One of the struggles for the financial advisory sector has been how to increase profitability and productivity. There isn’t a “one-size-fits-all” product or answer.
Growing profitability and productivity requires advisors to run their business efficiently. As business owners, independent financial advisors need to be assured that the systems in place create a seamless flow of work, with few interruptions (if any). Many advisors try to identify “true” costs and revenues by product and service line (e.g., investments, fiduciary, trust, banking, custody) in order to clarify which products add to the profit margin. Some wealth managers may be assessing the cost to serve various accounts to identify well-performing businesses, while also analyzing individual client relationships across different offerings. In addition, for some wealth managers, advisor profitability is under review. In short, assessing profitability is taking place along three primary dimensions: product, client and advisor profitability. Here’s how some of the best in the game do it:
Delegate: Top producers know that they need to focus on revenue-generating activities. By delegating everything else, they’re able to protect their time and spend it only on tasks that move the needle for their firm.
Hire another advisor: Bringing in another advisor can help you shift lower priority clients, delegate non-revenue tasks and bring in new business. New advisors can learn about your firm by helping clients with retirement planning and other regular tasks.
Outsource: Elite advisors understand that everyone has a specialty and bringing in experts in marketing, content production and administration can help them (and their office staff) focus on serving clients and bringing in more business.
Segment their clients: At some point, a growing firm needs to identify top clients and prospects, and determine how much each client costs to serve. Lower priority clients get less service in order to boost profitability and leave the advisor time to work with top clients.
Compliance: While it can be frustrating to deal with regulations and compliance concerns while trying to build a business, dotting the I’s and crossing every T will keep you out of regulatory trouble or arbitration.
In addition to the above, here are some other ways to improve profitability:
Structure an effective team: Define roles and responsibilities, provide staff with clear and actionable mandates, structure a communications process and assess current and future resource requirements.
Build a consistently profitable practice: Turn ideas into action by assessing practice costs, defining service levels, setting weekly goals, assessing profitability and assessing capacity.
Optimize client relationships: Understanding the needs of your clients allows for more effective cross-selling and increased client referrals.
Use client feedback to drive referrals and improve profitability: Knowing what your customers think about you and your company is critical to your success. As a business owner and financial professional, you need to find out and understand how clients feel about their experience dealing with you, your staff and your company. By identifying the needs, wants and expectations of your clients, your business is able to maximize customer satisfaction and retention. The most satisfied clients are said to be the best for any business, including the independent financial advisor. Satisfied clients tend to be loyal and will, most likely, pass your name on as a referral to family and friends. Proactive financial advisors should conduct client satisfaction surveys on a regular basis – once or twice a year – to gain a better understanding of where they need to focus their efforts, and how to follow through. Survey Monkey, an online provider of web-based survey solutions, says being consistent about soliciting and analyzing feedback is crucial if you want to deliver great results.
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