I once heard that Einstein said the definition of insanity is doing the same thing over and over again and expecting different results. I attributed this definition to him or for years, until recently, I found it was also credited to Mark Twain, Benjamin Franklin and even an old Chinese proverb!
Today, I just like the definition no matter who said it first. As a member of the Carson Institutional Alliance business development team, I talk to successful advisors every day who truly want to improve, develop, or change their businesses to grow. But, often what I see and hear has me thinking of that definition.
Are you using a “strategy of insanity” to manage your practice?
While most advisors verbalize that they want to grow, they are either unwilling, unable, or too complacent to do anything differently than they have for years. I often hear, “I don’t prospect anymore. My growth comes purely from referrals from my current clients.” This usually really means, “My business has plateaued. I’m happy with my current income. I have no formal plans for growth.”
If this sounds familiar to you, maybe you don’t have the time or resources to take your practice to the next level. You may want to consider a strategic partnership if you want your practice to potentially attain its highest value when it comes time to retire and monetize what you’ve spent years building.
Financial Advisor Service Providers
When partnering: make an educated selection
As the financial services industry evolves, there are compelling reasons why thousands of advisors and billions of dollars every year move to strategic partnerships. These advisors saw opportunity that scale provided and they made a move that made the most sense for them and their clients. If you have already considered making a similar move then you know that there is no shortage of options available.
There are RIA aggregators, TAMPs (Turnkey Asset Management Platform), Super OSJs, Custodians, or TIPs (Turnkey Integrated Partners) ready to bring you aboard. You probably also realize that finding the partner who is a perfect fit for your practice can be a time-consuming endeavor.
To help you on this journey, I’ve compiled a list of the top 10 critical areas advisors need to research and understand before taking that big step toward partnering.
Financial Advisor Service Providers: 10 Critical Areas to Consider
- Culture – Do you like the people (and do they like you)? This may sound like an obvious litmus test, but it’s often just skimmed over. The last thing you want is to have a false start and join a partner that is not a good cultural fit. A good idea would be to have your spouse, business partner or a significant stakeholder meet the people you’re about to partner with. Often times they can see things you don’t, because you may be concerned with other details of the transaction (i.e. you can’t see the forest for all the trees).
- Ownership – Will you keep ownership of your clients, or will you give them over to the partnership? If you are giving up ownership, what happens down the road if you feel that things are not a good fit and you want to leave? Will you get to keep your DBA? Do you keep your own ADV? Can you even call your clients?
- Investment Management – Is there in-house research with CFAs, JDs and CPAs that will be a resource for you? Will you have access to them? Can you pick up the phone and call them with on-the-spot questions? Will the investment management solutions simplify and improve your investment process for clients and prospects? Will you gain greater access to investment managers with strategies to cater to high net worth clients, who are more fee sensitive and require greater transparency?
- Leadership/Vision – Who is at the top, making the day to day decisions that will affect your practice? Are the people in the firm experienced, proven advisors you can learn from? Will they help you get to the next level? What type of communication and access will you have with the other partners, if any?
- Marketing/Brand Building – Can they help you build and improve upon the brand you already have? Do they provide or help you with your marketing strategy and a marketing plan? Will they help you with your website, blogging, LinkedIn, Twitter, Facebook? What lead-generation capabilities do they have? What marketing collateral—such as brochures, fact sheets, whitepapers, infographics and presentations—do they provide to partners?
- Technology – Will you gain more powerful or more robust resources? Do they offer cutting edge technology to deliver the best client experience? Is the technology cloud-based so you and your clients can access it from your personal devices, from any location? Can they aggregate reporting from multiple custodians with their CRM and document storage? Are they committed to investment in future technology needs to stay relevant and ahead of the competition?
- Compliance – Compliance can be time consuming for advisors, especially if they do not have staff dedicated to this area of the practice. Are you able to offload some of the day to day compliance responsibility to the partner firm? Is the compliance handled in-house or outsourced to a third party? Are the firm’s processes and systems built for and integrated with compliance requirements?
- Training – Once you plug into a partnership, what kind of initial training is provided? Will the training be ongoing? If you add human capital, will your partner help get new team members up to speed? How will you be treated 6 months or 6 years from when you join? The key here is to talk to some of the other partners; both the ones that recently joined and also ones that have been there for years. You will learn the most from advisors that have been in your shoes.
- Succession – When you are ready to take a step back in your business and move into retirement, how can your partner organization help you maximize the value of your firm? Will they step in and buy your assets from you? How will they value your book of business? Is it a preset formula? Do you have to be a partner for a certain period of time? Will they help you find a local successor and how will they assist with the transition?
- Cost – Request and review an economic analysis of making the move. You need to understand how the partnership will affect your profitability as well how the fees for clients will be affected. Oftentimes, increased efficiencies and scalability will allow you to do more with less resources and improve your profitability while lowering fees for clients.
What are you going to do differently to serve clients, run your practice and grow your business?
If you are not growing your business by 15% or more per year you are at risk of becoming irrelevant very quickly. I challenge you to ask yourself the following questions and commit to putting your answers in writing:
- Where do you want to be in 5 years?
- What will you do to get there, that is different than what you are already doing today?
- Who can you leverage to help you get there?
- Can they deliver in the ten critical areas?
Your practice and your life are too short to waste away your days with a “strategy of insanity!” If your practice would benefit from partnership, make sure you consider all the key areas.
For advisor use only. Not intended for client distribution.