Optimum Efficiency

The objective of high performing Advisors is to create optimum efficiency in their practice and to alleviate many of the dreary day to day activities that burden most Advisors.

By creating highly efficient team and implementing technology into their practice, the Elite Advisors has the luxury to:

1. Offer Advice & High Quality Service Offerings

2. Do more and do it efficiently

3. Be more effective for more clients

4. Generate more Revenue, i.e. earn a higher take home

5. Pursue more efficient Growth Strategies like AUM acquisitions

Build Moats Around Your Clients

Build moats around your clients by offering unbelievably high service quality that cannot be easily replicated by other Advisors. This can be done by creating other avenues of affinity with your clients, by aligning with professionals that can provide high value response to address situations specific to your clients, e.g. personal and corporate accountants, divorce lawyers, personal and corporate lawyers etc.

Your Perfect Client

Have a perfect client in mind, build a system to attract this perfect client to your practice.

• Portfolio size

• Professional background or business owner focused

• Age range, i.e. retired, near retirement, transitioning from corporate executive to retirement etc.

• requires certain investment offerings that align with your practice and can be scaled across the board

• is align with your others in your offering, i.e. other clients or professional support i.e. accountants or lawyers, so there’s a second layer of affinity to the clients.

• focus on moving up market over time, but take advantage of your efficient infrastructure and team to increase revenues with profitable client opportunities.

• Have a full understand of your client communities and the niches that can be built around these communities and networks.

Having the ability to be flexible in attracting high quality clients is a huge advantage for the Elite Advisors, by having a highly efficient practice with scalable service offerings they have the luxury of onboarding clients that have the potential to grow.

These can be junior executes that aggressively moving up the ladder in their corporate setting, or families that are well aligned for significant inheritance, second generation families of successful entrepreneurs etc.

Because of the systems and team in place, all of these clients can be managed efficiently under the same streamlined practice. Some Elite Advisors never move their minimum account size higher, instead they focus on attracting high quality clients that are very well aligned with the Advisor’s overall offering.

As the team and infrastructure grows they have capacity to enhance revenues by managing clients that are not being serviced by others but can be very profitable in their practice.

As they get larger it becomes more efficient to serve the next incremental client regardless of the portfolio size, that said there’s usually a economic value that must be considered when onboarding each new potential client. These Elite Advisors have a good handle on why they choose to work with every individual client in their practice.

This is a unique position, one that is generally never considered by most Advisors.

Revenue Growth with Smaller Portfolios

Noteworthy - while the general impression is that Advisors with larger practices tend to have only very large clients, that’s not always the case.

In fact, as one very successful Advisor recently shared that after assembling her team and implementing some key processes and technologies necessary to deliver very high quality services in her practice, she realized that they could substantially increase their revenues by bringing on smaller clients that were well aligned with their offering but had small portfolio values.

The team realized that each incremental new client can offer a significant boost to revenue but did not pose a burden to their resources.

As she puts it, creating a highly efficient system and team is like having a bottle, its the container, most Advisors seek to fill it with large portfolio clients, like putting stones in a bottle, but there still significant room for mid size clients (the pebbles) and small portfolio clients with huge growth potential (the sand), many Advisors forego this revenue opportunity all together by ignoring the smaller portfolio clients, even though they may have ample capacity.

Overall she felt that outside of her largest clients almost 38% of her revenues come from client that would have been ignored had she implemented a minimum account threshold.

Having a system in place, where every team member can service clients allows for incredible efficiency when growing in this format. She pointed out that implementing appropriate service offerings for the different groups of clients and having a good understanding of all elements necessary to execute this approach is the key to exploiting this approach.

Generally the outcome is great for all clients as well, because the service offering is typically very well thought out and each member of the Advisor’s team is groomed to deliver very high quality service. This results in the smaller clients receiving a premium level of service that cannot be easily accessed elsewhere.

A big win for every one, the Advisor achieves higher revenues by fully leveraging the infrastructure that they’ve created and the high value services trickle down to all clients. The reality is that there’s also a sweet spot where smaller clients are far more profitable than large clients.

In order for Advisors to achieve this level of scalability to implement a clear distinction of client value and create systems to deliver appropriate service levels - they must first profile and segment every client.

Segmentation is a key factor in allocating resources to the different client groups, and as a result revenue enhancements can come from having clarity of what service levels are appropriate and then implementing fee schedules that align with each of the distinct groups.

This model is especially interesting for younger Advisors i.e. the millennial Advisors, many have a view that sticking to high minimum clients only, is a big hurdle and an inefficient restrictive approach to growing revenues.

While not always encouraged by many full service platforms, Advisors that take a more flexible view on portfolio minimums are more likely to fully utilize their internal infrastructure and team more efficiently and subsequently achieve much higher revenue growth earlier.

A Balanced Approach to Portfolio Size

When asked about minimum portfolio size, one Advisor shared that the ideal portfolio size is $500,000 to $10 million, and having a balance of everything i.e. having too many large clients can be inefficient because there’s significant redundancy in resources, and lower revenue levels on overall AUM. While on the other end of the spectrum, having too many small client can put a strain on resources.

It’s therefore very important to have a measured approach with controls in place to allocate resources efficiently when taking this approach.

Big Revenue Gains Achieved by Segmentation

Segmenting clients into distinct services model group create natural efficiencies and allow Advisors better leverage to provide services that’s appropriate for each segment and also price offerings in a manner that provide better economics when dealing with some smaller clients as well.

But an advantage here is that, having your operations streamlined this way drives greater increased capacity for the team to onboard and service more clients and as a result increases revenues for the overall practice.

Another key element of segmentation, is that it allows Advisor to have a clear sense of how much or little attention every client group requires. This is often overlooked, but having a clear picture across all clients, allows for easy targeted and proactive outreach at intervals that are important to each group. These outreaches are perceived as very high value to the clients, because they become very specific and relevant, rather that generic outreaches.

Important Elements of Managing a Large AUM business

1. Enterprise Thinking

2. Real Executive Team Approach

3. Capital Structure & Incentives for Partnership

4. Employees

5. Technology

6. Creating Scalable Solutions

7. Align with professional resources that enhances your service offering and creates a moat around your clients e.g. estate planners, personal and corporate accountants, divorce lawyers, estate lawyers, corporate lawyers etc.

Business Metrics & Segmentation are Critical

• Number of Clients

• Team Structure

• Service offerings - Wealth Management, Comprehensive Planning, Tax planning, Wealth Transfer

• Value Proposition, it’s important that your service offering aligns with your Value proposition

• Income Model - Fee Based Only, Discretionary Wealth Management, Fee plus commission, commission only

Practice Management is Also Important

• Lean Operation - Advisors plus Associate plus 1 - 2 Assistants

• Pay more for high quality support staff, build a support system that requires very little ongoing input from you the Advisor, instead give your Associate and Assistants clearly defined decision making capacity

• Allow all staff to interact with Clients, it can create a seamless and much better experience for clients, less friction and your staff will be empowered to efficiently solve clients issues without consultation. Keep in mind that almost 80% client service issue are often trivial matters and do not require your input.

• Focus on building a team that is a minimum of 2 client facing professionals with 2 administrative staff that are available to service every client.

• Everyone picks up the phone on the team!

The Chairman’s Council |  Strategy Playbook

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