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An Advisor’s Year-End To-Do List, Pt. 2: Technology and Your Budget

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Last week we discussed the first two items of an advisor’s end-of-year checklist (see An Advisor’s Year-End To-Do List, Pt. 1: RMDs and Harvesting). Please note that the list is not all inclusive. In this post, we will look at items three and four on the list. 

To review, the EOY checklist contained the following five items:

1)      RMDs

2)      Tax Loss Harvesting

3)      Examine Budget for Following Year

4)      Reevaluate Technology

5)      Refine Marketing Plan for Following Year

Your Budget

One of the most important factors when operating a successful independent advisory firm involves managing expenses and projecting revenue. In other words, creating and adhering to a well-constructed budget is of paramount importance. The budgetary process should begin around September-October each year. If your deadline were September 30, then the budget would include a revision of the final three months of the current year and a full projection for the following year. If you have not done this, it would be wise to do so before year end.

Here are some thoughts to consider when creating your budget. We will assume you are using an Excel spreadsheet where each column is a different month and each row a different item. You should also consider having three columns per month, with one for the projection, one for the actual number, and one for the percentage of total (i.e., percentage of total expenses for each item). 

The top portion of the budget should contain all business expenses. You might divide these into fixed, variable and debt payments. Another approach is to categorize your expenses. Here is a list of a few expense categories to consider:

1)      Office (e.g., rent, utilities, etc.)

2)      Marketing

3)      Supplies (e.g., paper, furniture, etc.)

4)      Technology (e.g., subscriptions, purchases, etc.)

5)      Employee Benefits (e.g., retirement plan, HSA, etc.)

Whichever method you choose, make sure you capture everything. When projecting your income, consider dividing it by type (asset management fees, financial planning fees, etc.). After you have listed your expenses and income, the next few rows might contain:

1)      The net result per month (profit-loss $ and %)

2)      A running subtotal (YTD profit-loss)

3)      Time elapsed and progress toward your year-end goal

Your Technology

Ideally, each piece of software that you use should integrate with each other and with your custodian to save time and improve efficiency. Here are a few steps to consider when assessing your needs:

1)      Get a categorized list of all technology vendors from your custodian.

2)      Determine your technology needs. For example, you will need contact management software (CRM), financial planning software (if you do planning), investment research software (if you do research), and so forth.

3)      Based on your specific needs, get a price for each potential option. Has your custodian negotiated any discounts? Which ones integrate with your custodian and with the other software you use?

4)      Create a preliminary list with a few possibilities in each category you will need and arrange an online demonstration.

5)      Make your final selection (see the following paragraph).

It may be a good idea to create a matrix in Excel with the features you need. Each column could be a different feature and each row a different product. This will help you keep accurate information on each product. Be careful when adding new technology. If you add too much, too quickly, the learning curve may be too steep. It may be best to add one, learn it, then add another, and repeat.

Next week, we will finish the EOY list by discussing the marketing plan for next year.

Until then, have a great week and thanks for reading!


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