridge the gap between those who prefer to set minimum goals that are likely to be achieved and those who prefer BHAGs (Big, Hairy, Audacious Goals) that may challenge an individual but that might not be achieved.

Expenses. Advisors are well-known as cobbler's children when it comes to creating a budget for their practices. Moss Adams provides a template for creating a budget. The annual Moss Adams financial studies not only present budget categories, they also offer benchmarks (see Web Extras for the January 2009 issue at InvestmentAdvisor.com). There is value in applying this approach rather than in reinventing the budget wheel.

Of course, anytime is the right time to enhance and upgrade business prowess to financially manage your business. Consider following these four Cs, some coming directly from Mark Tibergien, formerly of Moss Adams and now CEO of Pershing Advisor Solutions.

Create and track profitability measures (e.g., gross profit margin, operating profit margin, productivity).

Convert from "creative" accounting to GAAP (generally accepted accounting principles).

Common size data so that each revenue source and budget item is represented as a percent of total revenue for easier long-term comparison.

Construct regular times monthly to review financials and apply them to decisions about expenditures.

The Process: Page Three

Advisors tend to turn marketing on and off like a water faucet. A different approach is to have a steady stream of marketing for your firm. The third page of your game plan will focus on marketing and will include a marketing plan that relates:

A definition of your ideal client

Your value proposition

A positioning statement that addreses how your firm is different and attractive to ideal clients

The market niches your firm targets

The tactics you will deploy for each targeted segment

A final component of your marketing plan is essentially a calendar outlining what will happen each month for each target audience. The beauty of a marketing calendar is that, once it is in writing, it can be delegated to staff to monitor implementation (see sidebar, "Make a Marketing Plan," for more information).

Marketing in 2009 will be more important than ever. But budgets will likely be as pinched as wholesaler support. What to do? (See the sidebar below, "Now Is a Good Time to . . .")

The Process: Page Four

The last page is a dashboard--a measuring device for the SMART goals you outlined on page one. Typically, a series of checklists or Excel spreadsheets monitor key SMART goals, all scaled to fit on one page. A support person can maintain the dashboard, which you can use at staff meetings to show the entire team how the organization is performing. Building on the sample goals above, measured items could include new assets under management, number of new ideal clients taken into the firm in the current year, number of referrals from selected strategic alliances, and so on (see "Make Dashboards" below).

Don't Talk, Act

Everyone talks about evolving from a practice to a business, but in troubled times a plan is critical for making decisions that are in the best interest of the business. The current uncertain market may just separate the practices from the businesses.

Find a business planning system that you can sustain. The approach suggested here provides an alternative--one that makes the planning process straightforward. If creating a plan seems like a huge cultural change, completing just one of the four pages described here is enough for those with plan phobia.

Whatever approach you take, remember that planning is an annual event and that practice makes perfect. If you are new to a planning process, know that it gets easier and better each year.


Joni Youngwirth is the managing principal of practice management at Commonwealth Financial Network in Waltham, Massachusetts. She can be reached at jyoungwirth@commonwealth.com. Both John Augustine and Michael Duncan are registered representatives with Commonwealth.

Reprints Discuss this story
This is where the comments go.