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Practice Management > Building Your Business

How to run the most efficient agency ever

By Ed McCarthy, CFP, RICP

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As a senior market financial advisor you have a collection of specific skills and expertise. For example, you might have excellent selling skills. Perhaps you’ve mastered the intricacies of managing retirement income distributions. But if you haven’t focused on running your advisory business efficiently, your financial results probably are less than they could be. It’s a common problem, according to many in the field. “It’s a high percentage of advisors and advisory firms that struggle with running a business,” says Greg Friedman, CFP, founder and chief executive officer of wealth management firm Private Ocean in San Rafael, Calif. “Nobody said that being a great advisor or a great salesperson or just any of those things automatically qualifies you for making good business decisions.”

Recognizing the problem

Dave Lee, director of practice management with Raymond James Financial Services in St. Petersburg, Fla., cites author Michael Gerber’s book, “The E Myth,” in explaining why many advisors have trouble running a business. There are three different main “actors” in the business, Lee says. The technician does the work, such as selling or advising, while the manager creates the systems that allow the technician to do the work. The entrepreneur has a long-term vision of which direction this enterprise should go in.

Advisors are often great technicians but that role isn’t sufficient for business success. “You have to realize that you’re a small business owner,” says Lee. “If you don’t realize that you’re a small business owner, you fall into the trap of just constantly working in your business as opposed to on your business. Then what happens is the business degrades to such a degree that you can’t even afford to do the good work you do as a financial advisor in a lot of cases. And, we, in this industry, see it every year with people that leave the industry.”

The three S’s

Lee recommends that advisors who wish to improve their business management skills work on what he calls the three S’s: self, staff and systems. The first step in that process is to take an inventory that helps identify gaps in the key areas. Raymond James Financial Services offers its advisors business coaching and online diagnostic tools combined with self-study materials to identify and improve those gaps.

This approach works, Lee maintains. When he asks advisors whose businesses have improved dramatically, they frequently respond that they finally realized they are business owners and started acting the part. Two distinct but linked realizations stand out. First, the advisor realizes that he or she prefers to use or develop specific skills and work in a particular market niche. Those preferences lead to a second realization: there aren’t enough hours in the day to do everything successfully. At that point the I-do-it-all advisor can begin to genuinely work on the business and not just in it. “They realize: I’m out of time,” Lee says. “If I’m going to spend time in this area, that means I’ve got to delegate to someone else.”

Steps to success

Suzanne Muusers with Prosperity Coaching LLC in Scottsdale, Ariz. is a business coach to financial advisors. She recommends that advisors start by developing a business plan each year that sets specific goals and the steps to reach those goals. Having the right staff is also essential, she says, because a business’s growth is constrained if the advisor is the sole employee. It’s also important to set up and track business performance metrics, Muusers adds. “They may look at the numbers of investments but they don’t look at their own numbers: their gross, their new clients, their assets under management, that sort of thing,” she says.

Marketing the business — in addition to having personal sales skills — is another key element in the mix. Muusers describes this as “developing the advisor’s brand.” This involves identifying and clearly articulating how the advisor is different from and better than the competition. Using a website and social media can help build the advisor’s brand but many advisors, particularly those transitioning from sales, lack online savvy. “If they don’t have a very good website, I like them to think about their brand,” says Muusers. “What do they do better than their competition? Let’s take that and create a brand around it so that they’ve got some good prospecting tools built into their website.”

Friedman believes advisors can choose from several strategies to improve their managerial skills. One is to educate themselves on becoming more entrepreneurial. Study groups and professional associations can be valuable resources in learning those skills. Other approaches can include hiring staff whose skills complement those that the advisor lacks. Another possibility: Find synergy through mergers with other firms. “There’s a lot of reasons people merge and one of them absolutely can be, well, here’s another guy who has similar philosophies, another person who has similar philosophies to me but much better business management skills,” he notes. “A lot of mergers were put together that way actually when you think about it.”

It can be done

Brian Heckert, CLU, ChFC, AIF, with Financial Solutions Midwest LLC in Nashville, Ill., is a successful financial advisor. That’s evidenced by his 24-year membership in the Million Dollar Roundtable (MDRT) and his qualifications for the organization’s top tiers. Despite Heckert’s successful sales record, in 2001 several of the businesses with which he was involved suffered significant downturns and he “almost lost all of it.” His solution involved several steps. He started by going back to the basics of financial planning and with the help of his study group and family, he created a plan to get out of debt.

The other part of the solution involved taking a new approach to his business, starting in 2006 when Heckert participated in his broker-dealer’s business symposium. That event led him to develop a business plan that covered topics such as categorizing his clients, determining how many reps he wanted, how many staff people he needed and could afford. He also started working with Philip Palaveev, a consultant formerly with Moss Adams who is now on his own in Seattle.

Heckert subsequently separated his personal and business finances and started paying himself a salary. He began delegating more tasks and office management duties to staff so he could have more time for clients and business development. These efforts paid off, says Heckert: “With their help I set the business plan, we started hitting our goals, hitting our marks. I eliminated my debt and by 2008 was running the business I had dreamed of.”

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