There is no shortage of pundits who have a view of the future of the financial planning profession. When I listen to some, I'm reminded of so many retirement planning software tools that show us no matter how much we save, we still are going to be eating dog food in our old age.

Reality is, the business of financial advice can be a pretty good business. It's just that some of the people who are running practices are a little out of their depth. Not because they are not smart, but because they are not disciplined or focused or willing to invest the time in practice management. This is easy to understand, of course. Most financial advisors get their strokes from helping their clients achieve financial success, not from tending to their enterprises.

The foundation for these comments is the most recently completed survey on financial performance, sponsored by the Financial Planning Association, underwritten by SEI Investments and produced by Moss Adams LLP. One big thing jumped out at us:

Most practices are bending under the weight of too much overhead.

Four years ago, I said that if a practice kept its overhead costs-things like rent, utilities, administrative staff, marketing, etc. -under 30% of revenues, they were doing well. Two years ago, I allowed that most firms had to provide more and better service to their clients and so overhead at 35% of revenues seemed right. In our most recent survey, the average practice showed overhead as a percentage of revenue at more than 45%. This means that for every dollar of revenue the practice brings in, the practitioner is spending 45 cents on infrastructure costs before rewarding himself or herself and any other professional staff.

While one might attribute this expense ratio to declining fees tied to assets under management (AUM), I believe the problem is deeper than that.

First, this is a trend, not an isolated event. The cost of running a financial advisory firm continues to creep up every year, in good markets and bad. It's just that the current market has exposed the real problems with cost discipline. This is true whether a solo or ensemble firm, commission or fee-only-the cost of doing business is getting higher.

Second, one reason costs are now so out of line is that practitioners do not have the courage or ability to pare expenses to put them more in line with revenue. This is somewhat ironic considering the advice one might give to clients in the same circumstances.

Third, margin compression is not coming from a reduction in what one might charge. Rather, it is coming in the form of what one must provide to clients for the same fee as he or she charged three years ago. The implication is that many firms may have to move away from the AUM fee approach as their sole source of income, and supplement or replace it with value billing.

It's important to emphasize that cost control is a basic function of business ownership, but by no means the end-all. There obviously is more to managing a successful practice. The very best-managed practices have five things going for them:

1. A clear strategy and position in the market.

2. An understanding of which clients they are serving and why.

3. A commitment to charging for value delivered, not just assets collected.

4. Effective leverage of time and talent.

5. A commitment to understanding and monitoring their operating performance.

The point is, even though a practitioner's costs be out of control, there are enough models of success for them to apply to their own practices that they can make sure they won't be the ones eating dog food. But the reality is, the business of financial advice has changed. Most would agree with there premises:

There will be a slower rate of organic growth in practice revenue-perhaps 5% to 7%.

Clients are more demanding.

Few practices have built-in transition options.

The cost of running a practice is much higher.

Time compression is as worrisome as margin compression.

It is a continuing challenge to hire, retain and reward good people.

These forces of change will not go away without effort from the practitioner. Therefore, owners of practices will need to take stock of their own positions, organization and financial structure, to decide which steps they must take to not just survive but flourish. If running a business were easy, everybody would be doing it. But if you are one of those who regard yourself as an entrepreneur, it's time to recognize that success doesn't come just from the idea, but from the implementation.

Mark Tibergien is a consultant specializing in the management of financial services organizations, and a principal in Moss Adams LLP, the 10th largest CPA firm in the United States.