Put everything in writing. Involve your staff more in the process. Identify your target market. Trust your instincts. Hire quickly. Trust your friends. Be yourself. You don’t have to have a perfect plan.
The pithy prescriptions above for a successful advisory practice came from participants in a Dec. 3–4, 2012, workshop that wrapped up Power in Practice, Commonwealth Financial’s year-long coaching program for some of the independent broker-dealer’s advisors.
This final in-person workshop was guided by Commonwealth’s practice management experts, led by the sui generis, Joni Youngwirth. However, as a guest at the workshop, held in Boston, my biggest takeaway was that the genius of the program was provided by the participants. Good workshops of any kind make sure to involve the participants in a significant way, of course. Good advisors are particularly eager to learn from each other.
The 42 participants in the two-day final workshop of the 2012 Power in Practice program coached each other and gained insights into their own practices. Of those advisors, a number were alumni of the 2011 program who were there to share their stories with the 2012 “graduates.”
The goals of the final workshop were to reinforce the key lessons learned to date in the program:
- Firm business planning and financial management
- Human resources
- Operational efficiency
- Production enhancement
- Risk management
The overall goal of the final workshop was to create a system to sustain the progress participants had already achieved. That system, however, is not a static plan that sits on a shelf: The underpinning of the program is to allow participants to manage change on an ongoing basis, built on a plan designed to achieve clearly laid out goals to improve each participant’s practice.
The Year-Long Process
This article is the fourth and final in a series describing the Power in Practice program, which Commonwealth launched in 2011. The previous three articles, written by Joni Youngwirth, describe the entire program, which comprises three two-day workshops. Between those in-person workshops, participants hold peer group conference calls designed to reinforce the best practices learned in the workshops and promote accountability to the advisors’ peers in the program. Participants are given specific assignments to complete, and in addition, there are one-on-one personal coaching calls with Youngwirth and a team of certified coaches. By program’s end, participants are presented with a personalized practice management manual designed to provide ongoing support in their CEO role, along with a plan for increasing their production and taking their firms to the next level, which Youngwirth describes as taking their firms “from practices to businesses.”
According to Youngwirth, Power in Practice participants are more successful than those Commonwealth representatives who don’t participate in the program. Commonwealth’s internal tracking found that in the inaugural year of the program, participants who generated between $200,000 and $475,000 in 2010 GDC increased their 2011 revenue “by a weighted average of 24% over nonparticipating advisors with the same 2010 GDC.” Larger producers—those who generated more than $475,000 in 2010 GDC—“increased their 2011 revenue by 44% over those in a similar revenue range who didn’t participate in the program.”
If the overall goal of the program is to turn already successful firms from practices into businesses, for principals, the goal is to give them the tools to be successful CEOs. In the first article in the series, Youngwirth quoted one of the 2011 participants, Kris Maksimovich of Global Wealth Advisors in Dallas: “It all started with clearly outlining our business and marketing plan for the next year. While we’ve done this every year, it’s a bit different when you’re challenged by your peers to address any gaps in planning and focus more intently on the strengths of your practice.” In addition, Maksimovich said he had identified and fine-tuned his firm’s day-to-day operations; analyzed his client base to determine which clients were not profitable and what serving them cost; benchmarked his practice against similar firms; and “more clearly defined team member roles,” which had the effect of those employees taking “greater ownership of their positions.”
Summing up, Maksimovich said, “We now feel we have a laser-sharp focus on the drivers of profitability for our practice.”
Making a Plan, Getting Focused
Power in Practice has two major tracks: increasing production and building an infrastructure to systematize your business. In the first of the three workshops, participants begin to create a “streamlined” business plan based on defining the firm’s business vision, listing strategic directions for the following three years and setting SMART goals for the next year (SMART stands for Specific, Measurable, Achievable, Realistic, Time-bound). Much like a financial plan, a business plan need not and should not be complex and long. As Jim Komoszewski of Investment Centers of America said, “even the most detailed, well-organized and handsomely bound business plan is useless if it isn’t being referenced and utilized often.” Power in Practice suggests that a two-page or even a one-page business plan—one that is “right sized” for a small business like an advisory firm—can be sufficient.
The business vision in your plan provides three things, the program teaches: focus, focus, focus. The “production enhancement” focus requires participants to achieve at least 20 points of revenue-generating activity either daily (for smaller, earlier-career advisors) or weekly (for more established advisors.) The five activities that yield the best chances of increasing production are introductions, referrals, networking, small social events for clients, and building strategic alliances with associated professionals. While some advisors are better at some of these activities than others, setting numeric goals for these activities helps build a focus on revenue-generating activity.
The tools in the program include Excel worksheets that participants use to track their progress on the 20-point system and on the five other main goals of the program: leadership, human resources management, operations management, marketing management and risk management. Progress on achieving the calendarized goals on the worksheets can and should be shared with other advisors in your firm, but accountability on the goals is ensured by the other members of each participant’s peer group.
Peer Pressure and Encouragement
Spreadsheets. Conference calls. One-on-one coaching sessions. Writing business and marketing and HR plans. Setting increased production goals. Writing succession plans and continuity agreements. Conducting technology audits. Tracking revenue and expenses. Creating an annual budget and forecast. Defining the ideal client. Tiering your services to A, B and C clients. Building sustainable, repeatable processes. Benchmarking your business financials yearly.
The above are all addressed in the Power in Practice program and participants are encouraged to complete all those tasks in a systematic, calendarized way. Those discrete activities are also part of an overall plan, with the goal to build a business by documenting core processes and monitoring progress. As one participant said to the group, the program “brings flow charts into our procedures, using staff input,” which “gets us to see our business as a series of processes.”
If Commonwealth reps are selected for the program, they pony up $4,000 to participate (though they get the lion’s share of those dollars back if they complete the program), so they have skin in the game from the beginning. Since a core basis for the program is to learn from and to teach your peers, the participants are separated into two different groups based on their production levels. At the end of the fourth and final workshop of the year, the entire year’s learnings are reviewed, including a “final exam.” However, that exam is an “open book” test that each peer group fills out together, again reinforcing the program’s ethos.
What makes the program successful to this observer, and which could be copied by other organizations, is the power of peers, in Joni Youngwirth’s words. The 40-odd participants in the final workshop run firms of different sizes. Some are more successful than other participants. They have different client niches, and work in cities and rural areas. What they have in common is an openness to learning from other advisors and a feeling of accountability to their peers.
Here’s an example. The 40 participants didn’t sit in a lecture hall for the workshop. Instead, we sat at round tables in groups of six to eight, mixed up in terms of age, gender, firm size and experience. During one session that focused on how to deal with unexpected change, I presented my table with a personnel “situation” that happened to be challenging at the time. These five business owners probed me for additional details for 30 minutes or so, and each then suggested courses of action to deal with this unexpected issue. I got some very good advice from these experienced people, and they had just met me.
The other participants had been working in their peer mentor groups for a year. They knew the ins and outs of each other’s businesses. They had learned about each other’s successes and failures. They had forged strong relationships with each other. In their phone calls and in-person meetings, they had traveled along similar roads, completed the same assignments, had brainstormed within their peer groups. They felt a sense of accountability to each other. They hadn’t just vented about their problems, or sat in a classroom to be lectured at by a practice management consultant—not that there’s anything wrong with consultants. Most of the successful advisors I know have business coaches and personal coaches. They join local or even national study groups. From those successful advisors, I’ve heard how valuable those coaches and peer study groups can be.
The Power in Practice participants had much in common, not least of which that they are independent contractor reps, a notoriously independent-minded group, all of whom do business through Commonwealth Financial. The program, since it is sponsored by and run by Commonwealth, no doubt helps build the firm’s culture and makes it more likely that those participant reps will retain their affiliation with the firm. After all, when it comes to succession planning, I would think these participants would look favorably on making a deal with one of their fellow participants. They would also know that their fellow participants are serious enough about building their businesses to implement business plans and to document their core processes.
Learning from your peers is one thing; learning how to build a business and act like a CEO is another. The independent advice business remains a fairly lonely profession. Many solo practitioners are happy with their lifestyle practices: It meets their needs now and they can serve their clients now. But if you want to build a business that grows in value and meets the ongoing needs of your clients, a program like Power in Practice would be a very good start.