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Four Steps to a Thriving Wealth Management Practice

Four Steps to a Thriving Wealth Management Practice

While the process can seem long and complex, advisors who lead their firms with conviction and embrace these four disciplines will achieve their goals much sooner than they think.

Today’s wealth managers must contend with clients distributing assets, a growing incursion of robo-advisors and mounting fee structure pressures, all while shepherding clients through the fluctuations of the market.

It can be daunting to simultaneously maintain high-quality levels of service, and confront the industry, managerial, and operational challenges that threaten to impede growth.

To avoid losing focus, financial advisors should embrace four practice management disciplines that will help them better serve investors and stimulate growth at the same time: sustainability, reliability, referability, and profitability.


Sustainability: The Foundation of a Business

Advisors should first ensure their practice isn’t simply a job, but a sustainable business that will survive long after they’re gone. To create a true legacy business, the practice can’t be dependent on the lead advisor alone to bring in new clients, serve existing ones and provide the investment management expertise. The business must be able to continue running without disruption in the event the advisor leaves, either temporarily or permanently.

To do that, advisors need to develop a franchise model that is transferable to others at the firm. That means identifying junior talent or key employees who can be trained in all aspects of the business so clients don’t detect any change in service in the advisor’s absence. It also means outsourcing parts of the operation, such as the investment management process, account aggregation or technology functions, that aren’t part of the firm’s unique value proposition. Delegating responsibilities frees advisors up to focus on existing client service and prospective client outreach.


Reliability: Building a Repeatable Model

The advisor’s business model should be process-driven and scalable so the staff maintains consistent service and clients know exactly what to expect. At its core, the pillar of reliability involves leveraging technology and building workflows to efficiently deliver a repeatable process. Advisors, for example, can take advantage of customer relationship management systems with workflow functions that allow employees to easily track their clients’ progress through various stages. This in turn delivers a consistent experience that allows advisors to establish service standards and manage client expectations for how they will work with advisors.


Referability: Sticking to the Right Audience

Advisors need to focus on targeting their ideal client to create more ambassadors for the practice among their client base. Engaging that ideal client leads to strong, long-lasting relationships that help sustain and grow the business, and results in fiercely loyal patrons who are more likely to refer others to the firm to drive growth. But in order to do that, advisors must establish a specific target market and create an ideal client profile. The key is to avoid the unprofitable, high-maintenance clients, and ensure that the time spent on each client is proportionate to the value he or she brings to the business. Advisors can use qualitative or quantitative approaches, or perform a segmentation analysis, to gain insights about that ideal client.


Profitability: Getting Ready to Reinvest

Once that ideal client profile is created, a firm can build a service model that maximizes profit by properly aligning existing clients with suitable product and service offerings, tying it all to the philosophy of the business. The idea is that advisors will engage with clients more consistently with measurable criteria in hand.

Advisors should understand how much it costs them to deliver services to their clients, and ensure their profit and revenue models are consistent with the services they’re delivering. They should evaluate profitability on both a firm-wide and on an individual account level, determining whether, for example, the top 20 percent of clients is subsidizing the other 80 percent. Firms should use the 40/40/20 rule as a framework, directing 40 percent of overall revenue towards direct expenses and 40 percent towards indirect expenses, leaving the remaining 20 percent for profitability.

Ultimately, a truly engaged client will evaluate the value of the advisory relationship independently of investment returns, allowing the bond to survive the ups and downs of the market. The business will grow over time and the base of satisfied clientele will grow along with it. While the process can seem long and complex, advisors who lead their firms with conviction and embrace these four disciplines will achieve their goals much sooner than they think.


Matt Matrisian is Senior Vice President and Director of Practice Management at AssetMark, Inc.

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