Month: April 2015

Change a Practice into a Thriving Business

Many advisors are not actually considering selling their book, but they are interested in making their practice more efficient by reducing costs, and of course increasing their profitability. How can this goal be achieved without sapping the character out of your practice? To accomplish this goal, advisors must be willing to do their homework and take concrete steps to change their practice into a thriving business.

In the U.S. more than half of all advisors are solo practitioners who work directly with their clients. Based on a 2014 Compensation Survey conducted by, 47% of the respondents work alone and a further 20% were a part of a branch but have very little interaction with the other advisors in the office. In fact, only 33% of advisors actually work in teams and are diligently building a business in conjunction with their colleagues. These statistics appear to be similar to the composition of the Canadian investment advice industry.

There are any number of reasons why solo advisors feel the need to expand out of their current structure and seek like-minded partners: they run into capacity constraints and cannot service additional clients; as clients become more sophisticated they are seeking better portfolio management, or technology, or planning assistance; the industry is quickly consolidating and competition is becoming more intense; and there is the ever present question in the minds of clients as to how long you will be around to personally service their needs. So the question of finding the correct solution for your needs is not really a question at all but an absolute necessity.

In the past many advisors have been prevented from expanding their business because they have not been able to find the right partner; they insist on controlling all aspects of their practice; and after enjoying business life a certain way it is hard to adapt. However, as the old adage goes partnerships are like a marriage, never rush in and always wait for the right one. Establishing the correct partnership will make your life so much better but the wrong one could degenerate into an endless cycle of bickering.

A partnership can take on many forms, from the traditional joining of two solo practices to outsourcing certain functions that lead to synergies between both parties to the outright sale of your practice over time. In the end, partnerships come down to trust, respect and a compatible vision to see the combined business being better in the future. Unfortunately, Newton’s First Law of Physics always seems to apply in these types of situations; inertia.  A body remains at rest or continues upon its same path, unless acted upon by an external force. Certainly, most advisors do not need a bolt of lightning to get them going, but some old habits do need to be overcome.

Once that spark does occur, whatever it may be, the need to transform your practice will become an unrelenting force. From this point there are many decisions that must be made because transformations are complex and risky. While finding the right partner and getting to know them will require many questions, it is a vital step forward. The ultimate issue will be ensuring that the beliefs, values and goals that drive you as an individual can be maintained in your new partnership. Otherwise it is doomed to fail.
While the evolution of an advisor’s practice has the potential to be tremendously valuable, create economies of scale and pave the way for succession opportunities it can also be highly disruptive as well. Fortunately advisors do not need to surrender control in exchange for resources and support; they just need the right partnership that allows them to continue the good work they have been doing thus far in their career. All it really takes is the desire to move forward.