Business is booming, but advisorsí bottom lines are barely benefiting.

Financial success may be advisors' true business, but it seems to be catching up to them.

Advisors and their consultants report rampant profit-margin and time compression has meant more work for the same money, a fight to keep pace with client demand, and acknowledgement that all forms of competition are ramping up to embrace the successful planner model.

Surely there are worse problems to have than too much business. Still, this one in particular continues to plague advisors, as they struggle with the notion of becoming more pencil-pushing business owner than client-friendly planner.

"I'm just not sure I want to get any bigger," says Jill Gianola, president of Gianola Financial Planning in Columbus, Ohio, a fee-only firm that has experienced explosive growth despite the sagging economy and stock market woes. "I really am at the crossroads in my business planning. I enjoy planning so much; I don't want to spend too much time doing administrative work. Still, I feel a responsibility to people who call and want to work with us," says the longtime planner, who is finally adding another practitioner to help with the workload.

Gianola's struggle with a growing business makes her an everywoman-or man-of sorts, when it comes to advisors. The fact is that the independent investment advisor continues to grab a bigger piece of the investable asset pie (22%) than does any other distribution channel in financial services. This trend will accelerate over the next decade, predicts Chip Roame, managing principal of Tiburon Strategic Advisors in Tiburon, Calif. "The boomer population is now in its peak earning and saving years, and as it moves toward its peak liquefaction years in the next decade the $17 trillion in assets now invested is likely to double. The sheer numbers and lower market returns will push many to seek independent financial advice," predicts Roame, who spends much of his time tracking financial and practice trends for the profession.

It is a David-like feat for the relatively new independent financial advisory industry not only to compete successfully with but to beat mainstream financial services players like wirehouses, regional broker-dealers, banks, insurers and discount brokers, many of which have spent millions on national advertising campaigns to create brand appeal. But don't think for a moment that executives in these financial institutions haven't taken notice and revamped their strategic plans to emulate the victors.

It's both a beguiling and a bedeviling time for the profession-one that promises to give even great advisors a run for their money. We asked some of the most renowned experts across the country to help us compile a definitive list of the issues advisors are most likely to be staring down in the months and years ahead.

Show Me The Money

Every business owner loves the thrill of a busy office. But is working harder really working smarter? The problem, says Mark Tibergien, the consultant who has spent a good part of the past three decades benchmarking the industry's performance and practices, good and bad, is that advisors tend to want to put their foot on the accelerator and the brakes of their business at the same time. "I can't criticize people for choosing to stay small or create a lifestyle over building a business, but many advisors are too big and too small at the same time," says the principal of Moss Adams, an accounting firm in Seattle, Wash. "They have overhead to support, but are fearful of getting any bigger to be able to grow to pay that overhead.

"The inevitable outcome is profit-margin and time compression," he says. "Advisors are providing more services for the same or shrinking fees, and [are] having to spend more time with clients as nursemaid and bottle washer to provide the services."

Advisors whose portfolios are down significantly can find their asset-based fees compromised as well. Equally as challenging, when planners take on the role of jack-of-all-trades because of a growing clientele, Tibergien maintains they are often faced with growing operating expenses. Administrative costs in particular are continuing to climb, as employees demand and get higher salaries and clamor for more staff, to offset job pressures. While the industry pays market rates, it does not tend to have adequate measures in place to evaluate administrative staff productivity and performance.

"The things that concern me are the lack of operating leverage, the lack of capacity to serve more clients well, and the fact that advisors have let their marketing muscle atrophy. There's only so much cost-cutting you can do to achieve profitability. Then you have to add capacity to serve clients, leverage your time better and put a strategy in place to attract new clients," Tibergien says.

Sometimes the best strategy should involve adding a mid- or higher-level professional administrator, so the planner can free up time to do what he or she enjoys. "People hold on to the notion of independence to a fault," Tibergien counsels. "They're blinded by the idea that they're more free when they're actually consumed by more stuff that they don't actually like to do." Like management and administration.

Many planners like to get in front of clients and do financial problem solving. They don't seem to like administrative work or operational or strategic planning nearly as much, which is often why they're swamped and end up being reactive rather than proactive when it comes to making business and staffing decisions, the consultant adds.

While advisors actively are looking to expand their business, others are taking a slower approach. Thomas "Tif" Joyce, President of Joyce Financial Management in California's Sonoma County, says although the bear market has been an absolute boon, "I don't want to bite off more than I can chew. I don't need millions in income, and quality of life is more important to me. I've been too busy before, and you can't deliver that way. I get to be choosier now and even refer people out."

Is Competition Out There?

While experienced advisors may think they're the only game in town, they may be forgetting this important lesson: There is competition out there, and it is grooming itself to look exactly like advisors.

If advisors are happy with their firm size and level of clients, they may never notice the clients who go elsewhere. But if advisors are trying to be one of the top three advisory firms in a market, they will likely have to go head to head with fairly aggressive competitors, often with pretty deep pockets. These run the gamut of all the likely suspects, including banks, insurers, CPA firms, stock brokerages and national and regional broker-dealers, all of which are determined to increase their share of the asset pie by performing fee-based financial planning.

These competitors want to trade in their ever-shrinking commission and transaction-based business for recurring fees, the way many planners have. For those advisors who are interested in growing, it's wise to start a follow-up program now with prospects who they don't get as clients. "I think that advisors of all types are sometimes oblivious to the would-be clients they don't land," says Tiburon's Roame. "Someone doesn't call back, and they're forgotten about." As competition ramps up-and it is making some amount of headway all the time-Roame suggests that advisors create a program to follow up with all lost clients and prospects.

"It's easy to forget the guy who called in or came in, but someone got him," Roame says. "One thing advisors really could do better is interview the ones who got away."

All sorts of competitors are retooling their offerings and retraining professional staffs to provide a broader range of services for high-net-worth investors. This broader range of services is the primary focus of competition, says Barry K. Mendelson, managing director of Capital Market Consultants in Shorewood, Wisc., which does practice management work with financial advisors.

Like it or not, the marketplace is teeming with competitors spurred on by advisors' success, the quest for fee-based income and the fact that commissions are down two to three times as much as fees are, despite the haircut the stock market has given many firms' assets.

Fear Of Fees

Be clear. Don't undercharge. Don't apologize.

These are some of the profession's rules of thumb for setting and communicating fees. But we've uncovered several other interesting practices. One is that some advisors are raising planning fees at the same time they feel pressure on their asset-based fees.

Gianola, who doesn't have assets under management, has bumped up her retainer fees by 20% to 30% "and had no complaints," she says. She's not surprised, she adds, that asset-under-management-based planners are having to recast their fees and charge a little more for planning and a little less for investments, considering the current stock market contraction. "Right now the industry is set up to emphasize and charge based on investments, which can be a dangerous thing," says Gianola.

Paula Hogan, president of Hogan Financial Management, Milwaukee, recently raised her initial planning consultation fee to $3,000 from $2,500. The reason for the increase, she says, was a huge increase in demand, and the time it takes to do relatively comprehensive plans. She also gives prospects the option of hiring her for $250 per hour. These fees are in addition to her asset-management fees, which start at 1% for the first $1 million in assets and go down as assets increase.

In a renegade move, Hogan recently posted all of her fees on her Web site (www.hoganfinancial.com). "I'm a fan of transparency," she adds. "If I'm not comfortable talking about my own fees, how can I effectively communicate them to clients? And if can't communicate them, what does that say about me?"

The experience will also teach clients and prospects to ask intelligently about what and how others, such as estate attorneys or even competitors, charge. "I'm not getting any fee resistance," says Hogan.

Is Your Own House In Order?

Hogan, who currently manages about $35 million in client assets in addition to her robust financial planning trade, is not complaining about business. But what is becoming apparent, she says, is that some planners really are suffering financially, both on the personal and professional fronts, as a result of the market slump.

"There are a bunch of planners out there whose income has gone down, sometimes dramatically. It's hard for them to get in front of clients and radiate optimism when they're wondering how you're going to pay a home or business mortgage," she adds.

While playing psychologist has become particularly important for advisors who have clients or prospects who have lost significant money or become particularly risk-adverse, it's equally important that they learn to detect their own weaknesses. After all, a great financial plan won't do a client much good if his or her advisor has to declare bankruptcy.

The trend for some planners to self-destruct isn't terribly surprising, since many tend to be fairly outgoing sorts, who enjoy dialogue and external rewards, says Tibergien, This explains why they might be tempted to spend more time helping clients than helping themselves and their own businesses. But the trend, even on a small level, only serves to underscore how important it is for advisors to measure the productivity and profitability of their own practices and benchmark them against relevant industry standards. For starters, try the Financial Planning Association's survey of compensation and practices, which Tibergien prepares.

Such measures and benchmarks are crucial to making informed, strategic decisions regarding your own firm's future and growth. "You have to ask yourself, at what level of critical mass do you need to be to afford a professional administrator," Tibergien says. "It's different for every firm. It's a function of your fixed costs, gross profit margin and growth potential. And that's assuming companies have a handle on these measures, which they typically don't."

Maybe it's time to take such measures. After all, you don't want to be steering blind in the face of increasing client demand, potential profit margin compression and intensifying competition.