Financial advisors focus so much of their time planning their clients' retirements, but often neglect the big picture when it comes to their practices and their futures, according to Matt Matrisian of Genworth Financial Wealth Management. That topic is the subject of Matrisian's new book, The Power of Practice Management, which covers ways that advisors can manage their business more deliberately. Here, he talks with Managing Editor Lorie Konish on how advisors can improve.
1. How can advisors refine their approach to their business?
It really depends on what the advisor feels like he or she needs to work on. Each individual business is unique, and each advisor is at a different stage and maturity. We try to focus on five critical areas within a practice. The first three are business strategy and planning, business development and growth, and human capital. How are you building expertise within your firm, making it a self-sustaining entity? The fourth one is optimizing your operations. How are you building leverage and scalability to enable and also to maximize value? The last one is realizing that value at the end of the dayhelping advisors to think about succession planning.
2. So really addressing these practices from the beginning all the way to an exit?
Absolutely. For example, a lot of advisors have done a fantastic job building efficiencies in their businesses and leveraging human capital. But historically they have grown through market appreciation and organically by referrals. And now they're looking at it and saying, "Well, market appreciation over the last few years isn't all it has been cracked up to be." And referrals probably aren't what they used to be either, because of the uncertainty in the market and lack of consumer confidence. So how do I build business development within my firm to drive growth over and above what I have had historically?
3. What are some of the ways advisors can best use client feedback?
The simple act of asking somebody for their feedback actually engenders a better sense of loyalty and a better connection with that individual. If I came to you and said, "Can you tell me how my presentation was?" you'll probably feel more connected to me. We really encourage advisors to solicit feedback on a regular basis from their clients, whether that's from individual client meetings, building an advisory board and soliciting feedback more formally, or actually surveying clients on an annual or biannual basis. And if there are any gaps in your service model, we address those gaps and try to limit them as much as possible.
4. Are there typical blind spots that you see when you work with advisors on practice management?
There are lots of them. Often I find that advisors are happy with their business, they're making a decent living, and there's not much motivation to drive change within their organization, especially if you remember the average age of advisors is 57. They're at the stage of their career where they're not as hungry or excited to reinvent themselves. When we think about some of the recurring red flags, we find that advisors are working with too many clients. They have a lot of legacy clients within their practice. They're not able to service all of their clients appropriately. And generally, their top-tier clients are subsidizing their bottom-tier clients. So being thoughtful about how are you engaging your clients and offering a service model in a profitable way is keenly important. One other red flag involves the individual advisor's financials. Are they managing true business performance within the practice? Are they looking at regular key performance indicators in their business and benchmarking their firm versus other competitors in terms of size and scope of their practice, whether it's in terms of growth rate, clients per advisor, revenue per client, [or] profitability per client? I strongly encourage advisors to think about certain key performance indicators and then set goals around them.
5. So advisors almost need the same type of advice that they give their clients?
That is very accurate. It's so funny how the vast majority of advisors in our business talk to their clients about retirement planning. But when advisors think about retirement planning, they don't really think about their business as part of their plan. Some of the advisors that we work with have thought it through enough. In fact, I talked to an advisor yesterday, [who] said, "You know what, a couple of years from now, I want to be sending you a postcard from some river in Wyoming where I'm fly fishing. I don't want to still be doing this, but I need my business to be able to provide me enough equity, enough capital that I can retire and have the lifestyle that I want to lead." So few advisors actually think that way.
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