The No. 1 priority for firms wanting to recover is to retain their clients during the crisis, he said. This can be a problem if hiring plans are delayed. “Unfortunately, this means we need to work longer hours,” he said. Keeping clients happy also means not using now as a time to introduce new fee structures or personnel changes for those handling the accounts.
The good news—and there’s very little of it right now—is that advisors who do survive will be in good shape to pick up clients from those that don’t and will emerge taking advantage of the good years that often follow awful ones. A healthy firm can withstand a 25%-30% hit to revenue without suffering much damage. The operating income can forgo profits, but it doesn’t mean consuming capital in order to survive, which is “like burning the furniture to warm up the house,” Palaveev said.
It’s a good time to stress-test your P&L statements, he added. “Project on a monthly basis the rest of the year, use your existing budgets … assume that revenue is reduced by 25%, 30%, even 35% at this point in time and see what happens to the firm under those conditions.”