From the very first day I started my career in the financial advisory industry, I had had a particular fascination with the time line of an advisor’s career. If we could predict the exact career path (from cradle to grave, for lack of a better term), what would it look like? Or rather, what should it look like?

I have spent the past decade researching this very topic, among others in the advisory profession. While I don’t have all the answers at this moment, we have discovered some key foundational questions that must be answered to make an advisor’s career more successful, whether it be working in an existing business, being an owner-advisor or going independent. What I find most interesting is that these questions are most useful to those making the move to the independent advisory world.

When making the jump to opening an independent advisory firm, advisors do a lot of things. Unfortunately, in our experience, they are almost always the wrong things: finding suitable office space, choosing a custodian or broker-dealer to work with, hiring an assistant or junior advisor, designing letterhead and strategizing about how they are going to take their current clients with them.

Yes, these are important decisions, but they are not the critical decisions. Before planning how they are going to build a new firm, advisors need to think about what their new firm will look like. If they don’t, they’ll end up wasting their key first years in business creating their firm rather than building it by only transferring, attracting and servicing their new clients.

To go to the fully independent RIA world from the wirehouse world (or even from the independent BD world, where their affiliation usually shields them from having to build a business), advisors need a business plan. I know, writing a business plan sounds so cliché, but it needs to happen. The problem is, every time I say this to my clients, I have a hard time getting them to actually write one. Why? Because they simply don’t know where to start. As a result, we help advisors create what we call a “snapshot” business plan, which is divided into eight sections. Those sections comprise 25 questions (a detailed list of all 25 questions can be downloaded at AngieHerbers.com/Resources) that form the business plan of a successful advisory firm.

Regardless if you are going independent or already are, our research has definitively proven that every advisor must have answers to all these questions to create a successful firm. Then they have to live them. The answers to these 25 questions will tell you what to spend your time on, and will tell your team what to spend their time on, too.

While I would love to have 25 pages to describe all these questions, I don’t. So to get you thinking about your future firm, here is a brief description of each of the eight sections to get you started on your own plan for the future.

Section 1: What’s Your Culture?

The first section of your firm snapshot is about the culture of your firm, or what I like to call “attitude.” Ask yourself, “What are the five qualities that will make everyone at the firm (including the owners, employees and strategic partners) a great fit to work with you?” We suggest something along these lines:

  1. Do no harm (that is, before taking any action, be reasonably certain you’re going to make things better, not worse).
  2. Go the extra mile. Be willing to do whatever needs to be done, rather than just “your job.”
  3. Be dependable and trustworthy. Colleagues should know they can count on you.
  4. Look ahead. Anticipate problems and opportunities.
  5. Stand up. Care enough to offer your thoughts and opinions.

The reason this section is so important is because when you’re heading out on your own, you and your clients are vulnerable. The worst thing you could do is get involved with an employee, strategic partner or even another advisor who doesn’t have the same attitude about your company as you do. You have a lot on the line, and you cannot afford to get involved with someone or some company who could kill the culture you are trying to create for your clients.

 

Section 2: Define Success

The second section is about the firm’s definition of success: What is the company’s purpose or passion? What are you working to accomplish? Your answers might include helping clients reach their dreams or achieve their goals. Whatever the answer is, you have to know it. If you don’t know why your company exists, how long do you think it will?

Section 3: What’s Your Goal?

The third section is self-explanatory and concerns your vision. What are you working toward in this business? We recommend that owners provide five-year revenue targets, five-year profit goals and a five-year mission, which might be something like: “To ensure our company is enduring and lasts through the ages.”

Section 4: Your Ideal Client

The fourth section is about clients. Who is your ideal client? Most advisors focus on clients with assets above a certain level or who fall into a particular niche, such as doctors, small business owners, etc. We’ve found that while a niche can be an advantage for marketing, it’s more effective to target the services you need to offer to meet specific client needs, and to set client minimums to boost revenues. However, it’s also important for advisors to focus on clients they like to work with.

For instance, many advisors find they work best with people who are kind, appreciative, communicate their life changes, are focused on a life goal and are respectful of their advisor’s time.

Section 5: What’s Your Differentiator?

The fifth section is about sales tactics: What sets you apart? To answer this question, owners need to come up with three ways that their firm is different from other advisory firms in their area; a solid, short answer to the question, “What does your firm do?”; and a three-meeting prospective client process.

For the most part, when differentiating your firm, it’s best to avoid terms like “fee-only,” “independent,” “fiduciary,” “small firm,” “national firm,” “holistic” and “comprehensive.” They are what everyone else is saying about themselves. Instead, what resonates best is phrases that capture what you do and how that helps your clients. For example:

• We work as a team. Your situation is not in the hands of one person.

• We don’t take unnecessary risks. Your investments are based on goals.

• Wealth management is a lifestyle. It’s not a rate of return.

Describing what your firm does requires a well-thought out, concise sentence or two. 

Finally, we’ve found that using a three-meeting prospect process greatly increases an advisor’s close ratio. While the three meetings will be different for every firm, the key is to show the value that your independent firm can offer. A clearly designed process spread over a number of meetings shows value, as opposed to being merely a sales pitch (see sidebar on page 10 for an example of how one firm has set up their prospective client meetings).

We’ve found that when armed with the right differentiators, firm description and three-meeting prospect process, almost anyone can be an effective rainmaker for an advisory firm.

Section Six: Control Your Work flow

The sixth section is about mastering firm operations, answering the question, “How can everyone in the firm be more productive?” Again, while specifics will differ, there are two equally important factors to answer this question: knowing the five key processes of the firm’s work flow (i.e., the client experience process, the client onboarding process, the business management process, the annual meeting process and the document filing process); and deciding the firm’s (usually five) key software programs. Both the list of work flow processes and the list of tech programs should be completed and documented before you open your doors for business.

Section Seven: Define Roles and Rewards

The seventh section is about your team, and being clear about their roles in the firm and the rewards they can expect from working at the firm. To answer this question, firm owners should create two lists: the benefits to employees of working at the firm (We live a balanced life, we all share in the success of the firm, etc.); and the things they consider to be “big mistakes” (a bad attitude, wasting time and money, etc.). Whether you are hiring now or later, you need to understand what makes a great employee at your firm. If you don’t, the turnover is going to cost you years of success.

Section Eight: What’s In It for You?

The eighth section is about what the firm will yield for its owners. Who are the owners, and how do they think like owners? The owner should document both the current and future ownership structure of the firm, who the current owners are, how new owners will be chosen and groomed, and how equity shares will be allocated and financed.

What’s more, having an “owner’s mindset” is essential, both for the founder and for anyone who would become an owner. Each founder will have their own list, but we believe that qualities such as commitment to the common goals of the firm, unselfishness, self-discipline and leadership enable all firm owners to maximize their contribution to a firm’s success.

Build on a Strong Foundation

Taken together, the answers to these eight sections create a common goal for owner-advisors, strategic partners and their employees, and a road map for how the firm should be set up and grow. Armed with these answers, the answers to other related questions become clear: the best custodian or BD, the most advantageous location for an office, the kind of clients to attract and how to attract them, what services to offer, whom to hire and when to hire them.

Owning an independent business is very different from working under someone else’s wing. It can also be much more rewarding, particularly if you get your business started on a strong foundation from the beginning.