With a new year ahead, new challenges await financial advisory firms. The question is, do you handle those challenges in a proactive way, or do you wait until an emergency erupts—fighting fires as they happen. The truth is that most operations-related challenges can be addressed through an active strategic planning process.

Many financial advisors hold an annual strategic planning meeting. Those meetings are often with management personnel and not necessarily all employees. And when the meeting is over, the planning is also over. In other words, few advisory firms actually take the steps necessary to track the strategic plan progress or to develop systems or procedures to gauge progress. In a number of instances when I have visited financial practices and asked them to produce their strategic plan, they first blow the dust off it and then hand it to me (meaning it’s old and out of date).

For a strategic plan to be successful, it should be an ongoing process with periodic reviews during the year to ensure the firm stays on track or accounts for changes in goals. And it should be about a lot more than just increasing revenue. There are a variety of issues to be explored through the strategic planning process. Certainly, revenue goals are probably going to be at the top of the list. But from an operational perspective, building a practice with higher profits may include other issues such as hiring more personnel, adding new technology, increasing the office size, etc.

With respect to these other issues, there may be a need to evaluate different solutions to the same issue. As an example, if adding employees is on the list, the firm may wish to cost compare the salary of a new employee or, if realistic, look at a virtual solution, such as back office support services, a virtual receptionist or other virtual services. By considering the lower cost (compared with an additional salary), it may be possible to shuffle existing employees to take on higher level duties while outsourcing the simpler job descriptions. Either way, there are costs to be considered along with other issues.

One popular exercise is to use a SWOT analysis (it stands for strengths, weaknesses, opportunities and threats). These are grouped into a four-box grid. However, one mistake that is frequently made is to wait until the strategic planning meeting to present this to the meeting attendees. Having time to think through those four aspects of planning prior to the meeting will undoubtedly lead to more accurate results as compared with attendees having to think of issues off the “top of their heads.”

But a SWOT analysis alone is not going to produce a strategic plan. It can be helpful in uncovering issues to be addressed in the plan. A strategic plan should be a road map with reference points along the way to identify progress on the goals of the plan. And when the plan is completed, there needs to be a way to insert the time lines into a calendar with recurring tasks to monitor the firm’s progress.

Financial goals are often perceived as the most important. However, there are several other areas that can and should be addressed in a strategic plan. Technology, for instance, is another issue to explore. The question may be to determine what the firm needs going forward, rather than simply purchasing the newest technology. Technology, such as hardware, software, peripherals and mobile solutions, are key parts of the puzzle. The first step in exploring technology is to fully understand what the firm needs that is not accessible or available with current systems/devices/software. Surprisingly, many firms have systems and software that are significantly underutilized. Yet those same firms are buying new and more complicated solutions without considering the specific needs or whether those needs could be met with existing stuff.

One example of this might be a client relationship management (CRM) software. New CRM solutions are being introduced every year. Some are more feature-rich than others. Some may be new versions of older software. For an average sized financial advisory firm to change to a different CRM software is a major decision and should be carefully researched. It’s not just a cost difference; the specific features and functionality of the software need to be matched up with the needs of the firm. And quite frankly, it should be asked whether the current solution can be customized or tweaked to satisfy those needs.

More than just the cost difference of switching CRM software should be considered. All of the costs need to be considered along with other issues inherent in changing to different software. There is a soft dollar impact of the time involved in exporting/importing data, learning the new software, customizing the software, etc. Hard dollar impacts might be any setup charges, technology support or other expenses related to the changeover. CRM software is often sharing data with other systems/software. The integration of those other solutions could take weeks and, in the meantime, manual steps might have to be undertaken to produce data transfers that would be automatic with data integration.

How these soft-dollar impacts are felt in the firm is in the loss of productivity of employees who are re-tasked with the setup and learning of new software.

The issue of a CRM change is only one example of many issues to be dealt with in a strategic plan. By mapping out what needs to be done throughout the year and focusing on the specific needs of the firm, financial advisory practices can minimize the negative impact on the firm.

So other than revenue and technology, what are the most common issues that can be addressed in a strategic plan? See partial list at left.

These are just a few of the many issues that can be explored and managed through the strategic planning process. The key is to not just build the plan, but to use it throughout the year. 

David L. Lawrence is founder and president of EfficientPractice.com, a consulting firm that provides financial practices, broker-dealers and independent firms with comprehensive, profit-driven efficiency consulting and resources. He is also the author of The Efficient Practice: Transform and Optimize Your Financial Practice for Greater Profits and Success, available at EfficientPractice.com.