A question often on the minds of financial planning practice owners is “How do I simultaneously meet clients’ increasing service expectations while solving ever-increasing regulatory demands and shrinking compensation models?” Those who are good at financial planning don’t always have time to develop efficient business practices and, today, those efficiencies can spell the difference between a thriving business and a struggling one. 

The goal is to get in front of clients needing guidance, as well as move them to action. What often gets unfulfilled, however, is the need to continuously expand the breadth and depth of our knowledge. Failure to do so raises the risk of misapplication. Financial planning covers a broad range of topics, each peppered with variables that require in-depth understanding of how they apply to specific client situations. Given time limitations, how does one maintain the high level of knowledge and experience that creates perspective in multiple financial-related arenas? Addressing this question alone helps answer the broader question of how to reconcile service expectations, regulatory demands and diminishing compensation.

Despite growing one’s own knowledge base, oftentimes client situations call for a level of expertise beyond what’s been attained thus far. Considering the amount of time likely required for a practice owner to become totally adept in every area, complex situations are most often resolved through effective affiliations with other industry professionals. These affiliations generally take one of three forms: 1) hiring additional staff; 2) forming relationships with other individual professionals; or 3) affiliating with organizations that comprise a resource team. The key benefits and costs of each include:

Hire Additional Staff Pros:
• Hire people we choose
• Hire/fire as necessary
• Teach them the preferred way of servicing clients.

• Cost
• Requires good interviewing skills
• Keeping staff motivated
• Training
• Cost of maintaining appropriate licensing.

Form Relationships With Individuals Pros:
• No employee expenses
• Choose with whom to affiliate

• Not always available when needed
• Compatible service methodology
• Risk of client theft
• Reciprocation of prospect referrals
• Compensation issues.

Affiliate With Organizations Pros:
• No employee expenses
• Access to established team of professionals
• Team familiarity with investment product suite.

• Not always available when we needed
• No guarantee of complementary skill set
• Question of organization’s commitment to retaining/growing team’s value
• Availability limited to high-level producers.

Favoring one option over another is generally driven by economies of scale and leveraging the time available. Consider, too, that it takes time to develop relationships and build the level of trust necessary for such decisions. Those with whom we choose to affiliate must have the knowledge, experience and perspective ideally possessed by one’s own personnel; yet scrutiny shouldn’t stop there. Their drive, motivation and level of client service must be aligned with your own. Determining if these attributes exist can be a time-consuming process but, in the end, can be well worth the effort.

At some point, all financial planning practice owners find themselves in one of the three following career stages:

• “Newbies” – categorized as being relatively new to industry and aggressive in their efforts to grow clientele;
• “Growing At A Reasonable Pace (GARP)” – categorized by continuing efforts to grow clientele but increasingly burdened by time constraints;
• “Maintaining” – categorized by little-to-no attempts at growing clientele; majority of time spent attending to existing clients’ service needs.

Each stage comes with its own incentives, challenges and stress factors.  Generating enough income to pay the office utility bills is a likely stressor for a Newbie, but probably less so for a Maintainer. Conversely, finding enough time to handle client servicing requests is likely to challenge GARPs and Maintainers, but is easier for Newbies.

While each affiliation format has both pros and cons, the following represents the most appropriate choice at a given career stage:

For a Newbie, affiliating with organizations that offer a resource team is likely to be the most effective, and probably the only, viable choice. Practice owners in this career stage probably have neither the expertise nor, as yet, the time to evaluate other industry resources. They will be best served by looking to affiliate with an established organization (a broker-dealer, RIA, etc.) that offers access to a team of professionals. 

Those in the GARP stage would likely be best served by forming relationships with other industry professionals. It’s likely that those at this career stage have had the opportunity to work — formally or informally — with other industry professionals but lack the means and resources to hire their own staff.

Someone in the Maintaining stage has probably had the opportunity to work with, and evaluate, a variety of colleagues, and may even have accumulated the financial wherewithal to begin hiring a staff. 

It is possible for financial practice owners to simultaneously meet increasing client service expectations, ever-increasing regulatory demands and shrinking compensation models, all without sacrificing high levels of client service. Efficient use of available resources is a key component to meeting this challenge, and affiliating with industry professionals in one of three ways (depending on one’s career stage) can be an open door to success.