Measuring success as a financial advisor comes in many forms. Measuring practice management success for financial advisors is even more difficult.
To measure your practice effectively, it usually consists of several areas known as benchmarking your practice against similar practices. Benchmarking is a critical process in practice management and I encourage financial advisors to benchmark their practice every couple of years.
Measuring practice management success from a firm perspective
The landmark practice management study by ThinkAdvisor [AdvisorOne/ActiFi Pursuing Practice Excellence practice management study, 2012] revealed that 64.1% of advisors received practice management services from their broker-dealer in the United States.
A majority (65.65) of those advisors rated the practice management they received from broker-dealers as valuable or extremely valuable. The services they valued the most were:
Relationships are key
Practice Management is critically (and increasingly) important to the relationship between advisors and the institutions they work with. Practice Management themes include: Service, Efficient, Process, Time, and Financial Planning. Advisors want advice and best practices tailored to their needs and want someone to assist them in implementing improvements.
Financial Advisors said they will devote significant new investment dollars to sales and marketing, while advisor time spent is most weighted to client service. Practice management is becoming a critical part of the value proposition and firms are budgeting significantly to improve their practice management offerings to advisors. Practice management remains an immature area without clearly defined goals, budgets, staff and agreed-upon methods to measure the effectiveness of practice management programs. While almost all firms try to offer advisors help in any area they can, there is a need for specialization in terms of focus on specific areas of assistance. Most institutions currently deliver robust platform capabilities. Future differentiation will depend on their ability to help advisors leverage those existing capabilities versus simply developing more capabilities.
Five keys revealed from the AdvisorOne/ActiFi Pursuing Practice Excellence practice management study, 2012:
1. Practice Management is a relationship
It’s clear that practice management is critically important to the relationship between advisors and the institutions that serve them and will become increasingly so. It’s obvious why so many firms are investing in practice management, with two-thirds of advisors saying it’s critical to their relationship with their partners.
2. Define it
The definition of practice management is broad and varied, yet key themes emerge: service, efficient, process, time, and financial. However, advisors rank sales and marketing as the highest need. So there is an opportunity to expand the advisor’s definition of practice management to include sales and marketing.
3. Several areas
While sales and marketing is the individual sector that scored significantly higher than any other area in which advisors said they most needed help, all areas scored highly with even the lowest (operations and technology) hitting almost 40%.
4. Assist in implementation
While there are a wide variety of methods to deliver practice management services, advisors want advice and best practices tailored to their needs and want someone to assist them in implementing improvements.
5. Client Service
Time Management Advisors said they will devote significant new investment dollars to sales and marketing, while advisor time spent is most weighted to client service.
The most important goal
If nothing else changes and we carry on with business today, what is the one main goal of practice management that can make a difference? One thing executed above everything else that will make a difference, is coaching (training). Coaching advisors to “implement key practice management processes into their business.”
This is the one idea that is similar to when John F. Kennedy said, “Land a man on the moon and return him safely to earth before this decade is out.”
What are we trying to do? It is not several goals and programs, its one main goal. Until organizations and advisors figure out that in practice management, the goal is coaching and training, we can design create and implement concepts, solutions and ideas until the cows come home.
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Ask the top financial advisors in the industry in North America and the top 5% will have utilized some type of coaching to achieve their success. Without coaching and training, practice management is just a basket of ideas and concepts.
Just like coaching a hockey team. The goal is to prepare to play your system consistently, execute your system without compromise over and over from defense to offense until the other team makes a mistake or you score a goal. The goal is not to just score a ton of goals; the goal is to execute the systems repeatedly over and over, better than any other team (or advisor).
The legendary basketball Bobby Knight had a couple of great quotes that help capture the essence of coaching. Bobby Knight said:
“Most people have the will to win, few have the will to prepare to win.” “You don’t play against opponents, you play against the game of basketball.” “From a coaching standpoint, the greatest fear I’ve ever had - and it doesn’t take a Final Four to bring it out - is that in some way I might not have prepared my team as well as I could have.”