Ask financial advisors if they have thought about business planning, and most will answer “yes.” Ask that same group of advisors if they have actually taken the time to create a written financial advisor business plan and, more importantly, follow it, and the majority of them will most likely answer “no.” Those who most likely answer “yes” will be top financial advisors.
A business plan has many functions. It’s a tool for understanding how your business is put together. You can use it to monitor progress, hold yourself accountable, and control the business’s fate. Of course, it’s also a sales and recruiting tool for attracting key employees. A well thought-out and executed financial advisor business plan creates a roadmap to enable you to ultimately get from where you are today, to where you want to be. It lays the groundwork for successfully growing your firm.
Blogger Michael Kitces recently wrote about putting together a one-page business plan: For many advisory firms, a simple “one-page” financial advisor business plan may be the best output of the business planning process – a single-page document with concrete goals to which the advisor can hold himself/herself accountable.
Why should you make planning a priority? According to Financial Planning, top financial advisors spend the same hours at work as low- and mid-level producers, but use time differently. They also think through and document who they want to serve and how to reach those clients. They plan and, then, they act. Finally, 80 percent of financial advisors producing $1 million or more have written plans versus seven percent of advisors who are making $75,000 or less.
Are you ready to start writing your plan? Like financial planning, creating a business plan – whether it’s one page or several – means taking a good look at your business to determine where you are now, where you want to be, and how you will get there.
Kitces offers six key areas to define in a one-page financial advisor business plan:
Who will it serve? This is the most basic question of all, but more complex than it may seem at first. The easy answer is “anyone who will pay me.” , In practice, however, one of the most common reasons a new advisor fails is their initial outreach is so unfocused, there’s absolutely no possibility to gain any momentum over time. In the past, when you could cold-call your way to success ,by just trying to pump your products on every person who answered the phone until you found a buyer, this might have been feasible. If, however, you want to get paid for your advice, itself, you need to be able to demonstrate your expertise. Since you can’t possibly be an expert at everything for everyone, you have to pick someone for whom you will become a bona fide specialist. In other words, you need to choose what type of niche clientele you’re going to target to differentiate yourself. Notably, this problem isn’t unique to new advisors; many established advisors ultimately hit a wall in their business, in part because it’s so time-consuming trying to be everything to everyone, that they reach their personal capacity in serving clients earlier than they “should.” Focusing on a particular clientele – to the point you can anticipate all of their problems and issues in advance – allows the business to be radically more efficient.
What will you do for them? Once you’ve chosen who you will serve, the next task is to figure out what you will actually do for them – in other words, what services will you deliver? The reason it’s necessary to, first, figure out who you will serve, is that the nature of your target niche clientele may well dictate what kind of services you’re going to provide them.
How will you reach them? Once you’ve decided who you want to reach and what you will do for them, it’s time to figure out how you will reach them – what will be your process for finding prospective clients you might be able to work with? If you’re targeting a particular niche who are the centers of influence you want to build relationships with? What publications do they read, where you could write? What conferences do they attend, where you might speak? What organizations are they involved with, where you might also volunteer and get involved? If you’re going to utilize an inbound marketing digital strategy as an advisor, what are the topics you can write about which would draw interest and organic search traffic and what giveaway will you provide in order to get them to sign up for your mailing list, so you can continue to drip market to them? In today’s competitive world, it’s not enough to just launch a firm, hang your (virtual) shingle, and wait for people to walk in off the street or call your office. You need to have a plan about how you will get out there to get started!
How will you know if it’s working? Once you’ve set a goal for who you want to serve, what you want to do for them, and how you will reach them, it’s time to figure out how to measure whether it’s working. The caveat for most financial advisory businesses, though, is that measuring outcomes is tough because of the small sample size – in a world where you might have to reach out to dozens of strangers just to find a dozen prospects and then meet with all those prospects just to get a client or two, it’s hard to tell whether a strategy that nets one extra client in a quarter was really a “better strategy” or just random good luck that won’t repeat. As a result, in practice it’s often better to measure activity than results, especially as a newer advisory firm. In other words, if you think you’ll have to meet 10 Centers Of Influence (COIs) to get introductions, to 30 prospects, to get three clients, then measure whether you’re meeting your activity goals of 10 COIs and 30 prospect meetings and not necessarily whether you got two, three, or four clients out of the last stint of efforts. Not that you shouldn’t ultimately have results-oriented goals of clients and revenue as well, but activity is often the easier and more salient item to measure, whether it’s phone calls made, articles written, subscribers added to your drip marketing list, prospect meetings, COI introductions, or something else. So when you’re defining the goals of your business plan, be certain you’re setting both goals for the results you want to achieve and the key performance indicator (KPI) measures you want to evaluate, regarding your activities along the way?
Where will you focus your time? When an advisory firm is getting started, the role of the advisor-as-business-owner is to do “everything” – as the saying goes, you’re both the chief cook and the bottle washer. The challenge of needing to focus where you spend your time in the business never ends – as a business grows and evolves, so, too, does the role of the advisor-owner as the leader, which often means that wherever you spent your time and effort to get your business to this point is not where you need to focus it to keep moving forward from here. By making a proactive decision about where you will spend your time and also deliberately deciding what you will stop doing, it also becomes feasible to determine what other resources you may need to support you, in order to ensure you’re always spending your time focused on whatever is your highest and best use. In addition, the process can also reveal gaps where you may need to invest into and improve yourself, to take on the responsibilities you haven’t in the past, but need to excel at to move forward from here.
What must you do to strengthen (or build) the foundation to make it possible? What else needs to be done in the business in order to maximize your ability to make those business goals a reality? In other words, if you’re going to focus your time on its highest and best use in the business, what foundation do you need to support you to make that happen? If you’re a startup advisory firm, what business entity do you need to create? What are the tools/technology you’ll need to launch your firm and what licensing/registrations must you complete? Will you operate with a traditional office, from a home office, or run a virtual advisory firm? What are the expenses you’re budgeting to operate the business? If you’re an advisor who has hit a growth wall, what are the essential hire(s) you’ll make in the near future? Where/how else will you reinvest to get over the wall and keep moving forward? At the most basic level, the key point, here, is that if you’re going to execute on this business plan to move the business forward from here, you need a sound foundation to build upon – so, what do you need to do to shore up your foundation, so you can keep building? Remember the goal here is to do what is necessary to move forward- not everything; as with so much in the business, waiting until perfection may mean nothing gets done at all.
Summit Brokerage Services is part of Cetera Financial Group, RCS Capital Corporation’s (NYSE: RCAP) retail investment advice platform.
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