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How to Avoid 5 Common Practice Management Mistakes

Boston: “I’ve been in a coaching relationship for the past four years and I think I’ve got the practice management part of the business down,” Gerry said at our recent rainmaker retreat, “but I’m not growing. I feel like I’ve got a Ferrari in the garage that is never driven.”

I’ve heard Gerry’s Ferrari analogy before, but it seems it is becoming more frequent of late. What is going on? Do financial advisors have such an abundance of affluent clients that now they are compelled to focus exclusively on practice management in order to service them? Not likely.

Growth, as well as practice management, should be an active component of every business model. Our affluent investor research has created a roadmap to help advisors attract, service, and develop loyal affluent clients. In my book, How to Build a 21st Century Financial Practice, I outlined a business model consisting of four components, and I attempted to explain how they were inextricably linked. Apparently only part of my message resonated, because practice management has taken on a life of its own, sometimes at the expense of growth.

As I explained to Gerry, the solution is quite simple: Develop and follow a comprehensive business plan. And I’ve yet to see a business plan that didn’t have a growth component.

Business growth rarely occurs by happenstance. It requires thought, and to borrow Steven Covey’s phrase, that “begins with the end in mind.” And those thoughts need to be put into writing. In this manner, practice management will serve three distinct purposes—servicing existing clients, strengthening the loyalty of existing clients, and acquiring more clients. In other words, it’s the fabric that is woven throughout every aspect of your business.

Sometimes advisors pay too much attention to practice management. If you can only avoid a handful of common mistakes, you can save an enormous amount of time; this time savings will allow you to spend more time on marketing and growth of your business.

The following are five common practice management mistakes:

  1. Not linking practice management to servicing existing clients, strengthening client loyalty, and acquiring more clients. In effect, practice management must be linked to your business plan. Granted, this assumes that you have a written business plan. If not, you better get busy. If you have a business plan, make certain that your practice management processes have a direct impact on your marketing efforts. Our research tells us that loyal affluent clients are a rainmaker’s gold mine; therefore make certain that your client loyalty process is connected to your business development process. You can accomplish this, for example, by sourcing names when schmoozing your affluent clients and then transform client appreciation events into small social events where affluent clients bring a guest (the name you sourced).

  2. Failing to prioritize procedures. I have never doubted the importance of practice management (remember, I wrote a book on the topic), but it must include prioritizing policies and procedures—which directly impacts what people do on a daily basis. Not everything is equal. Every advisor knows that errors can be very costly; a worthwhile exercise is to take the major components of your practice (business development, operational efficiency, wealth management, and client loyalty) and outline all the processes for each. This will provide the platform from which you can assign areas of responsibility and then prioritize the “fixed daily activities” within each component.

  3. Getting lost in process overload. This is often a symptom of not linking practice management to the business plan. When policies and procedures begin to take on a life of their own (excessive paperwork; duplicate procedures, redundancies, etc.), two questions need to be answered. Is this particular “process/procedure” necessary for delivering the services you promised in an efficient and effective manner? And is this particular “process/procedure” in any way interfering with growth?

  4. Developing avoidance patterns. We are all creatures of habit. That said, we tend to gravitate toward consistently engaging in activities that are in our comfort zone. Herein lies the irony; very few advisors enjoy the operational aspects of their business, while most advisors enjoy the adrenaline rush associated with acquiring a new affluent client. Yet for some reason, as distasteful as paperwork might seem, most advisors don’t have to go outside their comfort zone to handle operational issues. Yet rainmaking activities often force advisors outside their comfort zone. Consequently, advisors get involved with tasks that should be delegated and unwittingly develop avoidance patterns—a bad habit. No practice management activities should ever interfere with a financial advisor’s marketing activities!

  5. Lack of leadership. Elite financial advisors are leaders. They take a leadership role within their practice, with their clients, centers of influence, referral alliance partners, and prospects. As for leadership within the practice, this involves having a vision for the practice, creating a business plan, establishing annual goals, defining areas of responsibility, effective delegation, communicating clearly, and consistently inspecting what is expected. In other words, leadership is hands-on work.

Gerry was a quick study. He realized that affluent client acquisition had to become a priority and that his practice management efforts were not wasted; they just needed to be refined so that they incorporated the business development component.

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