“Practice management” could be the greatest buzzword of the decade in the financial planning industry. It has become a catch-all phrase that product providers and broker-dealers use to promote their “value-added services” to advisors, who are urged on an almost daily basis to follow the latest piece of advice on how to run their businesses. These firms would like advisors to believe there is a magic system that will make them more efficient, productive and personally satisfied than ever before—all in six easy steps.
If only it were that simple. The truth is, there is no one-size-fits-all solution that can meet every advisor’s needs, because no two advisors are the same. However, if there is one practice management trap that virtually all advisors fall into, it’s making things too complicated.
A prime example of this trap is the long-revered business plan. Our firm surveyed the advisors we work with and found that 64% have a business plan, but only 26% are actually following it. Most of these advisors have formal business plans that exceed 50 or 60 pages, and the vast majority of these tomes are sitting on bookshelves, collecting dust. One advisor paid $12,000 to an outside consulting firm to write a 60-page plan for him. When I asked to see it, curious what a $12,000 business plan might look like (gold-leaf pages, perhaps?), he admitted he didn’t even know where it was.
The point I’m trying to make is that even the most detailed, well-organized and handsomely bound business plan is useless if it isn’t being referenced and utilized often. A one-page plan that is implemented and executed is better than a 20-page plan that is being used to stabilize a wobbly desk. The problem is advisors often place so much importance on the form, content and even format of the business plan itself that the document ends up being overwhelming, impenetrable and ultimately ignored.
I am by no means suggesting that advisors scrap their business plans altogether. After all, any smart business owner needs a strategic plan that serves as a guide for accomplishing short- and long-term goals. What I am proposing is that advisors pare their plans down to the bare minimum, until they reflect only the most critical elements of their overall strategy. Ideally, the key points of an advisor’s business plan should fit on a 3×5 index card.
Clearly, no two cards will contain the same points. But the process for creating the “note card plan” is essentially the same for every advisor. The process is a continuum that starts with examining the current state of your business. From there, you can define future goals, build a strategy, implement changes, and execute specific tactics. You then monitor the process consistently and adjust accordingly, repeating the entire cycle as necessary.
Within the context of this cycle, there are certain guiding principles that should always factor into the creation of a note card plan. The following attributes will help keep your plan focused, relevant and effective.
The first guiding principle of the note card plan is action, which is a term I use to capture the tangible, actionable and real-time nature of the plan. One problem with many traditional business plans is they are too forward-looking. Certainly advisors need to have a strategic focus and long-term objectives, but many of them tend to look five years out and ignore today. The world can change dramatically in the space of five years—just compare 2005 to 2010. As such, shortening the timeframe of your strategic outlook can help you better prepare for unforeseen events.
Traditional plans can also be filled with sophisticated-sounding goals or mission statements that are ultimately too abstract or vague to be actionable on a day-to-day basis. It’s often said that knowledge is power, but in the context of creating a business plan, that theory doesn’t always hold water. Knowledge without action is useless, and a business plan brimming with brilliant ideas that are never implemented is equally worthless.
The best way to make your business plan more actionable is to ask yourself, “What actually needs to be done?” Build your goals, strategies and tactics around the answer to that question, and you will have a plan that is designed to help you accomplish the tasks that will have an immediate impact on your practice. While every advisor has different goals, maximizing results always involves three common elements: time, energy and money. These elements should all be viewed as investments, each with three possible outcomes—a positive, negative or neutral return. The key is to focus as much of these investible assets as possible in areas that produce positive returns.
Keep in mind that what constitutes a positive return for one advisor may not be the same for another. For example, I had one individual tell me that he is perfectly content with the revenue he’s generating, but if he can’t find a way to stop working 80 hours a week, he’ll eventually go crazy. For him, time is his most valuable investible asset, and he is working to determine how to maximize his return on it. His note card plan includes his goal of making sure he’s spending time with the right clients, and on the right tasks, in order to systematically reduce the number of hours he needs to work each week.
The Advisor as CEO
One reason so many advisors find it difficult to focus on tasks that have an immediate impact on their business is that they simply have too much on their plate. I talk to advisors every day, and I have yet to meet one who doesn’t feel overwhelmed. The tremendous uncertainty and volatility of the past two years has only intensified that sentiment and led to even greater time management constraints. That is why delegation is a critical element of the note card plan—if you are unable to delegate, you will find it extremely difficult to narrow your focus to actionable, impactful tasks.
Advisors should ask themselves, “Could I hire someone who could do [insert function here] just as well as, if not better than me?” Perhaps that function is asset management; maybe it’s market analysis; it could even be creating financial plans. The point is, every advisor excels at—and enjoys—one particular aspect of his or her profession more than others. To achieve maximum efficiency—not to mention maximum job satisfaction—advisors should zero in on the one thing they do best and enjoy most. This goes beyond task delegation; this is about embracing your passion.
Another important point to consider is the dichotomy between being a financial advisor and being a business owner or CEO. Most advisors have years of financial industry experience, but little or no experience or training in how to run a successful business. Those who have recently transitioned from a wirehouse setting to the independent space have a particularly difficult time managing the operational and administrative aspects of their practices, having grown accustomed to the firm taking care of these matters.
Balancing CEO functions and financial advisor functions is often a major challenge. In my view, multitasking is not the answer. It is virtually impossible to constantly switch gears, so my advice is for advisors to allocate specific time periods to focus solely on business-planning activities. For example, one might designate every Friday as the day to meet with staff members, assess performance, or analyze progress on various objectives. That way, you’re not trying to squeeze these things in between client meetings.
If this approach doesn’t work, another alternative is to delegate the entire CEO function itself. I worked with one advisor who was dissatisfied with how his sales staff was performing. Meanwhile, his sales staff complained that he wasn’t providing the direction they needed. He realized that he needed someone else to take over the management role so he could focus on his core competencies. He was able to promote a senior member of the team to CEO, thereby ensuring that the individual understood the firm’s vision.
Finally, for those advisors who are great financial planners, but lack managerial skills, there is something to be said for management training. If you cringe at the thought of sitting through a two-day course or reading a 300-page book on how to be an effective manager, consider this approach: Rather than trying to absorb all 12 hours of an instructor’s material or all 300 pages of a book, use these resources to glean only the key points that are relevant to you and your practice. It is a strategy that aligns perfectly with the note card plan, in that it helps you cut through the clutter and focus solely on what has an immediate impact on your business.
The strength of an advisor’s business plan depends largely on buy-in from his or her staff. One of the advantages of the note card plan is that it can fit inside a shirt or coat pocket for easy reference, but it should by no means stay there. All staff members should not only have a copy of the plan, but also be intimately familiar with what it means. That is why unified vision is my third guiding principle—in order to successfully implement and execute a plan, your entire staff must be on board.
For example, if revenue goals are part of your plan, each staff member should be aware of why certain goals have been set and how the firm is progressing toward those goals. Furthermore, all staff members should have a clear understanding of how their performance impacts the firm’s goals, so that everyone can establish personal objectives that support the growth and success of the practice. In addition to having a copy of the “master” plan, each staff member may even want to create his or her own individual plan.
There are three key steps to keeping staff members aligned with the firm’s vision. First, communication with staff should be just as consistent as communication with clients—it must be an ongoing loop, not limited to a one-off or even quarterly meeting. Second, each staff member must have defined roles and expectations. Third, advisors should establish an environment of collaboration that encourages feedback and open sharing of ideas. Giving people the opportunity to express their ideas not only makes them feel like they are contributing to the success of the firm, it also helps improve morale.
Clearly, managing staff effectively requires significant effort, which brings us back to the advisor vs. CEO dichotomy. A successful business needs strong leadership, but most advisors are already overwhelmed and many don’t consider themselves good managers. That is precisely why having a simple, streamlined plan is so important—it will make it easier for everyone on your staff to understand and execute on the goals you outline for the firm.
That’s the beauty of the “note card plan.” It is a daily reminder of the actionable tasks you and your entire staff should be focusing on to achieve measureable goals. It is designed to help you maximize your three investable assets: time, energy and money. It can help you effectively balance your duties as a financial advisor with your responsibilities as a business owner. Finally, it is a manageable plan that you will actually use, rather than stuff in a drawer.