When lAST WE interviewed Don Schreiber in this space, he told us how he built his advisory firm, WBI Investments, and how he came to discard the received wisdom of buy-and-hold investing in favor of a “risk-managed, dividend-focused” separate account approach. That provides revenue diversification to his own firm while helping other advisors meet the retirement income needs of their clients. Now Schreiber has developed a technology application that he believes could help many other advisors improve their chances of business success by leading them through a process of looking at their client base, understanding their ideal client, then making some small adjustments that could significantly increase the value of their firms. But isn’t that kind of benchmarking service already being done by the likes of Moss Adams and others? Schreiber agrees, but then pointedly says “I don’t have to survey advisors to know what works; I’m already building a successful firm.” Schreiber talked about his latest passion with editor Jamie Green in the Little Silver, New Jersey, offices of WBI in early December.

Tell me where you see the profession going these days.

We’re such a young industry; the founders have yet to transition the business to another generation. So we’re seeing the initial creative destruction in the industry of trying to figure out: How do I really build this [business] to accomplish my business goals?

For some advisors, their business goals may be “I’m really happy providing an investment-related service and getting paid sales compensation. I have a couple of staff people who help make my life better. I think I provide good value for this. I’m doing something better than the traditional Wall Street broker.”

There have been no barriers to competition, but that business model is starting to become challenged. There is an aggregation in the industry where the bigger firms are going to dominate, whether they’re gigantic firms or independent financial services groups that are building out a much higher-quality offering than just an investment solution.

The reason I wrote my book [Building a World Class Financial Services Business; Dearborn, 2001] was to show how to transform your business from a single or multiple focus product-based solution to the advice and service model that we were sold by the College of Financial Planning.

Advisors are very interested in upgrading their business model, in accomplishing an end game where they get something from their life’s work of building a business and working with clients. They’d like to have equity value at the end of the day. But there’s very little in the industry to give us a clue as to what businesses are worth, and rules of thumb like “two times revenue” are worthless.

So I’m trying to help advisors create a better business model, a better result for themselves, their employees and their clients, who will be delivered higher quality advice and service. I need to go beyond the book; I can’t be the personal coach or consultant and help that many people.

Have you thought about that–being a coach or a consultant?

Yes. I do it now. I have half a dozen guys and gals that I coach. I found that I know the process of how to create a business like that, but when I coached and mentored people, I found it less than satisifying because I didn’t have the tools to help them execute the transformation of their business. Because there’s not a process that will take them from A to B to C to eventually Z, [advisors] wind up listening to other people and wandering in the desert dying of thirst. That’s the problem for a small business owner: you only have so much resources.

If I’m going to acquire a business, if I had an ideal target, how do I tell the wheat from the chaff? No one’s got it right on how to value a business. That’s one of the first pieces for this software suite that we’ve developed, which is really strategic business planning software that keeps it as simple as possible, saying here’s step one and step two and step three.

My goal is to help advisors create a better business that provides them with more income, more equity value, and show them: here’s where you are today, here’s where you could be. I’ve found that if you can’t demonstrate the difference of what your ideal business looks like when you’re done from where you are today, they won’t do it.

Everybody wants it, but not everybody is willing to do the hard work to get there. I’m trying to make it easier to do that. We’re going to charge for it, because we’ve invested a significant amount of money on the technology, but it’s not about the technology, it’s about these 10 things you have to do to create a better business. Regardless of who you sell it to, it’s a win-win for everybody

If you look at our industry, the only competitive advantage we have is the quality of the advice and service we provide. If we can do that on an individual basis better than the large conglomerates, better than our next-door neighbor, we will have a much better business. That’s our sustainable competitive advantage. It’s certainly not delivering the next product solution–everybody’s got the same thing.

So where’s your competitive advantage? We’re going to provide the highest quality of advice and service.

That’s difficult to do, but if they did 10% [of what I recommend], they’d be twice as good as anybody else is doing.

So it’s not all or nothing?

Not at all. I’ve kept it as a simple architecture, boiling it down and making it the least complicated, highest value drivers of change for your business.

The average financial services business owner is 55. As acquirers start to get smarter about what they’re buying, there will be less demand for chaff and much more demand for wheat, and that will be a major shakeup in the industry, because people will start to look for this kind of quality business model.

But this goes beyond just whether your firm is fee- or commission-based, right?

You bet. Scale is a big factor.

AdvisorToolbox is the company, [but] it isn’t about the technology, though, it’s about building a business. It’s about making this transformational change through business advice and technology. This is the first suite of four. It will be up and running [by mid-December 2007] and will be definitely available in the new year. Once a quarter we will release the other suites; I [envision users working] on a suite each quarter, then they’ll come back and update their business plan.

The [first module] is Valuation Pro, a software program I’ve developed with a valuation expert to make sure the metrics we’re using are accurate. It’s a combination of my business experience with a valuation expert which gives this tool its uniqueness. Remember, we’re trying to give somebody a roadmap, of getting from one place to another.

First, you take a business inventory [of where a firm derives revenue from]. The software demonstrates with what-if planning to see what changes [in minimum account size, number of principals, expected growth in assets, etc., would occur in changing those metrics in] income, profitability, and equity value, instantly.

Not only does this do valuation, but we also do business model analytics, so after you get your value [from the software], you also get “here’s what’s good and what’s poor about your business model.”

The thing is, advisors don’t even know how many clients they have. That’s because they’re not business people, they’re salespeople.

Through these surveys, people try to figure out what makes some firms more successful than others. I know what the right methodology is. What I’m trying to share with people through this [software] is what works.


Editor-in-Chief James J. Green can be reached via e-mail at jgreen@investmentadvisor.com.