The Magic Formula for Advisory Firm Success? There Isn’t One

I’m often struck by the parallels between the independent advisory business and consulting with independent advisors. For instance, most veteran advisors I know have learned not to take clients who aren’t ready to take advice; no matter how big their portfolio is, it’s just not going to be a pleasant experience for anyone.

Over the years, we, too, have learned that working with owner-advisors who aren’t ready to take advice is a bad idea—which is, of course, ironic.

Like advisory clients, owner-advisors are often “sure” they know what they need, and are usually looking for a quick fix to get their firm “back on track.” Perhaps most surprising, more often than not these owners are very resistant to taking a systematic “planning” approach to chart the future of their firms: determining where they are now and where they want to be in the future, identifying the challenges they are facing and coming up with a plan to get there. Go figure.

With that said, in our experience, the most difficult idea for many owner-advisors to get their brains around is that building a successful advisory firm is a process, not a formula. Specifically, there’s no magic formula: no template that some consultant can just plug into your firm and solve your problems overnight. That’s because every independent advisory firm is different—and what works for one firm, or 10 firms, won’t necessarily work for your firm.

To figure out what will work for your firm is a learning process: one that every owner-advisor (and his/her consultant, if he/she has one) has to go through in virtually every facet of his/her firm from financial planning to cash flow management, from recruiting to marketing. 

Don’t get me wrong: it took us years working with hundreds of advisory firms to come to this realization. The reason every firm is different is because every owner-advisor is different (with different skills, preferences, personalities, management styles, people skills, core values, experiences, knowledge and goals). So is every employee, every client, every target market, every vendor, every custodian or broker-dealer, and every location, etc. etc.

Sure, there are some similarities in each of these areas, but the little differences in each area multiply into a complex matrix that makes every firm unique: requiring unique processes and solutions that are tailored to each firm’s circumstances.

To create those processes and solutions, owner-advisors need to be ready to do things differently than they have done up to now; and they have to view the growth of their firms as a learning process: to find what works for them, their employees, and their firms.

As consultants with a  combined 20 years experience working with independent firms, we’ve amassed a lot of information about what has worked and what hasn’t with our clients. But we’ve also learned that strategies that have been hugely successful at some firms will be dismal failures at others. Sometimes we can identify the factors that made the difference; other times, it’s just not clear. 

As I said, there’s no magic formula. We do our best to understand each firm, its owner(s), employees, market, clients and goals and then use our experience to work with the owner(s) to create the best plan we can for moving forward. But we’ve found that the most successful owner-advisors are committed to our plan—but not attached to it. 

We try the best solutions we can think of, but if, after a reasonable amount of time, we find that they aren’t working, we either modify them or pull the plug and try something else. 

To help firm owners take this view, we approach all our new initiatives with a plan that clearly includes the possibility that it won’t work. Here’s how: 

1)    Have a Goal. Every new project should clearly define what “success” will mean. Measurable results are best, when possible: We will attract X number of new prospects by Y; or we’ll increase our closing ration to X in Y months; or we’ll increase the number of clients who answer “very satisfied” on our annual survey next year, etc.  

2)    Make an honest assessment of the results. If you use metrics like above, it’s easier, but in areas where you can’t, it’s vitally important to accurately determine how well you and your team did with each new project.

3)    If a new initiative didn’t work, carefully evaluate why it didn’t. This is really the key to successfully moving your firm forward. We all learn more from failure than success—but only if we make an honest assessment of what went wrong. That means avoiding knee-jerk finger pointing, making excuses or rationalizing results. 

4)    Decide to fix, or to try something else. If you’ve executed the first three steps well, this decision should be pretty obvious. Still, it’s hard for many people to admit failure, so try to leave your ego out of it and determine whether a given idea is really worth spending more time and/or money on. 

Like any business, successfully growing an independent advisory firm isn’t easy. It requires hard work, a commitment to succeed and a willingness to learn and get better.

The most successful owner-advisors I know make the best decisions they can, learn from the result (good or bad), and move on to the next decision. They know there’s no magic formula—except to keep moving forward. 

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