We’ve often said that the role of an advisor is to offer clarity, insight and partnership to their clients. As your business partner, Loring Ward strives to provide those three things to you as well. You’re likely bombarded by a deluge of emails on the topic of practice management, and Google could yield over 3,700,000 links. So what really matters? Where should you focus your efforts in building and managing your business?

Over the past several weeks, I’ve attended a number of practice management events hosted by our partners including TD Ameritrade, Schwab, Fidelity and DFA. I’m constantly scouring the media, industry research reports and related resources to identify trends, best practices and insights that could help you deliver a better client experience. As you’ll see in the screenshot below, my desktop looks like a Bloomberg terminal — but instead of trading stocks I’m researching the best ideas I can find.
Practice Management Desktop
We’re going to be addressing a number of areas and trends at our National Education Conference this month ( I thought I’d share a preview of 10 areas we’re following…

  1. Growth (organic): On average, firms could double in size within the next 5–7 years (3-year trailing growth rates range between 10-15% annualized, according to DFA, Fidelity and Schwab). The primary engine for growth continues to be existing clients (referrals, new assets) and COIs, in that order. Only a handful of firms are currently dabbling in new segments such as small or online-only accounts.
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  3. Growth (through acquisition): It continues to be a seller’s market with buyer-seller ratios as high as 100:1 in metropolitan areas. Larger firms ($1B+) generally have an internal owner dedicated to acquisition efforts as it takes significant time and resources to identify, acquire and operationalize any acquisition. The best approach for advisors seeking to grow through acquisition is to network through professional organizations (FPA, NAIFA, NAPFA, CFA), their broker-dealer or their broader professional community (e.g. local rotary chapter). A seller’s ultimate decision is emotional — similar to how your clients make decisions. Cultural and philosophical fit are also paramount.
  4. Challenges of Growth: Strong growth has arguably led to a few challenges reported in the DFA study, such as systematizing processes/managing technology and recruiting/hiring employees. Other studies listed these as top challenges as well. However, since our team provides many of the back office staffing and processes, those two areas should be less of a concern for firms partnering with us. For front office workflows, Redtail CRM now has our
    Design | Build | Protect workflows available (beta) to help firms scale their businesses more productively while delivering a more consistent and compelling client experience. By deploying a “diamond-team” structure with shared client responsibilities, firms can scale much more efficiently:
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  6. Scale/Productivity: One Wealth Advisor should be able to support $70M-$80M in AUM (@ ~$1M average HH size) assuming they’re truly leveraging all of Loring Ward’s services as their TAMP partner. A Wealth Advisor is defined as one who is practicing financial planning in conjunction with a broader expert team of COIs.
  7. Top Challenges: Firms continue to identify lead development, marketing strategy and differentiation as top challenges. Many of the events I attended were heavily weighted towards programs helping advisors build segments and client stories. By simply utilizing the exercises in our 360 Referral Strategy, firms can address all three areas concurrently. Moreover, Fidelity found that top performing firms are twice as likely to use client stories/profiles as other firms.
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  9. Pricing/Fee Compression: Published fees continue to stay stable at 1% for the first $1M (advisor fee only). On average, the effective fee is 74bps (revenue/average assets). Not surprisingly, only 8% of firms that offer financial planning and wealth management were concerned about fee compression. Investment-only firms were generally more concerned about fee compression. Hybrid pricing, retainer-based models and project/hourly approaches are still a sliver of the overall revenue mix. But according to Schwab’s recent survey, firms expect the retainer model to grow significantly in the next five years.
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  11. Client Experience/Service Models: Firms don’t really differentiate between basic, investment-centric service offerings and more comprehensive wealth advisory offerings. Clients receive largely the same services and advice. As firms scale, this is an area that needs to be rationalized such that the larger clients aren’t subsidizing the time you spend with smaller clients.
  12. CRM, Financial Planning & Workflows: Firms with 10 or more defined workflow processes (think Design | Build | Protect workflows in Redtail CRM) spent 12% more time in client- and prospect-facing activities and had 2% more organic client growth (DFA). According to both Fidelity and DFA, 82% of firms use CRM, with Redtail as the leader. According to DFA’s study, 53% of advisors use MoneyGuidePro for financial planning.
  13. Small Accounts/Robo Offering: Contrary to popular belief, 80% of younger clients (under 35) want to meet with their advisor face-to-face (DFA Primary Research). But they also want a streamlined online experience as well. Remember, Loring Ward’s online quarterly reports, the MoneyGuidePro Smart Portal and email support are far ahead of what most advisors provide. We effectively have a ‘robo’ offering for advisors already in place today.
  14. Focus: In a recent video shoot with Chip Roame of Tiburon Research, we asked him about ETFs, robo-advisors, fee models, etc. What has worked in industries like airline travel, coffee, retail clothing, online trading and computing translate equally well to the advisory space. You’ll get the full story at NEC 2015 along with perspectives from our executive team on how we’re helping advisors innovate.

So what’s the bottom line? What matters now is what’s always mattered. The lifeblood of your business is your clients. Many of the “new” trends have actually been around for decades. Companies that have done well and even thrived in changing industry environments like ours are ethically-driven and continually strive to deliver an exceptional experience. Understand your weaknesses and build on your strengths — just ask Amy Purdy, one of our NEC guest speakers. That can be the secret sauce to your advisory business.