Finding the right solution to practice development

Finding the best of breed solutions to practice management issues has been a hot topic with dealer groups over the last year, with the subject of practice management growing out of a recognition by financial planners of the need to extract the best value from their practices.

Planners who have been used to working solo or within a small team of fellow practitioners have in the past focused on two things — how best to service their clients and how to expand their client base in a manageable fashion. While this focus remains critically important, planners now recognise that they must pay more attention to business efficiencies that will support the growth of a sustainable and robust practice.

Enter the practice manager.

The practice manager helps to draft and implement a business strategy. A good business strategy should translate to a more profitable business in the short-term and a more saleable business in the longer term.

Large dealer groups have practice management teams which offer planners support in a variety of areas. They can advise planners on a raft of issues, including the composition and implementation of an appropriate business plan, the adoption of customised marketing strategies, the introduction of new technology, succession planning and the most appropriate way to exit the business when the time comes. In an era of increased legislation, they can conduct audits of the planner’s practice and offer advice on how best to address the issue of compliance.

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For the most part, practice management teams within large dealer groups are multi-skilled. However, individual practice managers may have differing skills, indicating that major dealer groups have made huge commitments to their practice management capabilities, constructing business models that fit within the dealer culture and provide relevant business solutions to planners.

There is a particular challenge for the smaller dealer groups that sometimes struggle to adopt best practice solutions. This is mainly due to the principal dedicating most of their time to addressing client related issues and finding that there is little time for anything else.

In this situation it is critical that planner principals look to distance themselves from business management issues and concentrate on the client service aspect of the practice. Only too often planners in this position attempt to take on the two roles and end up not being totally effective doing either — at some point something must give and service standards may fall.

While the planner may think that business planning is important, invariably it is not considered a priority and the decision to dedicate the time required to adopt the business planning process is delayed.

It is in this situation that the practice manager would encourage the planner to step back from the business and take a dispassionate view of how the practice should be managed. However, small practices often don’t have access to practice management resources or are unaware of how to access them.

Business development managers (BDMs) are to an extent helping to fill the void. This is evidenced not so much in devising a strategic plan and implementing it, but rather in helping the planner in the areas of marketing and technical services.

Those BDMs that offer most in this area are invariably able to understand the key drivers of a financial planning practice and the psyche of the planner. Financial planners in smaller practices are no different to many small business owners, in that they commence the business with themselves as sole practitioner doing what they know best: finding the best possible financial solutions for their clients. The sole practitioner then gets caught up in working in the business and finds that they are unable to work on the business.

BDMs who recognise that there is more to their role than delivering brochures attempt to work with the planner to get problem areas addressed.

Ten years ago when I was a BDM, I like a number of my peers at the time, worked with planners particularly to address issues of marketing their practices, including the use of advertising, design and composition of client newsletters and ways of improving their seminars.

More than once I was asked to look at the valuation of a practice and several times I was asked to look for opportunities for the sale of practices.

While brokering the sale of financial planning practices is still not the core function of a BDM, from time to time BDMs still get asked to get involved in this area by planners who trust their opinion.

BDMs must now demonstrate that they actually add significant value to planners’ practices by helping planners focus on business planning and taking a strategic view of their practices. A number of fund managers are drawing on the resources of companies such as SCAT and Business Health to equip BDMs with practice management skills.

As a planner it is worthwhile considering which BDMs in contact with your business can supply this type of service and who cannot and inquiring as to why those situations exist. The answers may provide insights into the people that knock on your door.

But all this is dependent on the actual business planning process undertaken by the adviser themselves, which, if absent, would make it difficult to fully reach the best possible result for which the adviser went into business.

Sitting down with a pen and a blank sheet of paper to draft a business plan is often a daunting task for financial planners. Most are not experienced business planners and do not feel confident in their ability to produce a business plan that is going to help them to take their practice forward.

But planning the future of the practice from an early stage will ensure that the business grows in line with your expectations. Planning may actually save your practice from spreading its resources too thinly.

A common mistake for small practices is tying the principal up in all facets of the business, when many of the day-to-day tasks such as administration or systems issues could be handled by experienced staff.

But perhaps the most significant thing you can do is to change the way you view your practice. And the first step is to think about what you want from your practice both now and in the future. Think about how you want to live your life — lifestyle issues are the single most critical element in laying the foundations of a workable business plan.