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May 09, 2011 at 08:00 PM
This is an extended version of the profile that appeared in the May issue of Investment Advisor, part of AdvisorOne's Special Report profiling this year's members of the IA 25, the most influential people in and around the advisor universe. See the complete list and Special Report schedule for extended profiles of all the 2011 members of the IA 25.
To be counted among the most successful firms, advisors have to focus on understanding and building enterprise value. It's a trend that Julie Littlechild, president of Advisor Impact, is already seeing take shape.
Littlechild founded Advisor Impact in 1998, and since then has worked with financial services firms to provide research on how to improve productivity and profitability through client engagement.
"RIAs are taking a hard look at their existing businesses and asking if they are building true, long-term enterprise value or creating a lifestyle business," she told Investment Advisor. "Many are focused on the former and that is creating a much sharper focus on defining and then improving the drivers of enterprise value, including team development, process, technology and branding, all of the things that create value over and above the individual contributions of the partners."
Part of understanding that value requires a focus on financial fundamentals. Value is linked to growth, Littlechild notes, and advisors who were confident turning away business and relying on passive referrals in the past may see their business's long-term value fall.
With an emphasis on growth – partly on offshoot of the recession – advisors are recognizing their faults, previously hid by a good economy.
"We’re seeing many of the most successful businesses taking a more proactive approach to positioning for referrals, recognizing they are not maximizing their referral potential," Littlechild notes.
(Littlechild presented the findings of her research on referrals at the 2011 FPA Retreat.)
While the aging boomer population has been touted as a major opportunity for advisors, Littlechild sees a downside there, as well. She acknowledges that advisors have "good reason" to focus on high-net-worth clients in their 50s or older, but the most successful businesses, she says, recognize that "an aging population may be a threat to the long-term viability of their businesses if they are not bringing in new or younger clients."
