FINANCIAL PLANNING
Focus on the Now for a Successful Future
By Ross Levin
I am not a futurist, but as a co-founder of an independent wealth management firm with over $3 billion in assets and 60 staff members, I have had to work with our executive team to help direct our future. The best way to handle the future is to understand the now so you can make incremental rather than dramatic changes.
As we make plans to continue our growth, we have some directions that we will take to amplify the skills we feel we have as a firm and continue to reflect the changing nature of the business. Our goal is to adapt so that we can bring in enough new clients each year to continue our organic growth while we serve our existing clients in meaningful ways. With all of that in mind, there are three things on which we are focusing, which some may call trends.
3 Areas of Focus for the Future
1. Slow work is the differentiator in our business. You can take many routes to succeed in wealth management. But you have to pick a route. Our firm views things as fast work or slow work. Fast work refers to aspects of the business in which automation is important and will likely end up commoditized. Investment and tax planning can be somewhat fast work, but the greatest opportunities for speed and efficiency so far are in back office services. We are using or are considering software that allows us to send text messages to clients, software that regularly updates our client portal, and client relationship management software that quickly screens clients for appropriate opportunities or notifications. You can build a nice business by maximizing these efficiencies and shrinking staff.
We believe we need to do fast things extremely well, but what will make our practice sustainable is the slow work. We are in the client meeting business. As a result, we have a high staff-to-client ratio (at least according to the surveys in which we participate). The slow work is engaging regularly with clients so that we walk with them through all of life’s events. We don’t promise that we know what will happen, but we let them know that through the years we have seen many things happen and have experience in dealing with how plans are disrupted.
Slow work is seeing people for who they are—it is inefficient, messy, and often difficult. It is family meetings where things completely fall apart. It is matching the right planners with the right clients. It is hard and yet rewarding. It is also difficult to replicate, hopefully providing some protection from artificial intelligence as more work becomes fast work.
2. Mergers create opportunity. There are a number of companies trying to buy practices similar to ours, and the premiums offered to potential sellers like us are tempting. But for the economics to work for the acquirer, it needs to grow earnings, cut costs, or sell at even higher multiples. And cost cutting can eliminate the staffing needed to do slow work well.
Profit maximization can create other tensions that seem to us to call into question how a firm serves its clients’ best interests. We will see a number of firms that were once Fee-Only bought by firms that create their own investment products as a way to enhance earnings. If they put together real estate deals, they can count on annual management fees and back-end participation even if the client leaves the planning practice. That’s good for the business, but the jury is out on whether that is good for the client. This creates opportunities for independent Fee-Only firms.
Talent acquisition is a prime example of a possible emerging opportunity. We always talk about how difficult it can be to find talent. Acquisitions will create a pool of talented people who are aligned with our desire to remain independent rather than those who are drawn to what private equity can offer. If cost cutting is used to grow profits, then people who may be great employees will be put out on the street and could become our firm’s great employees.
Consolidation is often viewed as this scary thing—get big or get out—but most firms don’t need to find their next 500 clients; they need to find their next five. And then the five after that. There will definitely be some pain as the pressure on these acquired firms to continue growing may lead to marketing dollars spent attempting to lure your clients from you, but the pain is limited when compared with the opportunity.
3. FaceTime does not replace face time. Video conferencing has certainly made it easier to connect with clients wherever they (and you) are. It has allowed us to have an office in only one state while we serve clients through Microsoft Teams and travel to them. Heck, it allows a senior planner like me to escape the Minnesota winter in Arizona while still doing my work. Video conferencing is good, but it is not a perfect substitution for face-to-face meetings.
Service from anywhere means you can hire people anywhere. The issue will be whether these employees understand your firm’s culture and service priorities so that the slow work is done right. Also, you need to ensure these offsite staff members have the same advancement opportunities as those who come into the office and stop by your desk. Younger planners have grown up accustomed to indirect forms of communication, so, eventually, this will be normalized. For multigenerational firms, though, fully integrating service from anywhere will take years.
Favor Incremental Adjustments
It is our belief that there is little first-mover advantage in our business. It is important to pay attention to changes that are occurring, but you can usually make incremental adjustments as needed rather than large-scale deconstructions of your business. Focus on the now while scanning the evolution of the industry to ensure your relevancy. Most importantly, build the business that you want to serve the clients you want in the ways that you wish to serve them.
Ross Levin, CFP®, is the founder of Accredited Investors Wealth Management.
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