What are the takeaways?
- Start to document processes and create a rock-solid continuity plan for the business.
- Start to create a “wish list” database of people you meet who are smart, creative and could be a potential cultural fit for the business. (And stay in touch with them!)
- Become familiar with “advisory enterprise value” and have a rough estimate of your business’ value at all times.
- Commit to either the “Life Style Practice” or “Wealth Management Enterprise” pathway.
Happy new year, everyone! I want to spend a couple minutes today talking to you about the initiatives that should be on your business plan this year, and every year for the next 10 years, that may have been overlooked in your business planning sessions in December, and you may have never thought to include in the past. I spent all of last year talking about a change that’s coming in the industry and how the advisory business model is going to look totally different over the next couple of decades, and how advisors need to think and act and build differently than they ever have before. And so, in light of that, here are the four things that advisors need to be thinking about and need to be including in their strategic plans, year after year, moving forward. Now I just want to add, even if this doesn’t manifest in actual change and action steps this year, it’s still really important that you keep these four initiatives top of mind as a business owner.
So the first thing is “be intentional about continuity planning this year”. And keep in mind, I said continuity planning, not succession planning. So advisors often consider these two things one and the same. And continuity planning really is about ensuring that your business – and even if you’re within a BD, I want you to imagine your business as an independent entity – we want to ensure that the entity, that the business can continue to serve and service clients in the same way it always has in the event of your departure from the business for a while, or any key team member, or the entire team. So imagine we took out your entire team and put in a new SWAT team to cover the bases for the next three to five months. Would that new team be able to serve and service clients the same way you and your team have in the past?
The answer is probably no. And so, slowly start to document each of your processes across the client engagement spectrum. Now, this doesn’t have to be anything major or fancy. You can document processes in a simple Word document, on a whiteboard, in an Excel sheet, using some fancy app or technology. And so I want you to imagine the client engagement spectrum as a linear line, that begins at client onboarding, even before that, at lead generation. But let’s start at client onboarding. And across that line there’s client onboarding, there’s a first client review meeting, there are ongoing client review meetings, there’s ongoing service and engagement. And then ultimately there’s next-gen wealth transfer. And so at each of those points across the spectrum, you and your team should document what is the system or process that happens.
So I want you to get as specific as “what’s our turnover time in getting back to-dos to a client after a review meeting?” “What’s the checklist that we send to clients that includes the documents that they should be bringing us for the discovery meeting?” And so at every point along the spectrum, you should have the process, the person, the role that’s responsible for handling, and then the actual document or template that you use. Now, the reason why I think advisors, or I know advisors need to be including this as a key initiative is because we are facing a time now where we are onboarding to our teams employees and team members who psychographically think, look, act, and succeed very differently than the employee of the past.
And so we have a turnover problem in our industry. And we have a turnover problem, not because the younger gen is “disloyal,” but because we haven’t created a place and culture for many of these folks that’s conducive to the way in which they want to work. So they are constantly seeking fulfillment and creativity and innovation and flexibility. And if they don’t find that in the traditional wealth management practice of the past, guess what? They’re leaving and going somewhere else. And so it’s important, not only that advisors work on the culture piece, but the reality is is that many advisors aren’t going to move and change fast enough to accommodate their team members. And so they have to focus on continuity planning.
Piggybacking off of that first initiative, focus on continuity planning, is the idea that you should be compiling a list of potential people and candidates who you may want to hire in your practice at some point in the near future. So my second initiative for you is “to begin to build a database of people who you meet at events, at conferences, in your travels, as a referral from a center of influence, someone who’s maybe a friend of your son or daughter, who you could see being a potential team member.” Now, on average, advisors, and as a rule of thumb, although most teams don’t have this built in, but most advisors should know, two years in advance, the role that they are going to be adding to their team next. In other words, it’s the idea that a really good and successful business owner has a three- to five-year strategic plan and vision that they’re constantly looking to continue to fulfill.
And so imagine that were the case, that two years in advance you knew what role you wanted to bring on, and you had those two years to go to your database and say, “I already have a great list of people who may be a good potential and cultural fit, and I’ve kept in touch with these folks, and it’s really easy for me to reach out and talk to them about this new role.” Now, this is also really beneficial to the advisor who isn’t planning two years in advance and has someone leave their organization and suddenly needs to fill that role. Well, now you can go to this list, this ongoing list of potential candidates that you have to look for talent. So that’s the second thing.
The third thing is “to become familiar with enterprise value and the value of your firm.” Even if it’s as simple this year as reading a book on enterprise value, advisory valuation, succession planning, mergers, and acquisitions. All advisors should feel empowered in this highly saturated marketplace and high activity marketplace. Every advisor should be empowered around what their business is worth and how they can further drive enterprise value. Enterprise value now is much more than just a multiple on EBITDA recurring revenue. Enterprise value is not only what someone’s willing to pay for your business, but it’s also so much about human capital and development pathways and whether you’ve built lead generation and marketing systems within your organization. And so advisors should be familiar with what drives value and that should help to inform the areas of practice management they are focused on. And so that’s the third thing. Use this year to really become familiar and educated around enterprise value in this industry. Even if you’re within a BD, by the way, and you think, “Well, I’m never going to be able to sell my business.” The industry is changing rapidly. And my prediction is that advisors who thought that they were in a captive system and would never be able to sell will be able to monetize their businesses at some point. More on that in a later podcast.
So my fourth initiative, remember we’re focusing on continuity planning next year, we’re building our database of potential cultural fit candidates, we’re becoming familiar with enterprise value, our value, and lastly, we’re “using 2020 as the year to make the decision between lifestyle practice or wealth management enterprise.” I spoke about this so much last year. Advisors really should use this year to decide what the next 10 years look like for them, and it is about making a decision on are they going to continue to build a lifestyle practice that needs sustainable and growing cash flow, but that focus is less on trying to bring on partners and merge and buy books of business, but that really doubles down on the brand, the brand name, and recognition that they’ve built. Or are they looking to build a wealth management enterprise, which will require you to bring on talent and generate revenue outside of just you and your rainmaking abilities?
If you want to build a wealth management enterprise, you have to rely heavily on others and you have to think more than just about top-line revenue and the current clients that you have. And so it informs a whole other set of initiatives and thinking and perhaps requires you to step out of the role as advisor one day and step into the role of CEO. And so making that decision, or at least spending this year thinking about those two options, is definitely worth your time.
So I hope that was helpful. I will be back next week with another Wednesday Wisdom. Thank you for listening. I’ll speak to you next week, same place, same time. Take care.