Businessman in front of giant percentage sign / DNY59

This article appears in the November 2022 issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.

“Coach’s Forum” is a place in which you can ask your questions, tell your stories or give your opinions on any aspect of practice management. For each column, George selects the most interesting and relevant comments from readers and offers his advice. Our objective is to build a community of people with a common interest in making their financial advisory practices as effective as possible.

Advisor says:

How do I make my business more profitable? My revenue has doubled in the past 10 years, but I’m sure not taking home twice the money. With increased costs, lower fees and overall inflation now accelerating expenses even further, my enthusiasm for the business is fading. Any advice?

Coach says:

There are only two ways to make your business more profitable: increase revenue or reduce expenses — and you can do both. And, since you are good at the first one, let’s focus on the second: reducing expenses. Before looking at the “what” and “how” of lowering expenses, let’s consider what not to do:

Don’t make across-the-board cuts that penalize what is working well for you. For example, reducing one of your largest expenditures — staff costs — by 35% is likely to lead to a deterioration in client service, a demoralized team and potential loss of key people.

Don’t focus only on the short term. While some costs can be temporarily curtailed, many will creep back to support the ongoing growth of your business. You want to make sustainable changes to avoid another round of cost cutting when the next crisis hits.

Don’t adopt a “no new expenditures” policy. It costs money to run a business, but it also costs money to remain in business. The best example is technology, which requires ongoing investment or you begin to lag your competition and client expectations.

Don’t put your business at risk. Cutting back on cybersecurity contracts is dangerous, as is restricting pay raises for staff, which might lead to the departure of a key employee. Ask, too, how your proposed cuts might diminish your value proposition in the eyes of clients, centres of influence and staff.

So, what should you do?

Do take stock of the current reality. Start by reviewing the past six months’ bank and credit card statements. Create a spreadsheet that shows how much you spend, what you spend it on and how often. Even small expenditures (like the four or five $10-per month online subscriptions you never use) can add up.

We consider a practice to be “efficient” if no more than 35% of total revenue (after dealer share) is allocated to overhead, such as rent, staff salaries and other operating expenses (excluding advisor compensation).

Do manage your variable costs. Variable costs should generally rise and fall as revenue increases and decreases, although not necessarily in lockstep. Calculate what percentage of revenue each significant variable cost typically represents. Use these historical percentages to set benchmarks for keeping future costs in line with revenue.

Our “efficient practice” model pegs advisor compensation at around 40% of total revenue. This amount represents the cost of providing “advisor” services and does not include what you are entitled to as the owner of your business. “Owner compensation” equates to profitability and the minimum profitability target is 25%.

Do scrutinize your fixed costs. Becoming complacent about fixed costs is easy because they often reflect long-standing relationships or contracts. Periodically check if there is a better deal for some of your major fixed expenses. Don’t be afraid to ask your current supplier for lower pricing.

Do make a plan. Evaluate where your business is now and where you want to take it. You need a well-thought-out road map to properly forecast revenue, expenses and profitability.

With your plan in hand, move onto specific cost-cutting measures in various areas of your business. Here are a few:


Remembering the caution regarding cutting employee expenses drastically, there are ways to maximize your team’s efficiency.

  • Workflow analysis. As practices grow, they inevitably become more bureaucratic. Outdated processes, unnecessary activities and duplicate efforts can creep in. A workflow analysis of key staff tasks can reveal opportunities to tighten up processes and eliminate weaknesses.
  • Job sharing. One advisor we know was challenged to find a qualified replacement for a key employee who decided to retire. When we changed the requirement from full-time to part-time, several good applicants became available. Two part-time people were hired at a cost significantly lower than that of a full-time employee, with the added benefit of two staff members cross-trained and able to cover for each other, if necessary.
  • Outsourcing. The rapid expansion of the “gig economy” has created a workforce that can provide on-demand services for your business. Tasks I know advisors outsource include:
    • social media (highly recommended)
    • client and marketing communication
    • financial planning
    • portfolio modelling and rebalancing
    • compliance
    • human resources
    • seminar, webinar and podcast setup

Increasingly popular are “virtual assistants” who can perform tasks such as managing your online calendar, preparing spreadsheets and presentations, formatting reports and creating marketing material. I use a number of freelancers with specialized skills from websites such as, and Finding the right match takes trial and error, but you will be surprised at the relatively low cost to get some significant tasks done. The added advantage is turning some fixed staff costs into variable costs.

Client Segmentation

Every client relationship should be a profitable one. To determine the efficiency of your client segmentation:

  1. Rank every client from top to bottom according to the revenue they bring to your business annually
  2. Segment your list by some meaningful revenue number, such as $10,000+; $5,000–$10,000; $2,500–$5,000, etc.
  3. Compare the cost of the level of service you provide to each tier (for example, your time, staff time, etc.) to the revenue generated. Look for ways to reduce service costs without compromising service, such as by giving clients direct access to their accounts. There will always be situations in which you overdeliver for some clients relative to their revenue. That’s OK — just make those the exceptions, not the rule.

Upgrade technology

Software and hardware are never-finished costs that are essential to your business. Therefore, you must accept that these are investments, not expenses. Do an inventory of your technology and a cost/benefit analysis for anything that might require an upgrade. Create a schedule for implementation (perhaps over a couple of years) and look for lowcost financing or subscription opportunities.

Office Space

The now popular work-from-home (WFH) approach has created opportunities to reduce office space. If you want to explore this possibility, here are a few things to keep in mind:

  • The current model of work in your practice — WFH, full-time in office or hybrid. What do you need today and how long do you anticipate that model will last?
  • The long-term aspect of most office leases. Will your proposed alternative stand the test of time?
  • Your image. If you currently have a “downtown” office in a AAA building, your clients would probably wonder about a move to a strip mall in the suburbs.
  • Issues such as transportation, parking and access.
  • Cost of relocation.

Check with your current landlord to see if they can offer any incentives for you to stay.

Speaking of incentives, some advisors offer staff a reward, such as a percentage of the savings, for any efficiency suggestions that are implemented.

As the saying goes: “Never let a crisis go to waste.” While a periodic review of the efficiency of your business should be a regular exercise, its importance is magnified in times like these.

George Hartman is CEO of Market Logics Inc. in Toronto. Send questions and comments regarding this column to