(More)4 for less
As summer is drawing to a close (in the Northern hemisphere) it is time to get back to business. Vacations are in the rear view mirror and the kids are back to school. Many advisors find that it is a great time to refocus and push hard. In that spirit, here’s a pop quiz:
Answer either “more” or “less” to the following five questions.
- In the future, will there be more or less market complexity and volatility?
- Going forward, will there be more or less financial products and product iterations?
- Will there be more or less regulatory/fiduciary burden on advisors in the future?
- Will clients ask for more or less service, advice, and availability from you and/or your team?
- Will you be able to charge your clients more or less in the future?
Good news. There are no right or wrong answers (technically) but if you are like most advisors you probably answered “more, more, more, more, and less.”
Bad news. This stark reality creates a biting tension that only further complicates the world of advice and financial services. Going forward you are going to be challenged to do more with less.
A solution: Creating capacity
At Russell we believe the following strategies represent a prudent response to this dilemma and finding ways to create capacity in your business is more vital than ever. Five ideas for you:
- Refine your ability to say no. The most successful people in the world are often the best quitters. They know what they are good at, where they can add the most value and they try to quit doing everything else. What do you need to stop doing?
- Consider reducing the number of clients in your book. Many advisors look at the bottom of their book and believe those clients don’t require (or are not consuming) resources. Ask your staff/sales assistant if that is the case with your book. You will be surprised at the response. Typically you are being insulated from these clients.
- Evaluate the number of positions in your book. Consider running a position report and evaluating the number of products and/or securities that you advise on. Are you able to diligently evaluate all of them on a consistent basis? It is not uncommon for us to see books of business that have 300+ mutual funds positions. Consider pairing this list down to a more manageable number or outsourcing (see #4 below).
- Outsource in areas that are not your key competency. We believe that most advisors deliver maximum value when they focus their energy on client engagement (discovery, planning, and service). Many believe they can add value through manager selection and portfolio implementation. If this is your primary value, then what happens when you underperform? Also, this activity is resource-intensive, making it increasingly difficult to scale. We believe most advisors are better served by leveraging investment management expertise offered by outside firms for a significant portion of their book and reserving their skills in this area for their best clients.
- Construct an efficient/leveraged service model for the bottom of your book. If you considered implementing a series of model portfolios in #3 above, you would be well-positioned to create a scalable service model to support it. Often times the bottom 80% of clients represent less than 15% of revenue. This economic reality requires that you become highly efficient in this segment.
Your initial response to these ideas may not be an enthusiastic one, so let me remind you what we established earlier: in the future, you likely get to do more, more, more, more for less!
If you don’t implement some of these solutions, you risk finding yourself crushed under the weight of servicing a book that is inefficiently constructed. If you already feel that crush, then consider yourself normal. The business is rapidly changing and many advisors are struggling to adapt. The painful truth is that the problem isn’t going to resolve itself.
As you consider reengaging in your business this Fall, we believe you need to consider ways to create capacity. The task of being a trusted financial advisor is only going to be more difficult in the future.