Industry Insights

The Power Of Practice Analysis Review

Many advisors are now turning to accountability coaches

by: Mary Mock

Mary Mock is Senior Vice President and Head of Distribution for Touchstone Investments. In this role she is responsible for developing and executing on Touchstone’s overall sales strategies and directing all external sales activities.

When it comes to practice management, how prepared do you feel for the expected – and unexpected? While we are all aware of the potential for increased artificial intelligence (AI) adoption, the expanding need for holistic wealth management, and the opportunities and challenges that may be presented with the next generation of advisors entering the industry, it’s time to get serious and be proactive.

Serving clients is what drives us as advisors, but managing a successful advisory practice involves more than providing clients with quality investment and financial advice. Just as the objectivity an advisor provides can be a difference maker in their client’s long-term outcomes, third-party practice reviews can be instrumental in helping financial professionals think impartially and critically about how to grow strategically, how to create efficiencies, and eventually seamlessly transition their businesses.

Practice analysis review, or PAR, as we refer to it at Touchstone Investments, is designed to help advisors to scale, reduce risk, and plan strategically with the objective expertise of a coach. No matter where an advisor is in their career, using the typically slower summer months to conduct a PAR can enable advisors to plan ahead before things get too busy. Here are three scenarios where advisors can leverage practice consulting to better position their practices for the future. 

Creating Capacity With Artificial Intelligence

With only 24 hours in a day, a financial professional with a large practice and many clients to serve, will value any time back to be more productive. While it is difficult to predict the full impact AI will have on the wealth management industry, the technology has already shown benefits that can free up advisor capacity. By acting as a virtual assistant, new AI tools can synthesize and summarize phone conversations, long-form documents, and other proprietary information to save time and may help you to “get to the heart” of a question quicker.

Many financial professionals may not be familiar with AI’s capabilities, or its relevance and potential value when working with their clients – but that doesn’t mean they need to test and learn all of the trending technologies coming out in real time. For financial professionals considering AI, practice review can help determine where it might make the most sense. We think some of the benefits of AI to advisors is reducing time spent on things like administrative tasks and cited research, which can create capacity for financial professionals to spend more time on the more human elements of the practice, like having important conversations with clients about life goals and financial priorities, making thoughtful recommendations on allocations, and being the voice of reason during times of volatility.

Scaling Business With Advice-Based Wealth Management

Advisors may have an opportunity by leveraging advice-based models using a more holistic approach to wealth management, which considers a client’s full financial picture and all of their priorities from accumulation to estate planning.

However, for an advisor juggling multiple priorities simultaneously, deciding where to begin can be daunting. We’ve seen how challenging it can be for financial professionals who have worked on commission-based compensation structures to transition to fee-based or fee-only compensation models – but there can be significant and sustainable value once implemented.

By engaging an objective coach through practice analysis review, advisors looking to buy a practice can better understand whether there are adequate synergies and if the opportunities outweigh the risks over the long-term...

Financial professionals looking to make this transition might be stressed by the thought of assessing all of their client accounts, as well as having to initiate the conversations with clients about the business model shift. A practice analysis review can help facilitate a seamless experience for those committed to making the transition to advice-based wealth management.

For example, we recently assisted a financial professional, leveraging our decades of conversion consulting, to create a personal value proposition and specific scripts detailing the benefits of fee-based accounts, which assisted with having the client conversation. This helped the advisor confidently communicate the intention and details of the shift in a way that made sense to clients, who were used to the traditional commission model. The results were successful as this advisor increased the recurring revenue from advice-based business from 8% to 50% of assets in just three years. In year four, the advisor transitioned over $150 million in client assets to advice-based platforms.

Seizing Acquisition Opportunity During Advisor Succession 

It’s no secret that financial advisors have been retiring faster than they can be replaced. In fact, according to Cerulli data, more than 109,000 U.S. financial advisors – representing 38 percent of industry head count and 42 percent of assets – are planning to retire in the next decade. For those remaining in the industry or just starting out, this presents tremendous opportunity for thoughtful succession planning to grow inorganically through purchasing a book of business. 

While buying a book can be the quickest way to grow a practice, a lot of upfront work needs to be done to determine if a transfer makes sense for both the seller and acquirer. By starting with a rigorous due diligence process, a financial professional can better ensure the business is a strong match in terms of client relationships, revenue streams, compliance considerations and many other related criteria. Naturally, navigating these nuances requires careful planning, due diligence, and strategic thinking, which can be hard to do alone.

By engaging an objective coach through practice analysis review, advisors looking to buy a practice can better understand whether there are adequate synergies and if the opportunities outweigh the risks over the long-term. One of the biggest risks we see in succession planning is failing to appropriately price a practice – and this is something a practice consulting coach can assist with.

An important part of the process to consider is using a practice consultant to objectively include tangibles like the number of orphan holdings, investment mix of the client roster and the existing service model – plus considering intangibles like goodwill and legacy relationships that the selling advisor has built. After all, acquiring a practice is a significant undertaking that includes weighing the risks associated with the practice to decide if the cost of the acquisition is too high.

The decision to engage a consultant to evaluate and enhance one’s practice is not just prudent; it’s strategic. At Touchstone, our decades-long experience in partnering with financial professionals using practice analysis review has shown that consistently improving a practice is vital to serving clients’ evolving needs as efficiently as possible, and the reality is that professionals at all stages can benefit from having an accountability coach.

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