Welcome to the new frontier

The trust factor within the world of financial services has been nuked — “getting Madoffed” is replacing “Ponzi scheme,” clients have become numb with fear and the adviser-client relationship will never be the same.

The trust factor within the world of financial services has been nuked — “getting Madoffed” is replacing “Ponzi scheme,” clients have become numb with fear and the adviser-client relationship will never be the same. Welcome to the world of radical change: Embrace it and prosper — or deny it and suffer.

Most advisers would like to prosper, but few have made the necessary changes to do so. Our research indicates that 85% of affluent clients are dissatisfied enough with their adviser to make a change.

Yet how many advisers do you know who have brought in a healthy number of affluent clients over the past year? According to our research, just 1.3%.

Rainmakers lure 10 or more $1 million relationships annually. Few advisers capitalize on the opportunities that the economic crisis offers.

Remember, the affluent are looking for a professional to oversee all their family's financial affairs.

“We do a great job for our clients. We're down, but not nearly as much as everyone else,” said John, a senior partner of a multimillion-dollar wealth management team.

“But we recently lost three good clients, and it has shaken us up,” he said. “I thought we were doing the right things, but obviously, we need to change.”

Like many advisers, John thought he had changed his practice by incorporating financial planning into its deliverables.

However, it provided a plan only when clients indicated that they wanted one.

NEED FOR STRUCTURE

John needed more structure in his practice, allowing him to deliver what affluent families wanted while spending more time with them. The first question I asked him, which you should also answer, is: “What business are you in?”

John struggled to come up with an answer, but finally determined that he is in the business of “handling the financial affairs for affluent families in Northern California.” From there, I was able to assist him and his partner in making the necessary changes in their practice.

They had to reinvent the practice and re-brand it in the minds of its affluent clients. I suggested that it begin by overhauling its business plan and then make changes according to that plan.

Here is what I advised the practice to do; you can do the same:

• Create a five-year business plan with a profile of an ideal affluent family.

• Take inventory of the entire client base, determining the upgrade potential, current ideal and non-revenue/non-potential clients.

• Determine the financial solutions it will offer, such as financial planning or tax guidance.

• Create strategic alliances with three specialists in the practice's city (tax, estate and insurance) that are selected based on the adviser's needs.

• Sell support staff on the new business plan (but only after it has done some of the groundwork — otherwise, the staff won't believe it).

• Commit to providing Ritz Carlton service with FedEx efficiency to ideal profile clients.

John and his partner were to contact their top 50 clients, set up a meeting to demonstrate their recovery strategy, including financial plan adjustments and organizing all financial documents.

In the midst of this crisis, they had radically changed their practice. They had brought in $65 million in new money, had another $50 million in their pipeline, and everything was linked to their business plan of servicing 100 ideal affluent clients, though they still had more than 400 clients.

MAGIC BULLET?

Was there a magic bullet? No, because all the forces of practice management are connected.

Separating practice management from business development is a common mistake. Your practice-management model legitimizes your business plan and ensures that you are creating a business that is “built to last” — a radical change for many advisers.

We view this radical change as 21st-century practice management with four interrelated processes: business development; financial advice; operational efficiency; and client loyalty.

Because they are interrelated, they must also be integrated. The tool that creates that integration is your business plan.

Remember, your actions over the next 12 to 24 months will likely define the rest of your career. Let's make certain that you are capitalizing on the opportunity.

Matt Oechsli is an industry speaker, researcher and writer. E-mail him at [email protected] or visit oechsli.com.

For archived columns, go to investmentnews.com/practicemanagement.