A powerful lesson I’ve learned in my 30 years is the importance of examining and adapting my strategy to overcome common obstacles faced by every advisor. In my practice, a shift in internal programs, workflow, and structure helped boost performance to achieve long-term goals. With new elements in play, and a focus on planning for both the present and future, a more efficient practice that provides a higher-quality level of service to clients is attainable.
Obstacles and challenges that established and emerging practices face
Compliance and regulations
Typically, compliance regulations pose the largest, most time-consuming obstacle to practice efficiency. Advisors must balance the unique needs of each client with solutions that meet regulations and the organizational strain of processing each request. Administrative staff and advisors face increased paperwork and financial costs associated with the required time and staff to process it. Particularly for small agencies, or young practices with small teams, the volume alone is overwhelming.
Competitive fees and pricing
Several factors impact advisors’ pricing strategy and revenue. Increased transparency and regulations, along with diminished product availability and low-cost competition are the most prevalent. A resurgence of DIY and technology-based alternatives have entered the market as direct competition. What may have previously been a reasonable fee, necessary to remain profitable, may now be prohibitive in comparison to automated options. Advisors must be conscientious of the competition’s price and their own cost of doing business when they determine their own fees.
Aging client base
Established practices whose portfolios are comprised largely of aging client bases are faced with a unique revenue challenge. In our practice, most of our current clients and referrals are individuals retired or nearing retirement, their portfolios commonly have more withdrawals than new investments. This high rate of asset utilization creates a constant drain on the portfolios in the form of payments to clients. This requires an added administrative cost of processing the requests, as well. Many advisors begin their careers with the idea that after a certain point, the revenue and growth from their AUM would offset costs of operation, but without an influx of diverse clients, the balance may tip the other way.
Solutions to operate an efficient practice
Evaluate from an outside perspective
The first step to overcome obstacles or increase growth for your practice is to evaluate it from an outside perspective. It’s important to get outside of the bubble and start working on your business, rather than in it. Objectively look at where things stand today, and where you’d like them to stand in the future. The dissonance between the two versions of your practice will provide an initial framework of tasks, changes, and steps you can take to get there.
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