Fiduciary

The Five Megatrends Disrupting Practice Growth

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Fiduciary

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To grow an advisory practice, identifying advisory megatrends lets you understand where practices, the industry and your clients are headed.

Surfing these waves will position your firm for growth.

Ignoring them will put both firm’s growth and foundation in peril.

Here are five advisory megatrends you must pay attention to build a thriving, sustainable firm and keep pace with the industry currents.

  1. Movement from investment management- to planning-led practices

Practices have largely kept existing clients happy by beefing up on credentials like the CFP® and adding basic planning services and wealth dashboards. At the same time, they have tried to maintain margins in AUM-based fees.

The transition from investing to planning has challenged advisors, diverted focus and lowered profits.

Existing clients – those with minimal planning needs – may even reject paying ongoing fees for planning services not used.

New entrants such as the planning-centric advisors found in the XYPN network are calling on financial planning as a reason to engage an advisor. These millennial planners, however, struggle with a different problem:

How can we offer ongoing value and create $2,000 to $5,000 of annual fees per client when a one-time $2,500 financial plan might organize the average younger client for the foreseeable future?

And there are only so many unattached $2+ million households who may have ongoing and complex financial planning needs.

Established firms historically have been strong at wrapping numbers around investments such as:

  • how much money a couple needs to retire and
  • how to not run out of money in retirement.

But as the focus of the planner’s value proposition turns to goals, fulfillment and peace of mind, many planners struggle with how to articulate those benefits to prospects and clients alike.

The outcome: More work, lower margins and an inability to articulate this new value proposition will choke-off growth of individual firms as well as stagnate the overall market for planning services.

  1. A lack of training in executive skills

Excelling as a position coach or as an offensive or defensive coordinator in the National Football League does not predict that you can be a head coach. The NFL’s roughly 25% annual turnover in head coaches shows you the flaw in their head-coach development process.

Being a financial practice CEO demands a different skillset from managing a book of 100 clients.

An advisor successfully managing a book typically goes after multiple credentials and devotes most of their week to ensure that existing clients are happy along with adding a client or so per quarter, largely through networking and referrals. Their training focuses on being a better advisor.

In contrast, a successful financial practice CEO will:

  • lead his or her advisors,
  • build a team,
  • contemplate acquisitions,
  • set the overall strategy for the next five years,
  • build the technology stack,
  • create a marketing plan (and hire someone else to implement it),
  • strategically cultivate COIs, and
  • occasionally get involved in major client issues or pitches.

While maintaining client relationships, managing investments and engaging in financial planning are all second nature to experienced advisors, they are largely inessential skills when it comes to building a team, driving a strategy and leading a growth-oriented organization.

Thus, as successful advisors build their own practice or create a partnership/ensemble of practices, they are largely untrained in the skills they need to run the practice as a business.

This deficiency hampers their ability to execute a sustainable growth strategy.

Read the full article here by Bob Hanson, Advisor Perspectives


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