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Practice Management > Building Your Business

Is this the calm before the fiduciary storm?

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It’s an eerie feeling, and maybe you’re feeling it too. With all the discussion about the Department of Labor’s (DOL) pending legislation set to reshape much of our industry, things seems to have been talked out, ad nauseam. Now we wait.

Will commissions on annuity products be slashed in favor of a flat fee? Will broker dealers find themselves receiving a fraction of current revenues? Will advisors who are not dually licensed quickly become unable to sustain their business models? Will clients find themselves out in the cold, wondering where their advisor has gone?

Back in November 2007, I alerted all of our clients to the fact that the stock market was going to crash. Phone calls and emails were received with mixed reactions; some said I was crazy, others looked to me for next steps. I share this because the feeling I had just prior to those conversations was a similar eerie feeling to the one I have now. I looked around and said to myself, “Boy, things are going to be a lot different for a while.” In fact, when I called people, one of the first things I said was, “I hope I’m wrong, but I don’t think I am.” I wasn’t.

With the DOL legislation coming soon, there’s a quiet sense again that things are going to be very different for a lot of people for a long while. Revenues are likely to shrink, marketing budgets will probably be reduced, and staff cuts may be a strong possibility for a lot of advisors. That beautiful building you may own could begin to feel like a noose around your neck. I hope I’m wrong.

With change in the air, what steps might you consider taking to weather the storm?

Here are a few suggestions:

1) Get out of debt now. Use current cash flow to reduce your fixed costs. Whether the actual changes are severe or not, you’ll be in a better financial position either way if you lessen your debt load.

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2) Ramp up your planning process. If you’re not doing actual financial planning for your clients, consider starting. If you’re doing planning, find a way to charge for that expertise. Reliance on product commissions may become a fool’s game.

3) Become Series 65 licensed. Whether or not commissions go away, having a comprehensive wealth management practice better positions you to be the trusted, complete advisor your clients desire. By deepening your expertise in the markets, you’ll likely find more opportunities with each client, which increases the return on your marketing investment while creating multiple streams of revenue.

4) Look around for strategic partners. Maybe you and another advisor can pool your resources or form a working alliance. In addition, consider opportunities to work more closely with other professionals such as attorneys, accountants and insurance agents. In some cases, they may be interested in sharing office space with you and working more closely on shared client acquisition campaigns.

5) Schedule a time away from the office to brainstorm and dream. Consider how the comingchanges may be the best thing to ever happen toyour business. How might a uniform fiduciarystandard benefit you and your clients alike inways you may not have considered before?

Change is coming

Of course, I’m not sure how drastic the changes will be. Nobody is. But what you can do is get yourself ahead of any forced changes by building your business as if those changes are imminent. Waiting to see is one strategy, but moving forward intentionally is another.

Just as the markets crashed in 2008, things got better eventually, but they were not the same. Use this moment to propel yourself to a better position regardless of what happens “out there.” Do the tough work now, by getting clear on who you are “in here” as an advisor. You’ll be glad you did.