A Seven-Step Plan To Transform Your Advisory Practice

August 23, 2016

by Bob Veres

Advisory firms face a daunting challenge as they prepare themselves for the latest version of the future. They will have to retool their service offering for a new generation of clients (aka Millennials), who have very different preferences, different advice needs and far more digital sophistication than your Baby Boomer clients ever had.

Of course, they also need to strengthen their relationships with the heirs of their current clients, while also capturing Millennial-client relationships before those clients have reached your asset minimums – because if they don’t, those relationships will end up elsewhere.

Advisory Practice
Photo by Dave Dugdale

At the same time, today’s advisory firms need to start incorporating what I’ve termed Software 2.0 – or automated software, sometimes called “robo” platforms – into their business operations.

To make the transition even more complicated, they need to get their younger advisors some real-world experience bringing in new business. Many experienced advisors took the advice of practice management pundits and hired people with complementary skillsets. The result, in many cases, is a successor team with limited rainmaking skills.

Finally, advisory firms will need to transition from the AUM (or commission) revenue model to retainer fees – because that’s how Millennials prefer to pay for their services, and also because retainers present fewer conflicts of interest in the client relationship.

Where do you start as you address this confusing variety of interlocking challenges? Here’s a quick seven-step process that will take you from here to there in an organized, systematic way.

  1. Embrace robo technology

Incorporate one of the robo-solutions- – like Betterment Institutional, Vanare/NestEgg, Schwab Institutional Intelligent Portfolios or Jemstep – or an outsource solution like SEI, for your accommodation clients.

This reduces your internal costs to manage assets, and gives you leverage to turn a profit with clients who have much smaller portfolios than your current minimums. But more importantly, this gives you a taste of how to implement the automated back office of the future. And (perhaps most importantly) it lets you provide the sons and daughters of your current clients – Millennials – with a chance to gain a digital asset management experience through your firm. That will increase the likelihood that they’ll keep their inherited assets with your firm when your current clients pass on.

These robo platforms will evolve from their relatively primitive state. They will integrate with your current software suite, allow legacy assets to be accepted and eventually allow you to create portfolios with a much wider spectrum of assets than ETFs. If you’ve gained familiarity with this technology, those will be relatively easy transitions. If you haven’t, your evolutionary challenges become more complicated.

As the technology evolves, you will too. If you’re still laboriously creating performance statements, you’ll see how to give your clients real-time access to their investment information. You’ll get your feet wet with the newfangled auto-ACAT transfers of assets and clients signing on via e-signatures rather than physical paper. Eventually, these innovations are going to dramatically reduce the paperwork hassles that you and your clients currently have to endure when prospects move from their brokerage firm to your advice model.

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