Many financial planners and advisors do a great job for their clients. But do they invest enough resources in a good business plan that will drive the long-term success of their individual practices? A business plan that puts resources and creates strategies for client management, regulatory complexities and the leveraging of technology will greatly assist financial planners and advisors in achieving their future success.
Maximizer Software recently commissioned a study entitled Key Trends in Wealth Management Business Practices (Key Trends) that highlights the challenges financial planners and advisors will need to deal with — and what the good ones are already doing — to meet these challenges. The key findings focus on client management and technology, which you would expect from a company providing solutions to these challenges. However, a more detailed read of the data suggests items that everyone should consider in their business plans.
First, focus client management in the areas of client attrition rates and new client growth, which will grow your overall practice revenue. The Key Trends report shows that top advisors and planners have low attrition rates and strong new client growth, which makes them bullish about their growth of assets under management and administration this year. According to the study, client attrition rates are 10% in Canada; and 37% of Canadian advisors expect to see a 10%-20% growth in revenue for 2014.
This data is further supported by many analysts who suggest that the big stock markets, such as those in the U.S. and Germany, have reached maximum asset levels and there will be greater growth opportunities in the mid-level markets, such as those in Canada, over the next few years. So, review your business plan and create activities to reduce your client attrition and increase your number of new clients to take advantage of these growth opportunities.
(A special note on online client communication and prospecting: If you haven’t fully implemented a program yet to deal with the new Canadian Anti-spam Legislation (CASL), you need to. Keep in mind that although CASL refers to “spam”, the law is drafted so that it applies to a much broader array of messages than would normally be regarded as “spam.” You need to understand fully the requirements to avoid getting fined.)
This focus of client management sounds very simple, but many advisors and financial planners are so focused on their work that they do not allocate sufficient resources to business development.
Second, the Key Trends report finds that 68% of advisors consider technology a top priority for this year. With the increasing business and regulatory burden, especially on small practices, your business plan needs to focus on ways to leverage technology. Technology has been used traditionally to automate repetitive low-value processes, but it can also be used for customer relationship management (CRM) and client prospecting, with many Internet-based services offering new ways to reach the younger client.
Moreover, automating processes will free up more time for high-value client management activities. For small independent firms, the cost of technology and right-sized solutions has never been lower and more available, respectively. If you ply your trade through a larger dealer, inquire about its technology investment plans and how you can leverage these tools to reduce your burden. Furthermore, ensure that they can meet the needs of the future so that you can as well.
It’s also noted in the Key Trends report that 26% of Canadian advisors consider “keeping up with regulatory change” a strong obstacle to growth. Financial planners and advisors need to be proactive in shaping regulatory change by working with advocacy membership bodies to prevent regulatory burden at the policy stage and before the rules are drafted.
As a result, you need to invest some time in your business plan to understand and participate in regulatory issues. For existing regulations, ensure you and your dealer have integrated systems and processes to handle the increasing complexity of compliance tracking and documentation. A good, integrated CRM system can help you deal with client communication and documenting the corresponding compliance activities.
The pressure on the business model of Canadian financial planners and advisors will continue to increase. The competitive requirement of a value-added proposition of great advice and service to clients will only be enabled by ensuring an optimized business practice. Prioritizing resources in your business plan to focus on client management, to deal with evolving regulatory complexities, and finally, leveraging technology, will ensure that you’ll be a survivor in an increasingly complex and regulated advisory channel.