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The 3 Phases of Financial Practice Evolution

The 3 Phases of Financial Practice Evolution
Apr 10
2023

As our team looks back on our collective hundreds of years of experience, what's interesting for us is that there remains one consistent theme/challenge that has held true for every advisor and firm we've ever worked with - and continues to hold true today - and that is how to successfully navigate the three phases of evolution that every practice finds itself working through. Those three phases are loosely described as Acquisition, Expansion, and Succession.

Before I speak to each phase let me add this thought:

Many organizations, be they IMO’s, BD’s, or RIA’s, profess to have answers when it comes to assisting advisors and teams with solving or seizing on the problem or opportunity of the day, many espousing “best practices” of their particular company and approach. And while I have no problem with the “best practices” in and of themselves, the question has to be asked: “Until we know where you and your team actually are in your own evolution, understanding the challenges and opportunities specific to you, why would we claim and how would we know our own best practices would work for you?” There are both challenges and opportunities associated with each phase and it’s a fair question that we start every conversation with.

Where are you and your practice right now?”

“Where do you see this thing going?”

Phase One is Acquisition – Client and Assets  

We're not talking about acquiring other firms or practices in this phase. The focus here is around the consistent acquisition of new clients and new assets. While this is certainly an important aspect of firms that are just getting started, it is also something that remains consistent and important through the next two phases as well. The challenge for many advisors in the Acquisition phase is how to acquire qualified clients right away; that is, clients that can quickly develop into ideal clients who feel compelled to duplicate themselves by making introductions. The opportunity in Phase One then, like many things, is simply a matter of process.

Of course, any conversation around client acquisition connects directly to marketing. Here again we see both a challenge and an opportunity. We work with advisors to get them off the “hamster wheel” as many call it... the idea of spending countless dollars on marketing year over year with minimal results. Proper execution of processes leads advisors to “attracting” ideal clients instead of “chasing” every client. A focused approach here also allows advisors to stabilize and control marketing budgets while generating a consistently higher ROI.

Phase Two is Expansion – Scale Your Business

It would not be an exaggeration to say that 80% of the advisors that we work with find themselves in this second phase. These are firms that have built a successful practice and are doing many things well, but also recognize the need to get over the proverbial “plateau” and experience a meaningful breakthrough for the progress and growth of the firm - with many using the term “scaling the business”. And while there certainly are challenges in this phase, we typically find that there are many more opportunities. Firms will describe scale in many ways. Some are looking to hire the next advisor - perhaps an associate or junior advisor. Some are looking to expand the administrative and/or operations team. And others are looking to retain key team and staff members by creating development tracks, providing a method for staff and team to “grow into the practice”.

The crucial issue here revolves around the idea of creating repeatable processes in every facet of the business that in turn create meaningful efficiencies.

Over time, we have observed that a lack of processes is a significant factor in why successful practices and firms level out over a period of years, often at the point where exponential growth would be expected. Several key opportunities that we help advisors and teams implement and execute on are around issues such as:

  • Right-sizing the practice with the idea being “it’s not how big we can get, but how small we can stay”.
  • Classifying clients and understanding where time is being Are we as a firm serving our best clients to the best of our experience and abilities (The Pareto Principle at work) or are we serving every client the same way?
  • Developing and deploying a service matrix.

These are just a few of the opportunities realized by implementing proven processes with a significant outcome of restoring order and liberation to the practice (and the lives of the advisors and team).

Phase Three is Succession – Your Life’s Work

When preparing your firm for what's next – whether you're selling your practice, handing it down to a family member, or acquiring or being acquired by another firm – there are unique challenges and opportunities. The ongoing focus in this final phase is to continue to increase the enterprise value of the business. And while this has many tentacles, “competitor-proofing” best clients is at the top of the list. Additionally, we understand that the current and future value of the business is largely based on the client's ability to stay connected to, and recognize value in, something more than just the relationship with their financial advisor. Not surprisingly, this too is a matter of repeatable, documented processes.

It is here, where having gotten all the ideas and processes of you and your team out of your head and written down in a playbook, where they now become a tangible asset. A significant outcome of our work in helping advisors to implement and execute those processes, is ensuring that future generations of current clients, buyers, sellers, your staff, and the clients themselves all stay connected to the practice after a transition.

No matter the stage you find yourself and your practice in, if your life is serving your business instead of the other way around… there’s a process for that! Increase enterprise value, scale your business to its full potential, realize the maximum value of your life’s work, and restore order and liberation to your business and your life.

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