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3 Key Concepts Advisors Need to Thrive as Business Owners

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SEI released a white paper in October that identifies “three I’s” to help advisors take their practices to businesses: independence, integration, intelligence.

The paper argues that advisors need to think of themselves as business owners first to achieve long-term success, which may be difficult for some advisors. A recent SEI poll found almost two-thirds of respondents surveyed saw themselves as advisors first; they just happen to own a business.

The report, “Dotting the I’s: How Independence, Integration and Intelligence can Transform Your Practice Into a Sustainable Business,” describe independence, integration and intelligence as part of a three-tier system.

“The independent RIA segment has experienced incredible growth since 2005, and we don’t see any signs of that pace slowing,” John Anderson, head of practice management for the SEI Advisor Network, said in a statement. “As such, many advisors have the opportunity to branch out, but seem to be unprepared for what they encounter once they do. However, capitalizing on the very strengths that differentiate their firm — independence, integration and intelligence — can help them flourish as business owners. Taking stock of these attributes and understanding how to apply them as they evolve is key to advisor business growth.”

SEI called independence “an advisor’s greatest asset.” It gives them the opportunity to make the best choices for their firm and clients and to work with the people best able to help them achieve their goals. However, they need to work hard to establish a firm culture that helps clients connect with the firm as a whole, rather than one advisor.

“While strong client relationships are essential, when the relationship is owned by a single individual, it inhibits the long-term viability of the business,” according to the paper. “A team approach not only provides for more client interfacing touch points, it also enables owners to devote more time to client acquisition and firm growth.”

Independent advisors have to stay on top of how their clients’ needs evolve. Clients are more hands-on and understand investing better than they may have previously. The paper referred to a survey by the Corporate Executiev Board that found more than a third of mass affluent and 32% of high-net-worth clients would prefer to manage their portfolio with little input from their advisor. Unfortunately, some advisors may not have gotten that message. A 2012 survey from SEI found 83% of advisors think their clients are unlikely to manage a portion of their investments themselves.

Advisors who worry they may not have the right idea about how involved their clients want to be should inventory their assets held elsewhere, the paper suggested. Not only will they have a better view of that client, but by incorporating other assets into a comprehensive report, they can demonstrate added value and maybe even eventually capture those assets.

To take independence to the next level, though, advisors need to integrate new technologies into their practice. The paper suggests advisors start by mapping out their operational processes to identify where they might be able to deliver a better experience with more efficient technology. For example, reconciliation, fee calculations and performance reporting take time and money to manually transfer between systems. If an advisor’s software can’t do that automatically, someone at the firm will have to.

SEI referred to research from Aite Group that found advisors can boost their revenue 30% by using integrated systems. “True integration links technology so that information is shared, collected and catalogued automatically without extra effort,” according to the paper. “In the best-case scenario, integration includes every aspect of an advisor’s business, including client-facing support services.”

Finally, SEI said that intelligence as a factor of long-term success should be part of the firm’s culture.

“In the context of a successful business, intelligence is offering clients the mix of services they really want and managing the balance between artful client relationships and the science of effective decision-making,” according to the paper. It requires advisors to take advantage of their firm’s intellectual capital, as well as tracking and analyzing the results of their initiatives to measure their success.

Firms that can improve operational efficiency this way can “build profitable client relationships and develop differentiated product offerings that generate higher-than-average return-on-investment.”

The paper noted that success as an advisor doesn’t always translate to success as a CEO. “What’s clear is that advisory firms cannot succeed without a vision for the future or a solid business plan that outlines the steps to realize that vision.”

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