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The Five Biggest Ways Your Practice Needs to Change

October 7, 2014

by Bob Veres

Building data integrations across your software stack – High priority

Too many advisors are leaving too much efficiency on the table because they’re paralyzed by “overchoice.”  All of a sudden, new mobile technologies, cloud offerings, venture-capital-backed software introductions, gizmos and gadgets are clamoring for your attention, and the easiest thing to do is wait for a sign from God as to what you should buy or replace in your office systems.

There’s no reason to wait.  Younger advisors are using Precise FP to allow clients to enter their own data, and ByAllAccounts, Yodlee  or one of the other account aggregators to pull in all the account information.  You need a CRM system that will tie it all together – Redtail, Junxure or XLR8 are popular and come with all the necessary integrations – and the data will flow, without any need to keystroke, into your planning program and your investment-account management platform.  Then, if you have a paperless system and a forms program like LaserApp  that will automatically pull client data into the proper fields for all your client paperwork, suddenly you are doing very little keystroking, which is a rote chore unworthy of you and your will take another step forward with a new program called Genesis Smartware (still about to be rolled out to the general advisor population) from the Fox Financial Planning Network

Going to the cloud – Necessary eventually

Cloud-based software is all the rage and you can see why.  You can work remotely, the updates happen automatically and when was disaster planning ever so easy?  Just find the nearest coffee shop that has WiFi access and you’re back in business.

But if you still have servers, chances are you still have a lot of legacy spreadsheets, quirky software, one-off tools and a lot of data that would have to be migrated to an online system.  There’s no hurry rushing to the cloud just to, well, be on the cloud.

The software products that are not cloud-based either will be soon or they won’t work with some future operating system, so you should ask the vendors hosted on your server what their plans are. 

Meanwhile, this is a good time to start exploring a hosted solution like those provided by ExternalIT  and True North Networks , which will put everything on your servers on their servers and package up all your IT services in one monthly fee.  Presto!  You’re cloud-based, and you can also get some consulting on how to tie all your software together.

Marketing to the next generation – High priority

This is one step below “urgent” only because most practices I’m familiar with can survive on an aging client base for another seven to 10 years without suffering significant diminution of revenues.  But if you want your firm to survive long-term, it will need to have a healthy, diversified portfolio of clients.

When Accredited Investors in Minneapolis recently projected its AUM growth over the next 10 years, the conclusions were disturbing: the client base was aging, and based on who the firm was attracting, a greater percentage of the firm’s clients would be retired each year.  AUM growth would slow, then gradually contract, then contract rather quickly 10 years out.

Of course, the problem is that many established advisors don’t know how to market their services to the Gen X/Y cohort, which to them is an alien species.  Moreover, how many 30-year-olds are able to meet their $2 million minimum?

So how do you need to evolve?  Step one is to hire younger advisors in the firm – and give them meaningful responsibility to market and service their age-group peers.  If you have younger staffers who are mostly pushing paper around, include them in client meetings and turn them loose to bring in new clients.

Step two (actually should be done at the same time as step one) is loosen up your client minimum.  Accredited Investors created spreadsheets which looked at the net present value of that 30-year-old client who was earning $350,000 a year and saving more than half of it, versus the aging decumulator with a $2 million nest egg.  Any reasonable assumptions show that a young high-income saver is worth more, over the life of the relationship, than a retired couple with nothing better to do than stop by your office when they get bored.  If you don’t believe it, look at the clients you initially took on, who built your firm to where it is today.

Creating a more interactive planning experience – Urgent

This is related to the previous item, of course.  I find it interesting that the financial services profession has discovered that women can be clients, but in fact several different trends have conspired to raise the number of women knocking on advisors’ doors.  The Greatest Generation couples, and to some extent the Baby Boom couples, tended to designate the male as the financial/investment decision-maker.  But now those males are dying off and the women are left holding the reins – and looking for a professional to whom they can relate.  At the same time, Generation X and Y women aren’t delegating their decisions to anybody, and they’re starting to reach the stage of their lives where they, too, are looking for a professional with whom they can build a relationship.

And these women have one thing in common: they want an advisor who, instead of telling them what to do, will serve as a thinking partner and co-create their financial plan with them.  They want collaboration, not somebody to handle everything.

Here’s the punchline: this also happens to be what Generation X and Y men want.  The women are teaching us how the next generation wants to be serviced.

What, exactly, is an interactive planning experience?  I recently wrote about one advisor who, I think, has created the friendliest, most enjoyable initial client onboarding experience I’ve ever seen.  Send me an email and I’ll send you the article describing how she does it, but the Cliff Notes version is that she has multiple meetings with clients, pulls in all the financial information through aggregation software (saving a lot of tedious form-filling), she goes through an iterative process where clients articulate what they want to happen in their lives, and then get many chances to refine it, define it, and put a dollar value on it.

Then she pulls up the planning software, with the relevant data already input, and lets them drive it.  They create their financial plan, asking questions, asking for advice, and she becomes their thinking partner as they decide what they can afford and how to improve their chances.

That’s the future of financial planning, and it’s far more fun and interactive for clients than what most advisors do today.  And here’s the bonus: clients are much more likely to refer their friends and neighbors to you when they’ve enjoyed the initial experience, than when the initial experience felt like a root canal.  Your referral rate will skyrocket.