Easy ways to enhance your business

By Keith Pangretitsch | March 15, 2011 | Last updated on March 15, 2011
6 min read

I really did plan to eat healthier this year but after hanging out at my friend’s party a few weeks ago, I realized it’s tough to change your ways when hot wings, beer, chips and pizza keep calling your name — followed by the eventual moan from heartburn.

When it comes to life resolutions such as diets, saving money and breaking bad habits, it seems the more you try to change, the more things stay the same. Our business life can often be like that too. We hear good ideas and tell ourselves over and over again we are going to change, but nothing happens.

I’ll admit it. The advisory business is slow as molasses when it comes to change. Sure there are some advisors who seize new opportunities and are quick to execute, but the majority like to take their time. In that regard, I often tell peers my worst fear is that we will be doing business the same way at the end of the year as when we started.

So to avoid falling into a resolutions rut, I’m encouraging all advisors to make changes that can advance their businesses in 2011. Here are three easy changes many advisors can make to improve their businesses.

1. Disengage unprofitable clients

How many times have you heard this one before? For all the badgering, it’s amazing how many advisors still have lots of unprofitable clients sitting on their books. The first thing you need to do is gather data to determine your unprofitable clients. I have spoken to countless advisors who have told me the required information is difficult to put together. An increasing number of firms have recognized this issue and have either invested in an outside data provider or internal resources to tackle the issue.

At Russell, we created a business analytics tool to help advisors. After analyzing over 1,000 advisory practices over the last 10 years, the same surprising numbers came up over and over: The bottom 50% of an advisor’s book represents less than 5% of revenue.

Even if you received a payout of 80% from your firm, you would lose between 2-3% of after-tax income if you gave up half your clients. I must admit, before these analytics tools became available, I was not a believer in the culling strategy. The rationale for keeping them? “Every dollar of AUM generates 50 to 100bps in revenue,” or, “I never speak to my small clients.” The reality is not all clients produce profit for your business. The other important thing is in the advisory business, your most important asset is your brand. How well you are known in your marketplace and the reputation you have will play a large role in your future success. If the brand that half your clients circulate is the perception that they never hear from you, that cannot be good for your business.

2. Create a target market

The second thing advisors should consider is building a client focus. The scarcity mentality is alive and well in the advisory business. I am not proposing you pass on every opportunity that comes by unless it meets your target market. Instead, I am suggesting that if you did focus on a market and were able to attract five new targeted clients a year, after 10 years you would have an interesting business of clients you enjoy working with.

Where do you start? Look in your existing business. Based on internal Russell research, we discovered 94% of an advisor’s revenue during a year comes from clients that existed in his or her book of business at the beginning of the year: 84% comes from the revenue generated from clients who were in the business at the beginning of the year and 10% comes from referrals from existing clients. The final 6% comes from all other sources (mail drops, cold calls, etc.).

Most advisors find they either have a group of clients they enjoy working with, or they have some sort of leg up with these clients versus other advisors. Advisors often have a significant number of clients from past industries they worked in, such as the IT or accounting industries. My advisor earned my business because he specialized in working with young professionals. He identified the following issues most of his clients needed to address:

  • Financial planning to gain clarity on how much we needed to save for a robust retirement
  • Insurance issues to protect my family, which had significant debt and expenses but only one income earner
  • Income splitting and other tax issues
  • RESP, will and estate considerations
  • Investment management

He won my business because he determined the most important issue for most young professionals is to secure the future of their young family if anything were to happen to the major income earner. He also won me over with a plan to split income today to ensure a lower tax bill in the future. Most prior advisors had focused solely on the investment management piece, which was frankly still relatively small and not needed for another 20 to 30 years.

3. Build a WOW service plan

I often receive feedback from advisors that their clients do not want to meet on a regular basis. They prefer to communicate via email on an as-needed basis. This could be a red flag for your service plan. Look at culling unprofitable clients. You need to make sure your service plan is relevant; to deliver a WOW service plan, you have to deliver what your clients want.

This may sound simple, but it is often more difficult than expected. One of the reasons is advisors often have a diverse client list. For instance, many advisors say they want to work with entrepreneurs. My immediate question: What type of business owner? The needs of an incorporated doctor are dramatically different than a business owner in the oil and gas industry. For an oil and gas entrepreneur, the most important issues may be access to capital or planning for the sale of the business, even if it is 15 years away. The setting up of family trusts, insurance and estate issues may be significantly more important since most of the cash flow is received at sale. This is in contrast to an incorporated doctor who has consistent cash flow throughout his career and little, if any, terminal value.

Once you get the deliverables down, you can focus on adding the WOW factor to your practice. We recommend a “fresh eyes” walk through your office. Get a friend to walk in your client’s shoes. What is it like trying to find parking? How does the reception area look? How is she greeted? Is she forced to watch Cramer on TV while she waits? Do you have a meeting room that would wow your HNW clients? This all directly develops your brand. It’s the little things that create a WOW experience for clients. What if you were the primary relationship manager, called the clients to book a meeting, and followed up with a personal hand-written note thanking them for the time they were going to spend with you? What if your team followed up with an agenda of the meeting and a one-page summary of their plan? Your clients could even be wowed if you included a map from their home to your office parking lot with a prepaid parking ticket for their convenience.

You have to determine what works best for you, but keep in mind efforts to WOW your clients can drive referrals. A major differentiator between the best advisory practices and the low performers is the amount of time spent in front of clients. That’s the time you have to impress and build a referral practice.

A change for the better

You may throw these ideas into the garbage, store them in your iPhone or implement them right away. Regardless, I hope these points stir action, because when you are through changing, you are simply through. Consider this early part of the year a time of renewal for your business. Combine these business resolutions with your diet and fitness resolutions and you might be surprised how good your clients think you look next year.

  • Keith Pangretitsch is Director, National Sales at Russell Investments Canada Ltd.
  • Keith Pangretitsch