Advisory firms rely on outside help to improve practices

Nearly half of financial advisers have relied on outside advice to help improve their practices, and according to a new Cerulli Associates Inc. study, those who do so generate 28.5% more in annual revenue than those who don’t.

Seeking to improve their production, planners are hiring coaches and consultants or forming client advisory boards, according to the first quarter issue of The Cerulli Edge Advisor Edition. Data for the study were compiled from the Boston-based research firm’s fourth-quarter 2007 survey of Financial Planning Association members.

Even though the vast majority of advisers who have worked with coaches or consultants (90%) report being very satisfied, such services are not suitable for every firm, the Cerulli report said.

Hiring outside help to give feedback cannot rescue a failing advisory firm, but it can help a motivated financial planner to improve his or her practice, the study said. “The only advisers who are going to have success with a coach or consultant are those who want to take their business to the next level,” said Cerulli analyst Katherine Wolf, one of the study’s authors.

The research also showed that advisory firms that have employed a coach or consultant generated $861,289 in average annual revenue, compared with $670,050 for planners that did not.

Client advisory boards also assist planners, and the Cerulli report said that while only 9% of responding firms had utilized them, 15% were planning to do so in the next 15 months. While those who have client advisory boards all reported satisfaction with the results and the trend is on the upswing, Cerulli senior adviser Scott Smith, author of that portion of the report, said he doubted that the incidence would rise above 20%.

Citing accountability and “finding a mirror for one’s weaknesses when no one else will tell the emperor she has no clothes,” Cheryl Holland, president of Abacus Planning Group Inc. of Columbia, S.C., said she had hired financial expert Tracy Beckes as an outside coach to critique the firm’s performance. Ms. Holland said she tapped Ms. Beckes soon after the firm’s launch 10 years ago, when she heard her speak at a National Association of Personal Financial Advisors conference for advanced planners.

“I realized I needed a coach to help me reach my aspirations,” said Ms. Holland, whose firm manages $525 million in assets. “I can unequivocally state that the coaching I receive from Tracy Beckes is one of the three most influential factors in the success of my business.”

Craig DuVarney, a sole-practitioner certified financial planner in Concord, Mass., also hired Ms. Beckes. Under her guidance, his firm, which has $50 million in assets, instituted an investment minimum of $350,000 for new clients while transitioning those with smaller portfolios to other advisers. It also hired technology consultant Joel Bruckenstein, who helped institute a new data system that keeps tracks of all appointments.

“The [coaching] process forces you to look at your practice like a business,” said Mr. DuVarney. “The benefit for me is delving into my business and looking at all aspects of it.”

One advisory firm that has found a coach to be a great motivational tool for its small staff over the last eight years is Resource Advisory Services Inc. in Knoxville, Tenn. Sharon Hoover, a financial expert in Nashville, Tenn., has helped the firm’s four employees both over the phone and in meetings. The firm manages $65 million in assets, and Ms. Hoover will remain with it through the end of 2008 as it tries to grow and plan for the succession process when its president, J. Davis Lewis, 60, retires in a few years.

Having a coach “has helped us do a far better job serving clients and working better as an organization,” Mr. Lewis said.

Consultants tend to be used when an advisory firm wants to diagnose a particular problem, while coaches are hired to provide continuing support for the firm’s practice, according to Ms. Wolf.

A consultant can improve not only client business but also day-to-day operations such as human resources, said Peter Vessenes, chief executive of Shorewood, Minn.-based Vestment Advisors Inc.

“Most advisers are good at accessing their client needs … but when it comes to daily operations at a firm, they aren’t able to concentrate as much on it,” he said.

Georgia Bruggeman, a certified financial planner with Holliston, Mass.-based Meridian Financial Advisors LLC, has used both online and executive coaches. “My executive coach really helped me redefine our business practices and processes,” she said. “The online coach is great for encouragement and support, as well as a great way to be reminded of simple client service techniques.”

E-mail Andrew Coen at [email protected].