Why advisers need to be both effective and efficient

Peter Drucker may be gone, but his contributions to the field of management live on, particularly his espousal of the need to focus on both effectiveness and efficiency. That means doing the right things (effectiveness) in the right way (efficiency).

Designing and implementing a business that runs like a well-oiled machine is something to be proud of. It takes a lot of work to get there. Once you do get there, though, you can’t exactly “set it and forget it”—no matter how tempting that may be. Businesses need to be managed on a daily basis. Sure, workflows, documented procedures, integrated technology, scale and capacity tools, and good time management skills can get you to a certain point, but they won’t help your business if you’re doing the wrong things.

In industries undergoing change, such as ours, it’s all too easy for a business to unravel. So how can you ensure that you’re doing the right things?

What the Right Things Are

Think of four quadrants, as follows:

1. Right things done the right way (strategic efficiency)

2. Right things done the wrong way (strategic inefficiency)

3. Wrong things done the right way (wasteful efficiency)

4. Wrong things done the wrong way (wasteful inefficiency)

Clearly, you want to be putting your energy into doing the right things the right way. That’s where you get the biggest return.

(More: From asset manager to holistic planner)​

Where things get off-track

Some advisers today tend to stick with the status quo. Maybe they have a lifestyle practice and aren’t necessarily interested in change, or they just aren’t sure what to focus on next. The problem with this approach is that what once might have been the right thing to do has now devolved into the wrong thing to do.

Let’s look at an example: You’ve worked with a couple for a decade. They have more than $7.5 million in investible assets, plus $4.5 million in non-investible assets. You’ve taken a yellow-pad approach to their planning, with annual meetings focused primarily on how the couple will retire. Suddenly, things have changed — the wife has died; there’s a new girlfriend; a grandchild has been born with Down syndrome; the surviving spouse has moved from a state without state estate tax to a state with estate tax. How is that yellow-pad approach going to work for you now? Not well, I’d argue.

Embracing a different, more sophisticated approach to financial planning could be the right thing. Yes, you have to choose the best software, learn how to use it and evaluate with your client the analysis it provides, so you can decide on what to do next. It will take work. But the results can be life-changing.

Now your client may not be asking for any new information or financial planning services from you. After all, you’ve been his trusted adviser for a decade, and you’ve never delivered a software-inspired plan before. But that doesn’t mean the client doesn’t need it.

Are you prepared for your firm to make a strategic shift to more sophisticated financial planning? If not, perhaps it’s time to suggest your client take his business elsewhere, to a firm that does offer comprehensive investment management, tax planning and estate planning, as opposed to your current approach of responding to one-off questions as they come up. What’s best for the client? Be honest.

(More: Top 5 ways comprehensive technology boosts client engagement)

Will You Be an Early Adopter or a Late One?

We’ve watched trends such as this emerge and grow. Others include going fee-only, ensuring fee transparency and embracing cutting-edge technology. Still, we can’t predict the future. Did we see the DOL rule going away as it has done? Every adoption of a strategic change carries potential risk. Ask yourself: What’s your risk tolerance as a business owner?

Trends require you to respond to them. When you choose to confront them and adapt your practice is a matter of timing. But if you are never willing to change? No matter how efficient you are, you won’t be as effective as you could — or should — be.

(More: Why saying goodbye to your clients and business is hard)​

Joni Youngwirth is managing principal of practice management at Commonwealth Financial Network.