Close Close

Practice Management > Building Your Business

Pursuing Practice Excellence: The Industry Perspective

Your article was successfully shared with the contacts you provided.

With apologies to John Dunne, we remind you that no advisor is an island. To be successful—whether you measure success by growth in assets or increased profitability or in excellent client service—advisors must partner with larger firms to conduct their research and trading, to custody client assets, to gain entree to money managers and investment vehicles, and to access technology tools to effectively service clients and run better businesses. Those partner firms all provide practice management assistance to their affiliated advisors as well, but are their offerings useful? Do they have a clear understanding of what advisors need, and are they then meeting those needs? Are they accurately measuring what works in practice management and what doesn’t? Are they putting dollars behind those offerings, or are they merely paying lip service to helping advisors run more efficient and effective businesses?

In this, our second published report on the findings of the inaugural AdvisorOne/ActiFi Pursuing Practice Excellence practice management study, we take an objective, comprehensive look at what those partner firms are offering advisors in the practice management arena.

Our first article in the June issue of Investment Advisor and online at related what nearly 1,000 advisors in a comprehensive online survey told us they need and want regarding practice management help. For this analysis, we then followed up by conducting personal interviews with more than 50 practice management leaders from advisor partner firms of all shapes, sizes and affiliation models, from the wirehouses to independent BDs both large and small and clearing firms, from the leaders of large RIAs to the mutual fund companies and software firms advisors work with.

By listening to advisors first and then speaking to these industry leaders, in Pursuing Practice Excellence we will be able to identify the gaps between what advisors say they need and what their partners are providing. By analyzing those gaps with the help of a select group of industry experts in a roundtable meeting, we will present in our third article in August how the industry as a whole can more perfectly target its practice management efforts to meet advisors’ true needs, while giving advisors the tools and strategies they need to be more successful.

Who the Survey Participants Were

In the second phase of our Pursuing Practice Excellence study, we conducted comprehensive telephone interviews with 52 industry leaders from five different categories of firms. Our interviewees answered a series of questions and completed an in-depth online survey as well. This pool of interview participants represents a broad swath of the financial services industry. While the number of participants in the survey may be too small to make the sampling statistically significant on its own, the participants’ leadership positions affect such a large number of advisors that the results, we argue, are quite meaningful. Realizing that many of these firms compete with each other but wanting to encourage candid responses, we also guaranteed anonymity to our industry leaders.

To help measure the importance of practice management to these firms, we asked them to tell us the number of staff members dedicated to practice management. A majority reported having between one and nine dedicated practice management staff members. It is important to point out, however, that in almost all cases, interviewees reported that practice management staff resources have not been totally centralized as part of a specific department but spread across multiple areas of the firm. This may be a result of a strategic decision to provide an integrated offering delivered and managed across the firm. At the other end of the spectrum, individual components of practice management may have been grown organically without any coordinated oversight.

During our interviews, we also asked whether firms had formal practice management programs and how advisors were selected to participate in those programs. We found that larger firms tended to have formal programs and most often had defined processes for selecting the advisors that could participate in those programs. Several firms had formal pre-work requirements for potential advisors and also measured skill and readiness to participate prior to engaging advisors in their programs. Most of the firms based selection of advisors on recommendations from sales or branch managers or other field leaders. A small number of firms require advisors to participate in the cost of the programs. Finally, almost all firms had some sort of self-service option that was open to all of their advisors.

Words, Words: How Do Industry Leaders Define ‘Practice Management’?

Echoing what we asked advisors in the first part of our survey (see “Pursuing Practice Excellence: The Advisor Perspective,” Investment Advisor, June 2012), we asked each industry leader to provide us with their own definition of practice management. While no one quoted a formal definition, most were able to fairly quickly define what practice management meant.

The most common words used to define practice management were:

  • Help
  • Build
  • Improve
  • Manage
  • Productivity
  • Profitable
  • Efficiently

We had several interesting discussions about the differences between “business development” and “practice management,” with equal numbers of respondents arguing that the terms were interchangeable or that they were separate, unique topics.

Interestingly, while one Pursuing Practice Excellence participant said his firm tries to focus on helping advisors improve what they already have rather than adding anything new, another participant seemed to speak for many firms in saying they view practice management as a way to make their “internal program managers more effective sales managers.” So while there were certainly many similar definitions of practice management, there was also wide variation in the specific ways participants define practice management.

What Participant Firms Offer

Our 52 respondents reported that they are mostly working with non-employee advisors. Exactly half also reported that less than 25% of the advisors they work with take advantage of the practice management offerings that they currently provide.

The Leaders Speak

“A big challenge is to deliver information to advisors in a way they can absorb it […]. We all hear ‘I didn’t know you have that.’ Our biggest challenge is to get them to adopt what we already have.”

—CMO of West Coast-based independent broker-dealer

Which People and Programs Work

We next turned to the question of which staff members or outside providers tended to be most effective in delivering practice management solutions and which programs were most effective. Perhaps not surprisingly, 70% of respondents said they believed their own programs and staff were effective. However, their views of the effectiveness of sales management (46.2%) and product wholesalers (17.3%) in delivering practice management were rated much lower than their own staff’s effectiveness.

This demonstrates one of the disconnects between the advisors’ portion of the Pursuing Practice Excellence study and the industry leaders’. As reported in our first article in this three-part series—Pursuing Practice Excellence: The Advisor Perspective—50.7% of advisors reported that they have a “good” or “deep” relationship with their wholesalers. Look for an exploration of this and other disconnects between advisors and their industry partners in our August cover story. (Visit the Pursuing Practice Excellence homepage at for updates.)

In terms of programs, participants were somewhat less enthusiastic. The highest rated program type, business management solutions, was only rated “effective” or “extremely effective” by 55.8% of participants.

In a theme we saw throughout the industry leaders’ portion of the study, despite their confidence in their own teams, participants were eager to improve their practice management solutions and staffs. More than 60% of respondents rated as “important” or “extremely important” each of the six options we presented. This indicates that there is ample opportunity to improve programs and that firms are actively working on making their offerings more effective. Practice management is an emerging discipline; while it has always existed in some format, making it a consistent and effective part of the advisor experience is relatively new.

What Are Firms Actually Spending on Practice Management?

In one significant finding from the industry leader portion of the Pursuing Practice Excellence study, it appears that most respondents expect their firms to allow them to put money where their practice management mouths are. A significant majority of respondents (60.8%) said that practice management will be a priority in their next budget cycle. Given the emerging nature of practice management solutions, it is also not surprising that success appears to be difficult to measure given the lower rankings of case studies, ROI analysis and the concept of advisors participating in the costs of providing these solutions.

ActiFi Speaks

We believe that the success of practice management programs will become more effectively defined and measured over the next few years as these programs mature.

Given the importance placed on helping advisors improve their sales efforts, it’s probably not such a surprise to see that most firms focus on activity and sales results to measure success of their programs.

The Leaders Speak

“We do have trouble objectively evaluating the impact, and the outcomes, of these [practice management] programs to be able to compare them to the returns on recruiting.” —Regional director of Southeast-based broker-dealer.

How Advisor Needs Are Perceived

The participants viewed advisors as looking for solutions that are tailored to their needs, but the industry experts also argue for a sweet spot in terms of sophistication, rejecting approaches that are too basic and those that are too involved.

Managing plans are a strong area of need for most advisors, according to our Pursuing Practice Excellence study participants. All four areas of plan management would be valuable, the industry leaders said, to advisors.

Survey participants didn’t believe there was too much difference in the importance of the four areas of practice management, with all of them hovering around 60% importance.

The Leaders Speak

“Product manufacturers will pick and choose where they want to play. [We] may be experts in loyalty, retention and acquisition. You might find [someone else] being the expert in generating alpha. It’s going to get sliced up a bit.”

—Head of strategic integration for a large mutual fund company

Digging deeper, how the industry leaders listed the importance of specific areas of practice management also reflected the balance of each of the four areas with a mix of different types of activities. (Click the chart at the left to view an extended version with all of our respondents’ answers.)

Leaders’ Perception of Advisors: Not Ready for Business Prime Time?

There was a prevailing view among industry leaders that a majority of advisors do not view their practices as businesses. This probably ties quite closely to the fact that, as we saw earlier, a majority of advisors are not taking advantage of practice management solutions.

However, there is a bit of a disconnect between the industry leaders’ perception that advisors are not running their practices as businesses and the leaders’ belief that advisors perceive value in practice management solutions.

ActiFi Speaks

This disconnect above may have to do with firms positioning practice management as individual solutions to specific problems as opposed to integrated solutions that drive business value.

What’s Most Valuable in Practice Management?

Industry leader respondents in the Pursuing Practice Excellence study said that person-to-person delivery was the most effective delivery method for practice management solutions. The human touch remains important overall: The top four delivery methods—and the only ones called “valuable” or “extremely valuable” by more than 50% of respondents—all involve direct human interaction. Most leaders believe that this human touch is much more valuable than automated alternatives. The challenge is that the cost of human delivery tends to be more expensive than other options.

The Importance of Practice Management

While participants believe that practice management is important in many ways, when asked to compare it to other core services (back office, product and technology offerings), only 50% agreed that it was equally important.

ActiFi Speaks

Since the core value proposition of these partner firms has historically centered on back office, technology and product offerings, rating practice management as equal to those three actually confirms the growing importance of practice management to these firms.

We also discussed with interviewees the priority practice management was given within their firms. Their comments (“definitely top five,” “top one or two,” “top handful,” “top five, maybe even top three”) strongly reinforces the survey responses.

The Leaders Speak

“Yes, [practice management] is still a differentiator, but we are rapidly coming to that point where it’s not enough to just have the next great white paper or a fantastic conference or the greatest seminar or some new tool and gadget. It’s not enough to just say you have it; it’s going to be a matter of truly moving the dial with your best client so that they are rabid, raving fans of how you have helped them build their business.”

—Vice president of practice management for an RIA custodial firm

In another part of the interview with these industry leaders, we asked about some of the obstacles firms faced in implementing practice management solutions. A couple of themes emerged—the importance of creating scale, improving management buy-in, finding qualified people who understand what practice management is, and being able to demonstrate the ROI from practice management programs.

The Takeaway

Here are the key findings from the industry leader interview portion of the Pursuing Practice Excellence study:

  1. Most advisor partner firms recognize that practice management is becoming a critical part of their value proposition for advisors and, beyond paying mere lip service, are actually budgeting significantly to improve their practice management offerings to advisors.
  2. Practice management remains an immature area without clearly defined goals, budgets, staff and agreed-upon methods to measure the effectiveness of practice management programs.
  3. It will be important for firms to develop a sustainable economic model to continue to deliver a high-quality practice management experience. Many firms are experimenting with different delivery methods and cost structures. As they figure out what works and what doesn’t, we expect that the offerings will be refined and focused on the areas and methods that create the most value.
  4. While almost all firms try to offer advisors help in any area they can, there is very little specialization in terms of focus on specific areas of assistance.
  5. For advisor partners, it remains an open question whether or not to include business development or sales and marketing efforts as part of the definition of practice management.
  6. Most institutions currently deliver robust platform capabilities. Future differentiation will depend on their ability to help advisors leverage those existing capabilities versus simply developing more capabilities.

The Leaders Speak

“We expect to see an increased focus on practice management […] with new firms coming to the marketplace with practice management solutions to meet the needs of advisors.”

—Vice president of advisory products and services for a Midwest-based asset management and financial planning firm

ActiFi Speaks

All of these issues are common for products and services early in their product life cycle. As the value of a product is proven, economies of scale can be created, centers of expertise emerge and clearer value propositions can be defined.

What’s Next: Identifying the Gaps, Proposing Solutions

In the next article in this series on the findings of the Pursuing Practice Excellence study, we will look at the gaps between what advisors said they needed and what their partners are offering. We will also analyze the differences in the expressed needs of advisors of different business models and affiliations and their respective affiliated partners. And in a conscious nod to the importance of in-person assistance in providing successful practice management help, we will be convening a panel of experts from across the industry that we identified in the second portion of the study as being particularly insightful. In a roundtable discussion moderated by Investment Advisor Group editors with the assistance of ActiFi’s practice management experts, we will report on the suggestions of these experts to help close the gaps between what advisors need and what their partners offer to the benefit, we humbly hope, of the entire industry and, in the end, to advisors’ clients.


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.