Capital Group launches practice management platform for advisers

Capital Group, the home of American Funds, is upping its practice management services game for financial advisers with the launch of PracticeLab, a new platform that expands on and consolidates many of the services advisers are increasingly expecting from business partners like custodians and fund companies.

“We’re on a path to being full partners with financial planning professionals,” said Mike Van Wyk, vice president, customer research and insights, at Capital Group.

The platform, which is designed exclusively for financial planning professionals, includes access to various educational programs, including webinars and podcasts, covering practice management areas.

According to Van Wyk, the resources and various tools include how to best market your advisory business and client acquisition strategies, tax and estate planning information, and how to navigate challenging client conversations, including the often-sensitive subject of politics.

The platform content reflects insights from Capital Group’s first comprehensive study benchmarking the practices of over 1,500 financial professionals across the U.S. The study found that practice management choices are often the driving force behind outsized growth of advisory firms.

“The average financial professional spent nearly half their time on client management activities, but if they could shift even 1% of that time to activities such as team management, strategic marketing or prospecting, our study showed this boosted their firm's AUM by 3%,” Van Wyk said.

The breakdown of the time spent on client relationship management activities includes preparing for and conducting client meetings, emailing and calling clients, conducting wealth planning outside of investment management, prospecting, client training and marketing.

Meanwhile, the advisers surveyed said 32% of their time is spent on investment management and 20% is spent on business/practice management.

The fact that just 32% of time is spent on investment management reflects the increasing availability of funds and strategies that have made investment management easier to do, according to Todd Rosenbluth, director of mutual fund and ETF research at CFRA.

“The growing use of well diversified index-based ETFs and mutual funds has freed up advisers that used to spend time trying to identify the managers that would hopefully outperform the market,” he said. “Fast growing advisers have determined it is better for their practices' growth and their clients’ investment objectives to simply replicate the equity and bond market. Advisers that are building custom stock-specific strategies for clients rather than model portfolios using ETFs and mutual funds have a harder time benefitting from scale.”

The benchmarking study highlighted three areas that are characteristic of the fastest growing advisory firms: an intentional strategic focus on getting new clients, providing a broad array of services that deliver value and promote engagement, and running the practice like a business.

In terms of a focus on attracting new clients, the study showed that high-growth practices are 25% more likely to implement client acquisition goals, and 71% of high-growth practices have built-in procedures for client onboarding, compared to 57% of low-growth practices.

Also, high-growth financial professionals are 50% more likely to say they are experts in marketing or building a digital presence, and are more likely to use direct mail, email or text messaging as a new client channel.

On the relationship alpha characteristic, the fastest-growing firms in the study were more likely to offer services such as generational wealth transfer education, tax and estate planning and charitable giving.

Those same firms have a higher ratio of clients gained-to-lost compared to others in the survey. 

Practices whose book of business contains 50% or more high-net-worth clients are not growing any faster than the average practice, but those firms that optimize their relationship with other high-net-worth clients, such as multi-generational relationships, tend to see higher growth.

And financial professionals with a higher percentage of institutional assets under management from retirement plan consulting are twice as likely to be growing their business.

And on the strategic scale front, the study found that financial professionals in the highest growth segments spend 14% less time preparing for client meetings, 10% less time monitoring the market, and are 13% more likely to use models than lower-growth practices, all while being 38% more likely to have an expert-level skill in practice productivity.

Financial professionals in the highest-growth segments also use tools such as portfolio management software, trading or rebalancing software and CRM and document management software.

“Financial professionals are business owners as well as experts when it comes to understanding their clients’ financial needs and goals,” said Riley Etheridge, president, wealth management client group at Capital Group. “Our benchmark study reinforces that each firm has its own unique pathway to growth,” he added.