In today's business environment, rigorous focus on practice management is vital. According to a recent BlackRock Inc. survey, almost 30% of financial advisers with more than $50 million in assets under management are working harder than just six months ago to retain their clients.
Consider also clients' growing desire for advice on a wider range of wealth-related topics and it becomes clear that advisers face challenges that can be met only with an enhanced skill set.
However, delivery of enhanced service for optimal economic return also demands a deliberate strategy for how the practice and the client base are structured so that the adviser's service truly targets those clients best positioned to return value to the practice.
It is no different than any professional practice — medical, legal or accounting. Preserving the requisite time and depth of expertise to serve clients well and managing the client base to focus on your best clients are both key to enhancing your practice's overall economic value.
Recently, my firm conducted research with some of the most successful advisers nationwide to see which techniques they use to meet those challenges. There is no single pathway to success, but the advisers cited some common practices and strategies as vital elements in building an elite business.
Build a high-performing team. The first step in implementing any business model is having the right talent on board. It is incredibly difficult for an adviser to stay current on every aspect of investment and wealth management. Building a team with varying strengths helps the practice deliver holistic client solutions while leveraging the team's time.
When choosing potential partners, make a critical evaluation of his or her distinct skill set, shared vision and work ethic. Don't underestimate the importance of compatibility among team members.
Many top-tier advisers are attracted to the independence a successful practice can afford. But for some of the best advisers, committing to a team structure can make them feel confined and penned in. Team structure is critical to maximizing the collective wisdom of all the talent on a team. Do you need a vertical team with a clear leader who makes all the team's decisions or a horizontal structure where all team members are equal and each has an equal say in the practice's day-to-day operations?
Segment your client base. Assets under management continue to be a critical pathway to segmentation. But many top advisers expand beyond investible assets to identify additional client segments, such as revenue generated, future asset potential and — very critical — the personal client relationship.
The best advisers want to be all things to some people and look to develop more-in-depth relationships with their best clients. By providing a deeper set of service and solutions, these advisers capture additional assets from existing clients and generate better client satisfaction and referrals.
Shrinking to grow. Advisers with the highest assets under management tend to manage significantly fewer clients. Therefore, the segmentation discipline typically requires an adviser to shrink his or her book. Although some advisers are reluctant ever to fire a client, top advisers are more willing to make tough calls on low-return or difficult accounts.
Hiring new clients. Avoid troublesome clients through the interview process. Get to know them as much as they know you. Defining the right client varies by adviser, but being disciplined and deliberate is paramount. You often can't afford a time-consuming, ill-tempered client, even if the client comes with $1 million. Don't be afraid to turn away “bad” assets.
When hiring clients, look for alignment with asset minimums, especially given future goals of your practice; fit with service model and investment approach, and fit with personality and temperament.
Run a practice, not a business. Successful advisers run efficient, client-focused practices. Revenue and practice drive a business, but a practice is driven by fulfilling client needs. Fulfilled clients are easy to work with, loyal and refer people of like affluence.
A plan that clearly defines the service delivery structure, target audience, key value proposition and service offering is a key component of a top-performing practice. For successful physicians and attorneys, a truly client-focused practice allows them to align services with client needs and reap optimal economic reward.
Advisers should adopt the same model.
Michael Bitterly (eliteadvisor@ blackrock.com) is a managing director in the U.S. retail division of BlackRock Inc.
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