recently examined data from more than 250 advisory books of business. Their findings provide advisors with some simple ways to grow your business more efficiently. Three ideas in particular are crucial to transforming your business from a good one to a great one.
“The first thing is don’t be afraid of looking under the hood. Examine and re-examine your book over and over; make improvements, see if they actually work,” Russell Investments
’ practice management consultant Julie Zhang told WP. “I think that advisors make a lot of assumptions about their books that aren’t necessarily true. There’s always a big gap between what they think it’s going to look like and what it actually does.”
Why is this important?
Russell found that the average advisor’s book of business has 520 positions including 167 mutual funds. By eliminating one mutual fund from your book of business you’d save yourself a full day (eight hours) of product due diligence per year providing more time for client meetings, prospecting, etc.
“The trend of going to discretionary or fee-based is not just about transparency, it’s not just about CRM2 and regulatory measures, it’s also having the ease to make changes on behalf of your client without the fear of incurring redemption fees or low-load fees or whatever that may be,” said Zhang. “It takes away another element of excuse so that you can do the best job for your client and the best job for your business.”
Advisors using the embedded commission business model certainly won’t like reading this but the findings from Russell would seem to suggest that moving to a more efficient business model will ultimately make a difference in your effectiveness.
“The third thing is to challenge the partners you’re working with. If you’re working with certain mutual funds or ETFs, say to them ‘I have 20 funds with you, help me figure out how much I’d pay in fees were I to switch out, etc.’ Go to your best partners and challenge them to do that work for you.”
All three of these recommendations point to the recurring theme of scalability reminding advisors of the old 80/20 rule – 20% of your clients will generate 80% of your revenue.
In order to properly service the 20% you’ve got to have an efficient business with an optimal set of products that can both solve the investment conundrum of your different client types and create a scalable service model for each.