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January 01, 2010 at 02:00 AM
Each year I identify 10 Big Things that advisors should consider as they develop their long- and short-range assumptions for strategic planning purposes. In the past, I tended to dwell on sweeping industry issues like the talent shortage or pending regulatory changes. But after meeting with scores of advisors over the past
year to learn what’s keeping them awake at night, I realized that after so much suffering, advisors today would prefer to see the issues boiled down into manageable solutions that could “move the needle.” We’re not talking about seismic shifts but rather smaller, incremental movements that are measurable by advisors.
In surveying the advisor landscape, the hills and valleys are a bit higher and deeper than they were just two years ago. The typical firm is experiencing stress from many corners–clients, staff, and regulators. Profit margins are squeezed and time is more compressed. So now is a good time to redefine your goals and how you will get there.
But before applying these 10 initiatives, it will be helpful to establish a mechanism to monitor and evaluate your firm’s performance to determine whether your management actions are making an impact on:
o Gross profit margin (gross profit dollars ? revenue)
o Operating profit margin (operating profit ? revenue)
o Productivity (revenue/staff; revenue/client; operating profit per staff and client)
Establish a base line from three years ago and calculate the ratios for each of the subsequent years. When evaluating your business performance in 2010, you then can observe the trend line and compare your performance to what may have been your best year. With the end in mind, it will make it easier to create buy-in among partners and associates on the critical action steps required to achieve better operating performance.
Assess Pricing Strategy. An effective pricing strategy aligns with your value while remaining conscious of what the market is getting for comparable services, and produces a reasonable profit margin. Most firms have discovered that the asset-based pricing model serves them well in up markets–but puts added pressure on them in down markets. Evaluate whether your current pricing strategy reflects what you offer and produces an adequate profit per client.
The Optimal Client. To determine what your future client service experience should be, develop a profile of your optimal client. Create a matrix with the 25 existing clients you would like to replicate and track common characteristics. A matrix can identify traits such as the source of the business (how they came to you), the catalyst for them in engaging you, how far they live from your office, their personal demographics, or their interests. See how many common boxes are checked. This will help you to define your optimal client relationship.
