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At FPA Retreat, 7 Steps to Success by Investing in Your Advisory Firm

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Over the course of her career consulting with more than 500 advisory firms, Angie Herbers has found seven common investments that the most successful advisory firms take to ensure success. Speaking at the FPA Retreat in Bonita Springs, Fla., on Tuesday afternoon, Herbers suggested that every advisory firm can take these seven ROI steps that offer the greatest return with the lowest risk.

angie herbersHerbers (left), who has written a monthly practice management column for Investment Advisor magazine for seven years, and blogs regularly for AdvisorOne, told the attendees at her Retreat session that data she has gathered from her clients over the past five years shows that that firms that focus on these key ROI drivers, and on the people that work in their firms, are the most successful at “achieving systematic growth,” regardless of whether they were solo firms, ensembles or market dominator firms. That growth, she argued, will even counteract the effects of poorly performing markets, and reported that those firms following those steps limited their revenue and profitability declines to only 2% to 3% even during the 2008-2009 crisis.

Tellingly, the seven ROI steps are:

Knowing and clearly communicating your goals, deciding what the best business structure is for yourself, especially understanding the amount of control that the owner wishes to retain in the firm, and the level of income that the owner needs to generate for herself or himself.

Investing in your firm’s culture, making sure you have a clear set of core values, and that you invest in events—education and social—that help build that culture

Building a brand, including investments in your client service operations and, notably, hiring a good writer to help articulate your brand regardless of the media you use to communicate the brand. The  goal is to involve all members of the firm to consider themselves your brand champions, making all employees rain-makers.

Learning corporate financial management, including building a customized P&L for the firm that uses the” owner’s need” for compensation as a required line item. This is a natural outgrowth of step one, where the owner decides how much compensation is needed to live comfortably and also how much to invest in the firm’s culture.

Managing on growth, since manipulating profit is much easier than manipulating growth, the best firms focus and compensate employees on growth, not on profits. But the owner, hearkening back to step one, must set clear growth goals and communicate them to all employees.

Segmenting your services, not in the traditional way of determining your ‘A, B or C’ clients, but giving clients a choice on what services they would like from you, from basic investment management to more holistic financial advice, and then charging accordingly for those services.

Growing with people, since she has found that the most successful firms create good employees rather than necessarily hiring the most qualified or experienced employees. The best firms teach those new hires to be good employees, pay a fair wage with bonuses based on firm growth, focus on performance, but also invest in hardware and software that increases performance.


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