Updated April 19, 2024, at 3:33 PM
As a financial planner, you expect to wear many hats. You accept and even relish the role of a financial planner, asset manager, and a bit of a behavioral psychologist.
However, financial professionals—particularly independent ones—have the additional responsibilities of running small- to medium-sized businesses. This might include having marketing, public relations and communications, an IT specialist, an HR manager, and other tasks that have little to do with wealth planning.
If you’re like most industry pros, you’re simply not well trained in these areas. Or at the very least, you don’t like to get bogged down with managing processes outside of client relationships, planning, and sales. And while some issues tend to re-appear, there are always new issues popping up that demand attention.
Let’s examine some of the common challenges financial planners face today.
Staffing Challenges
Business management challenges vary based on the size and maturity of your business but training new staff and succession planning both present significant problems. That’s due to a lack of formal training to grow and groom talent successfully.
Typically, secondary agents start by processing applications and other forms, then give planning a try before moving into sales. This makes sense and is appropriate from a sequencing aspect. Still, any training process should include performance objectives that are associated with a predetermined timeline. This should be adjusted as required skills and responsibilities change over time for a secondary planner. Once in place, a sound training process provides a track for identifying and growing successful producers for the future of your firm.
If you’re the senior planner and business owner, it’s your responsibility to develop an environment that educates your staff and provides opportunities for the business and personal growth of your team. This allows your clients to benefit from an improved client experience. Even better, you’ll have a process that develops internal candidates and potential successors.
Succession Planning
Succession planning is by far the number one issue that prompts a financial planner or professional to seek our input. Our Next program works with over 40 agents in various stages of the continuity and succession process, from mapping out a proper continuity strategy to identifying potential successors, to exiting the business.
Any continuity plan should cover your short-term absences (for instance, a health-related issue), as well as any damage to your working environment. In addition, key employees can have significant impacts on the operational success of your business. These both might require continuity and succession planning.
Succession planning for financial professionals can be extremely mentally, emotionally, and financially challenging. Long before you can get to the finish line, we’ll sit down with you to have conversations that create a successful transition. Other considerations to remember in a succession plan are the transfer of client assets, technology, staffing requirements, and cultural fit.
Through our partnerships with industry experts, we’re able to assist you with structuring and financing the transaction. Just like the tailor-made solutions for your clients, every exit strategy is unique because every agent wants to structure a deal that works best for them. Be prepared to spend considerable time reflecting on your desires, as well as the needs of clients and staff. As you move through the process, newly discovered information will shape each component of your succession plan.
Lastly, proceed with patience and grace. Both will be necessary to navigate this stressful time in your life successfully.
Designing Effective Compensation Plans
As a business owner, it’s crucial to align your compensation with employees’ roles and responsibilities so your firm can adequately serve its constituents. At Surge Business Consulting, we can help you restructure your compensation plans for planners and support staff alike.
For example, one financial professional had one-third of a secondary agent’s compensation tied to non-producing tasks. This was even more egregious since the secondary producer estimated the non-producing responsibilities accounted for about 10% of the workload.
If you want to encourage production, compensation must reward the desired activity. And in this case, avoid (over) compensating the wrong activities. When necessary, another member of our Family of Companies, FIG Talent Solutions, can assist you with job descriptions, compensation and incentive plans, and performance evaluation tools.
Technology + Workflows = Efficiency
This next item appears often, but it bears repeating: Remember to take full advantage of all technology, including your customer relationship management (CRM) system.
Today’s CRM is more than an address book. And our proprietary Force CRM™ is no different. With this powerful platform, you can manage your entire office’s business securely and efficiently. From marketing and prospects to data feeds and file storage, Force CRM™ is your one-stop-shop.
Regardless of which CRM you choose, if properly deployed, it can become a robust database that you can leverage for superior client service, communication, social media, and marketing campaigns.
It’s no secret the more extensive your business grows, the more crucial time management becomes. This often means improving back-office efficiency as advisors try to maximize time spent with clients and minimize time on paperwork.
Unfortunately, it can be hard for a financial planner to manage capacity and allocate the team’s time. Organizations with poor efficiency skills will soon become overwhelmed by business growth, and the support and service work that invariably come with that growth.
Symptoms of poor time management and inconsistent prioritization include:
- Improper sequencing
- Redundancies
- Things slipping through the cracks
The solution is to prioritize the responsibilities for all your significant tasks. You’ll need workflows to keep your firm’s processes running smoothly and efficiently. Everything from seminar preparation, client meetings, the planning process, and more must have a corresponding workflow for financial planners.
Here are several benefits to following workflows:
- Critical tasks will be accurate and monitored through completion
- You consistently provide a superior client experience
- Allow others to step in and perform tasks successfully
- Accelerate the training of future team members
What’s Your Differentiator?
Independent agents are challenged on all sides by readily available planning tools, robo-advisors, self-help options, and big-name competitors.
How do you stand out to attract more business? It’s one of the biggest challenges that you face. And the answer is two-fold.
You can gain access to a variety of products these days, so the products themselves are not the differentiator they once were. However, the way the products are used to solve problems can be your differentiator.
Thankfully, the FIG Family of Companies has an ever-expanding arsenal of marketing programs. Some added the comprehensive analysis and review (CAR) life insurance program to their client process. CAR provides value by reviewing a client’s insurance portfolio and initiating broader planning discussions. Others take advantage of offerings like David McKnight’s Power Of Zero, Delaware statutory trusts (DSTs) with Brian Evans, or the advanced planning capabilities of Schechter to boost production significantly. We continue to expose planners like you to innovative and executable planning ideas to build your value proposition.
Your differentiator as a financial planner can also come in the form of a service. Several of our agents use the StoryBrand exercises during team planning meetings to flesh out the issue their prospects face. Once identified, the teams craft a message that truly speaks to those needs. These teams are armed with a unifying vision of what makes them qualified to serve their clients successfully. This has been a great tool to reinforce the firm culture and expose the value proposition to prospects and clients alike.
Increasing Revenue, Growing Profit
Fee compression, product changes, and regulations are eating away at industry profit margins. Also, many advisory firms realize that a growing number of potential clients—Generation X and millennials—prefer to pay flat fees. It’s no wonder agents inquire about growing revenue and profits. One way could be to offer a more diverse set of services to clients.
By adding services like property and casualty (P&C) planning, tax planning, estate planning, and business succession planning, you can increase your profits and your status as a financial professional. We can provide guidance for you to expand your network and establish working relationships with professional allies. These opportunities are in plain sight but often overlooked.
Another way to grow your profitability is to modify your revenue model. For example, several agents took us up on incorporating a service fee in combination with AUM fees. Soon, that fee, be it hourly or recurring monthly, may replace the AUM fee altogether.
By charging a flat fee, or retainer, you’re also able to serve high income, low-net worth prospects. You might even use the new fee structure as part of your client segmentation by attaching greater levels of concierge-like service with successive higher fee levels.
The question is always asked: How do you make the service fee transition?
Best practice for a financial planner would be to start with your least-profitable clients. Create a spreadsheet with clients’ names, the revenue earned from them, and the total cost (agent, staff hours, and overhead) to serve the client. Subtract the cost from revenue and then sort clients by profitability. Using this measure, you’ll find 1/3 or more of your clients are unprofitable.
Shifting to Retainer Fees
To start shifting from AUM to retainer fees, schedule meetings with the least profitable clients. Talk to them about your new revenue model: flat quarterly fees debited out of the client’s account. Propose to raise their fees to whatever would be profitable on your spreadsheet.
One of two things will happen. They’ll either accept your new flat-fee model because of the value they receive from you, or they’ll leave to find a more appropriate planner.
Don’t fear the latter outcome.
It removes an unprofitable client and creates an opening for more attractive prospects. By the time you get halfway through your spreadsheet, you’ll be pretty good at communicating the value and importance of your new fee model. Be forewarned, those clients at the top of your list may be performing the same exercise.
Use this opportunity to build on that relationship by scheduling a meeting to propose a reduced fee or provide additional planning work that betters the client’s position.
Stay Nimble
These are just a snapshot of the challenges for a financial planner today. When I asked Alexa what financial services will look like in the future, she responded with, “Hmm, I’m not sure.” And neither are we.
Rest assured, there are many planning firms with visionary leaders and committed teams who will be nimble enough to navigate the change. As a member of the FIG Family of Companies, Surge will work alongside you to provide insight and feedback, share best practices, and design new ways to respond to the ever-changing industry where we operate.
You’re not alone. Let us know what issues you’re navigating. We want to serve you on this journey.
