Practice management is a struggle for nearly all advisors. While in most instances they know they should have better practice management skills, there is little agreement among advisors and their partners over what the term actually means, much less any empirical, public evidence on which approaches and programs actually deliver success in practice management.

So over the past six months, the Investment Advisor Group and ActiFi have partnered to help solve the mystery of practice management. Rather than dictate a definition or merely brainstorm our own ideas, however, we asked the people doing the work—advisors themselves—to do so, to tell us what they need in terms of practice management help.

We also approached the firms that partner with advisors on a daily basis—your broker-dealers, custodians, asset managers, product manufacturers and technology firms—to share with the advisor community where they are spending their energy and dollars on practice management programs (see “Pursuing Practice Excellence: The Study” for more on the research approach).

Beginning with this article, we present the results of what we humbly believe is the most comprehensive, objective research project ever on practice management for advisors of all kinds. Over the next three months in the pages of Investment Advisor and on, we will share with you the key findings of this research, so that informed of those findings, your partners can better meet your needs, and you can use actionable insights from this project to better run your businesses, improve your profitability and best meet your clients’ needs.

In subsequent articles, blogs, videos and web seminars, we will present what your partners are providing and identify the gaps between what you need and what they provide. In this, the first article, we start with the insights of the nearly 1,000 advisors of varying business and compensation models who took the time to answer a time-consuming survey online. We undertook this project not simply out of intellectual curiosity, but as a service to the advisor community. We believe the scope of the research, the numerous surprising findings and our intention to provide ongoing research and analysis in this area will constitute such a service.

Which Advisors Responded

The 954 participants in the survey (fielded in December 2011 and January 2012) were overwhelmingly male (84.2%). Since the Bureau of Labor Statistics reports that 69.2% of all personal financial advisors are men, respondents to the “Pursuing Practice Excellence” advisor survey constituted a larger percentage of men than the industry overall. In addition, 28.4% of respondents were over 60 years old, a significantly higher age than estimates (14%) from a recent report by Cerulli Associates as to the average age of advisors. Finally, nearly 40% of the participants had more than 20 years of experience. So, in general, a higher percentage of respondents were men, and they were older and more experienced than the “typical” advisor. That experience, we believe, makes the findings additionally authoritative (for additional data on the respondents and the entire survey, see the Pursuing Practice Excellence homepage on

Respondents to the survey also represented an accurate cross-section of advisors. Nearly 50% of the participants described themselves as “employees of a financial services” firm. Just over 30% called themselves “owners of their own firms,” and roughly 20% described themselves as independent contractors. In terms of practice structure, respondents were spread across the five categories with over 60% identifying themselves as a “solo advisor” or “advisor with support staff.”

The survey participants were spread across revenue categories as well, with those reporting annual revenue of from $100,000 to $250,000 constituting the largest percentage of respondents (28.4%) and just under 15% reporting annual revenue of more than $1 million. This revenue comes from a mix of areas, but the largest group (35%) identified themselves as deriving more than 75% of their revenues from advisory fees.

Finally, there was a broad mix of types of firms that advisors are affiliated with, with each category constituting at least 15% of the whole, again reflecting an accurate cross-section of the advisor affiliation universe.

What Advisors Do Now and How They Measure Success

How do you measure business success?

A majority of the advisors surveyed (59%) said they have taken at least one of the first steps toward running their practices more like a business by creating a formal business plan. However, two of five advisors (41%) still do not have a formal business plan. Moreover, more than half of the respondents (54%) reported that they are going it alone and not working with someone else (such as a branch manager, field leader, sales manager or coach) to improve their practices, while the remainder said they were working with someone else to improve their practices.

As you would expect, success is most often measured by the amount of revenue a practice creates. In contrast, only 37% of advisors use expenses as part of their success metrics. Either monthly or quarterly reviews appear to be a common best practice (70%) of advisors.

Where and How Advisors Are Investing in Their Practices

Where will you spend more money and time in the year ahead?The survey found that advisors invest both time and money in improving their practices, but over the past year, 71% of advisors reported spending less than $10,000 on improving their practice, which we considered as showing a significant commitment. Looking forward, advisors say they are most willing to spend more than $10,000 on sales and marketing (19.7%) compared to client service (16.5%), operations and technology (14.6%) and, especially, business services (7.9%). Another finding of note: Advisors are much more willing to spend their time on client service than the other categories. Fifty-eight percent reported they spend three or more hours per week on improving their client service activities.

The Crux: What Advisors Want From Their Partners

How important are practice management services to your relationship with your provider?What kind of training do you find most valuable?Getting to the heart of the research, what do advisors want when it comes to practice management? How important do they consider their partners to be in giving them what they want? Our survey findings showed that practice management is viewed as a key part of the value proposition that advisors are looking for from the financial institutions that service them. Nearly two-thirds (64.2%) of respondents rated practice management services as either critical or very critical to their relationship with their partners.

Advisors are most interested in receiving training that is specific to their practice. It is interesting to note that all of the options listed in the survey were ranked positively by advisor respondents.

Commentary from ActiFi

The findings of the Pursuing Practice Excellence research clearly show that practice management is increasingly important to advisors while the institutions that service them are likely to continue to provide ever-more sophisticated levels of service. The most valuable types of training deal with how to make practice management techniques specifically applicable to advisors. We’ll talk more about that throughout the series.

The Partners That Deliver the Practice Management Goods

Broker-dealers emerged as the clear leader in not only providing services to advisors but in creating value. Advisors reported receiving practice management services from BDs (64.1%) at a significantly higher rate than the second highest firm (product wholesalers, 39%) and at twice the rate of all the other firm types. In addition, 65.6% of advisors rated the practice management they received from broker-dealers as “valuable” or “extremely valuable”; again the highest rated firm type.

Commentary from ActiFi

These numbers on where respondents said they received their practice management services closely match the percentage of participants in each area, so it’s probably not surprising that broker-dealers are the leading provider. We’ll have additional analysis of this issue in subsequent articles.

From a relationship perspective, however, product wholesalers top the list, with 50.7% of advisor respondents reporting that they have a “good” or “deep” relationship with their wholesalers. However, only 40.4% of respondents said they have a similarly strong relationship with a branch or sales manager.

How Advisors Define Practice Management

Definitions of practice managementParticipants were asked to provide a two- to three-sentence description of what practice management means to them. The word cloud in the sidebar below displays the most commonly used words of the 643 advisors who supplied a response to this question.

The top five words used were: service, efficient, time, financial and planning. The definitions advisors used were quite varied and covered a multitude of topics mirroring the above, but also include some off-the-beaten-path definitions based on ignorance, existentialism and even, apparently, Bachman-Turner Overdrive.

Commentary from ActiFi

There is a gap between the responses to the “How do you define practice management?” survey question and the next set of questions. When asked an open-ended question about practice management, the responses tended toward service, efficiency and time. However, when asked to tell us the most important solutions offered, a different picture emerges.

[Click here to view a word cloud of the words advisors used most often to define practice management.]

The Most Important Solutions Partners Offer Advisors

Which services from your partner are most important?Which specific sales and marketing activities do you find important?

In which general areas do you need the most help?In which specific areas do you need the most help?Sales and marketing services were viewed by advisor respondents as the most important practice management solutions offered. In particular, enhancing prospecting and client acquisition skills, improving client communications and improving asset gathering skills were at the top of the list. Interestingly, all 30 activities in our survey were marked as “important” or “very important” by at least one-quarter of the advisors surveyed.

Potential practice management solutions were divided into four categories. Sales and marketing was the most important category for advisors, with nearly 57% saying it was either “important” or “very important.”

At a more detailed level, advisors listed three specific sales and marketing activities as particularly valuable. Moreover, at least 25% of respondents reported one of the activities as “important” or “very important.” See the top 10 activities below. 

In each category listed, however, advisors reported that they needed assistance. Sales and marketing again was the top of the list.

Respondents put help with prospecting for new clients (71.4% of respondents) as the top need. See the chart below for the top five needs.

The Most Valuable Delivery Methods

Practice management solutions can be delivered in a number of ways. In the “Pursuing Practice Excellence” survey, we asked advisors to tell us which of 15 methods were most valuable to them. Nearly half of advisors said that one-on-one coaching was either valuable or very valuable. Conferences were the second highest ranked, followed by advisor CRM systems, on-site workshops and individual phone consultations. Since this is the first year this survey was conducted, we cannot make comparisons to prior years’ findings, but it is interesting to note that smartphone and iPad applications were cited by respondents as the most valuable practice management solutions delivery methods by 18% and 17%, respectively.

Five Key Takeaways

Looking at the results, here are the key findings from the advisor portion of the “Pursuing Practice Excellence” study.

  1. It’s clear that practice management is critically important to the relationship between advisors and the institutions that serve them and will become increasingly so. It’s obvious why so many firms are investing in practice management, with two-thirds of advisors saying it’s critical to their relationship with their partners.
  2. The definition of practice management is broad and varied, yet key themes emerge: service, efficient, process, time, financial. However, advisors rank sales and marketing as their highest need. So there is an opportunity to expand the advisor’s definition of practice management to include sales and marketing.
  3. While sales and marketing is the individual sector that scored significantly higher than any other area in which advisors said they most needed help, all areas scored highly with even the lowest (operations and technology) hitting almost 40%.
  4. While there are a wide variety of methods to deliver practice management services, advisors want advice and best practices tailored to their needs and want someone to assist them in implementing improvements.
  5. Advisors said they will devote significant new investment dollars to sales and marketing, while advisor time spent is most weighted to client service.

In the following articles on the findings of the “Pursuing Practice Excellence” study, we will look at what more than 50 industry leaders on practice management are thinking, and doing, in their firms on behalf of advisors. In the third and final article in this initial series, we will describe the gaps that exist between what advisors need and what their partners offer. We’ll also provide some analysis of the differences between different types of advisors. A panel of experts will help clarify those gaps, and propose ways to close those gaps, in a roundtable discussion moderated by Investment Advisor Group editors with the assistance of ActiFi’s practice management experts.