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Practice Management > Building Your Business

The Will to Prepare

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Hitting the midpoint of the year is an opportune time to assess both how your firm and the entire advisor industry is doing Over all, the picture is pretty good. Independent investment advisors have experienced a remarkable growth surge in the last few years. According to information released jointly by the Investment Adviser Association and National Regulatory Services, the total amount of assets managed by SEC-registered advisors climbed to $26.8 trillion in 2005, a 21% increase from 2002.

Most advisors are in pretty good spirits as well. According to our 2005 Rydex AdvisorBenchmarking survey, the majority of advisors (81%) feel the current state of their businesses is better today as compared to a year ago, while only 4% feel their businesses are worse than they were a year ago. The remainder said things were the same today as a year ago.

Business Challenges

In working to build successful businesses, advisors face a competitive, complex, and constantly changing environment. This often-overwhelming environment hurts advisors’ ability to see the big picture and can potentially lead to the mismanagement of their businesses. In our 2005 survey of advisors, we asked respondents to tell us what they considered the biggest threats to their businesses. The overwhelming first choice: government overregulation–which was the number one response in 2004 as well (See PracticeEdge, January 2005). The challenge of keeping up with compliance and regulatory issues has become increasingly time-consuming. This “time” theme ties in neatly with the second most commonly cited issue for advisors: “working in the business and on the business at the same time.” Almost half the advisors polled (46%) feel that they are forced to spend less time growing their businesses and more time managing them.

Light at the End of the Tunnel

Joe Paterno, longtime Penn State football coach once said, “The will to win is important, but the will to prepare is vital.” It might surprise you to learn that this football great’s coaching wisdom has a big takeaway for you: having a business plan can make a big difference in your ability to get out of the weeds and remain strategic. In fact, the 2005 AdvisorBenchmarking survey revealed a compelling truth: 68% of advisors who consider the “need to work on and in business simultaneously” as a threat to their businesses do not have a business plan.

If you’re one of the 44% of advisors who do not have a business plan, you need to create one. In fact, make it a summer goal. Strategic business planning gives you the power to explore all your available options so that your business can achieve its goals. It also keeps you honest–you’re setting goals, and you’re constantly measuring your progress against them. Plus, a well thought-out plan enables you to make the most effective use of your resources. In building your business plan, consider building goals and metrics around the following:

?? 1/2 Revenue per client

?? 1/2 Revenue per staff member

?? 1/2 Revenue per principal

?? 1/2 Operating profit per client

?? 1/2 Operating profit per principal

?? 1/2 Number of clients per staff member

?? 1/2 Number of services your company offers

Growing your business depends on careful planning. If you’re not sure where to start, one easy and cost-effective approach is to create a business plan through the use of business planning software. One of the industry’s leading business planning software packages is Business Plan Pro, published by Palo Alto Software, Inc. (

The bottom line: While the overall advisor market is growing, you need to make sure that your business does as well. Create a plan. Your business depends on it.


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