Pursuing Practice Excellence: Where Advisors and Their Partners Part Ways

Advisors rely on their partners to run their businesses, and many financial services businesses count advisors as key clients. So shouldn’t it be the case that advisors and their partners are on the same page when it comes to what works and what doesn’t in practice management? Wouldn’t the strength of the relationship between advisors and their partners be built on shared perceptions as to setting goals and how to measure success on practice management initiatives? Wouldn’t they agree, at the most basic level, on the definition of practice management?

The answers to those questions, the Pursuing Practice Excellence study found, are both yes and no. While there are shared perceptions to be sure, there are also wide gaps between what advisors say they want and need and what their partners are providing and planning to provide. In truth, there is both a push and pull effect in evidence when it comes to practice management initiatives: While their partners may be further ahead on the curve than advisors in some ways, in other ways, advisors’ needs are not being met. Their partners in some instances are expending dollars and intellectual capital in certain practice management areas that, according to advisors in the survey, are of little or no importance.

In the accompanying cover story in this issue of Investment Advisor (see “Beyond the Buzzwords,” page 24), we present the shared wisdom of four especially insightful industry leaders who came together in person in June 2012 to explore the reasons for these gaps, to suggest why advisors and their partners may have different priorities and to craft ways for advisors and their partners to narrow those gaps. Here in the final article in a three-part series relating the findings of our premiere practice management study, we tell you what the data shows and suggest some conclusions, but also allow you to draw your own conclusions.

During the course of our research, which has resulted in the Pursuing Practice Excellence study, we surveyed 954 advisors and interviewed 52 industry leaders from five different categories of firms that partner with advisors. In the first article in the series, we reported on what advisors identified as their key practice management needs and sources of help to meet those needs. In the second article in the series, we asked the executives responsible for building practice management solutions for advisors many of the same questions we asked advisors to see if there were differing perceptions—there were some fascinating ones—and to describe what those differences were so as to suggest ways for both groups to work together more closely to ensure each others’ success. In this concluding article, we identify gaps between advisors and their partners.

Yes, It’s Important, but…

To begin with the bottom line, both advisors and industry leaders found practice management services to be highly important to their relationships. But in the first of our surprising gap findings, more advisors (27.3%) said that these services were critical to the relationship with their partners than did the industry leaders (17.3%). Moreover, the number of advisors who said practice management topics constituted little or no impact on their relationships with their partners (13.3%) was lower than the industry leaders (19.2%). Considering that the industry leaders are dedicating their careers to practice management and should be the biggest proponents of these services, it appears that the industry might be undervaluing the overall importance of practice management to advisors.

All My Offerings Are Above Average

However, when we analyze the importance of specific types of services provided to advisors by their companies, industry leaders appear to overvalue all of the practice management services they provide. In particular, when asked about the importance of business services, a gap of over 20% opens up between the industry leaders and advisors.

Reviewing the specific list of 30 different activities, as you would expect given the summary numbers above, 28 of the 30 activities were overvalued (that is, rated as more important than by advisors) by industry leaders. There were several significant gaps of over 30% between what advisors and their partners valued, including client segmentation, staff efficiency, benchmarking and succession planning. There were only two activities that were undervalued: utilizing social media and PR/community outreach.