Experts at The 6th Annual Financial Advisor Symposium outlined what it takes for advisory firms to be among the best in the country.
Although their firms are nearly 3,000 miles apart, David H. Bugen and Tim Kochis have taken some similar steps that have made their financial advisory practices among the most successful in the nation.
What have they done? RegentAtlantic Capital LLC in Chatham, N.J., and Kochis Fitz Tracy Fitzhugh & Gott Inc. in San Francisco, are fee-only, comprehensive wealth management firms that have identified their core services and target clients (see sidebar on page 64). They've stressed cooperation instead of competition among employees by making them part of teams and by viewing clients as belonging to the firm instead of individual advisors. They've set up incentive compensation plans so that every employee can earn bonuses and a share of profits when certain goals are met. Both firms are profitable.
Mark Tibergien, a principal in Moss Adams LLP in Seattle, Wash., cites these firms and a handful of others as among the country's best financial planning practices. Other entities, including financial publications, also have recognized them as being tops in the profession.
Tibergien spoke at length about the characteristics of the best financial advisory practices during his closing address in September at The 6th Annual Financial Advisor Symposium in Chicago, which was attended by more than 1,000 advisors. Charles "Chip" Roame, managing principal of Tiburon Strategic Advisors in Tiburon, Calif., also spoke at the conference about what makes advisory firms successful.
Tibergien for several years has produced an annual compensation and staffing study for the Financial Planning Association. It looks at compensation, staffing and financial performance of financial planning practices. He noted during his symposium presentation that the business environment for financial advisors is changing. Today, competition is increasing from new sources, specialization and boutique practices are on the rise, consolidation is accelerating, rapid changes in technology are happening and pricing pressures are growing. Revenues are declining while assets are rising. Expenses are rising, too, so margins are being squeezed.
The challenge is making your practice function as a dynamic business, he said. "Most people don't get into this business with a desire to run a business. Most got into it to fundamentally impact the lives of their clients," he commented.
Most practices are poorly leveraged, and they have a limited capacity to serve more clients, Tibergien continued. Adding people, such as a junior advisor, can increase productivity and leverage, but most advisors have a phobia about adding people, he said. At the same time, most advisors don't use their time wisely. Said Tibergien, "The typical advisor spends 39% of his time on clients and the rest is spent on crap."
He said the very best practices:
Have a clear position. They can say which clients they are serving and why.
Look at leverage and capacity. Firms that do often find they are doing things they shouldn't.