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A 6-Point Advisor To-Do List for 2015

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It’s been another banner year for independent advisors as the industry continues to grow by leaps and bounds. The bull stock market, combined with assets pouring out of wirehouses, has driven AUM to new levels; by most counts, there are now more ensemble firms than one- and two-advisor shops; and  a growing number of firms are somewhere in the process of transitioning the majority of industry AUM to successor advisors or outside firms. 

Of course, it hasn’t been all good news. This growth has driven demand for young advisors so high that it’s almost impossible to find anyone to hire. Regulators (the SEC, FINRA, and the CFP Board), have largely been ignoring the Dodd-Frank mandate to bring broker regulation into line with RIA regulation, and instead, are launching various “crackdowns” on independent RIAs.

What’s more, stock market highs and recent minor corrections are causing concerns among many advisors who are determined not to repeat the mistakes made during the run up to the 2008-2009 Market Meltdown. Here are our suggestions for steps that owner-advisors should take in the coming New Year to meet these challenges, and position their firms for continued success: 

  • Rediscover a Cohesive Vision
    We’ve noticed that when advisory firms reach a new level of success—such as many firms have today—their owners tend to lose their vision for where they want their businesses to go. Without a clear vision, not only is it hard to keep up the momentum that you’ve worked so hard to build, it’s very easy to make missteps and errors in judgment that can damage a business for years to come, or equally as bad, result in a business that you don’t want.

    If you find yourself with a larger, more successful firm than you thought possible, it’s time to chill out, take a step back, put a moratorium on starting any new initiatives and carefully consider where you want your business to go from here. Remember why you started your firm in the first place, and think about what you really want to get out of it now, and in the future. 

    There are no right answers here: you might decide to double your firm’s size in the next five years, or to stay at your current size for the foreseeable future, or to sell the business and retire. But wherever you want your business to go, nine times out of 10 it’s not going to get there without a clear vision and a realistic plan to get there.

  • Get Hiring Help
    As we said, it’s nearly impossible to find advisors to hire these days. So if your vision involves hiring more advisors to help you grow your business, you’re going to need professional help, and that means finding a good recruiter. The job market has gotten so tight and competitive that it takes a specialist to locate solid candidates. We don’t even do recruiting anymore: we find it’s way more effective to turn our clients’ needs over to a pro and help them screen the applicants that the recruiter comes up with. You also might want to consider that after the next market downturn, it will be a lot easier to find advisors. But if you just need to hire now, seek a professional.
  • Have an M&A Strategy
    This is really Part II to the above hiring step. If you’ve decided to continue growing your firm, be prepared to be disappointed by your hiring efforts, even with a recruiter. By “be prepared” we mean get ready to acquire a smaller firm or two to meet your growth plans.

    These days, we continually have advisor clients who want to buy this or that firm that has come to their attention. But without a well-thought out strategic plan for what kind firm they want and how an acquisition will fit into their business, they have no filter to decide whether any particular opportunity is worth exploring. Consequently, they usually waste a huge amount of time with no result. If you know ahead of time what you’re looking for, you can easily identify the deals that make sense and quickly make them happen. 

  • Find a Compliance Consultant
    With both the SEC and FINRA stepping up their “enforcement” activities, and even the CFP Board causing problems for financial planners, we believe independent firms today need help to be sure they dot their I’s and cross their Ts. The odds are just not in your favor to shoot from the hip anymore. Even a minor misstep these days can result in a big legal bill to sort it out, and potentially damage your local reputation. In the long run, it’s far less expensive to pay someone to help you prevent problems from arising.
  • Create a Marketing Plan
    The best time to grow an independent advisory business is in the aftermath of a major market correction: many clients will be upset and looking to make a change. But once the market starts to go down, it will be too late to start marketing.

    You need to have a marketing strategy and plan in place before the market turns, so that you can hit the ground running, with the right message to the right prospective clients—at exactly the time they want to hear it. That means you need to get work on it now.   

  • Start Stockpiling Cash
    To maximize your growth following a market correction, your business has to be in a position to take advantage of the opportunities. That means ramping up your marketing efforts, and expanding your business to onboard and service substantially more clients. In 2009-2010, we saw many firms turning away new clients because they reached capacity. Don’t repeat that mistake. We recommend that firms today bank 25% up to $1 million of revenues, to create a launching pad for growth after the downturn. 

We believe that these steps will position advisory firms to meet the new challenges and take advantage of the opportunities that will make 2015 a very Happy New Year.