Understanding the practice in front of you

Although there is no ‘right’ or ‘wrong’ way when it comes to practice management, advisers need to know what they want to achieve for their practices and how they define growth. But before they choose the right metrics to measure whether they have the right practice management in place, there are a number of important structural, strategic and operational decisions to be made, experts say.

The recent changes across the industry have created the new reality where a growing number of financial advisers can no longer look at running a small financial practice, but instead have to adopt a business owner’s perspective and think about running an effective and efficient small business.

In fact, planners running their own practice need to learn to think in holistic terms and how they can best utilise their time from a business perspective. And choosing the most suitable business structure might be crucial for their future success or failure.

Centrepoint Alliance chief executive, Angus Benbow, said: “Initial beginnings of practice management is what type of business or practice do you want to run, how is it structured, what amount of revenue and expenses are you going to generate and also spend in terms of running the business that you want, and can you afford to be self-licensed or are you better suited to be on the license?

“The bread and butter of practice management is around operational targets and how efficient you are and that is where you come to those metrics around number of advisers, number of clients, average fee charged per client, your turnover of clients, new clients etc. They are all key practice management numbers that you look at in terms of how the business is tracking.

“And then there are really important structural questions outside of the practice management in terms of setting up your business in the right and sustainable way in the longer term.”

For Michael Gershkov, national practice manager at Lifespan Financial Planning, practice management is a process which is about understanding the business owner (and their staff) as people first by appreciating what they want, need, love, fear and helping them on their terms to achieve more. 

He said it was also about asking the right questions, challenging the responses and inviting the person in front of you to take risks, take initiative and step outside of their comfort zone through action rather than meaningless theory which is often designed to make the person delivering the content feel good about themselves. 

“Practice management is what I do. It’s at the core of everything I provide for advisers in order to help them grow their business and the key ingredient in practice management is to understand the person in front of you,” he said. 

“When you understand what it is what they want, ask them the right questions, you can absolutely help them on their terms to have an impact in their business. But the number one secret to my success is not walking in with a script or agenda [which says] this is how you have to do it. Because there is no right way.”

Another important factor to remember is that not all businesses have the same objectives in terms of their own growth or are looking for the same solutions. For some practitioners, the main goal is not necessarily growing their businesses but rather simplifying their lives which can be done by introducing the right technology and better processes, Eugene Ardino, chief executive of Lifespan Financial Planning, added.

“It really comes down to the fact that every business is different, has different needs and different things that they are good at, things that they could improve, and it is really a question of understanding that and looking for good solutions.”

HOW CAN TECHNOLOGY HELP ADVISERS?

Advisers need technology as a key component of operating their businesses smoothly as it helps to free up their time and allows them to focus on their core business. But at the same time, planners said that although there was ‘a lot of great software out there’, they often struggled to find the right technology that would offer more holistic and complex solutions, that ‘one software that does all’.

According to Ardino, there is plenty of technology that can help remove some of the most repetitive processes and improve client engagement experience but what remains harder to find are the full end-to-end solutions. 

“At the moment, you are often stitching different bits of technology together, if you want that end-to-end solution,” he noted.

“You have got good pieces of technology that help you with the client interface and data collection process. Then you have other good bits of technology that do financial modelling and that can put together an SOA [statement of advice] and perhaps manage the client relationship. And you have also got great pieces of technology that are a bit more DIY [do it yourself] so they enable the clients to enter their data and keep track of things and advisers will have access to that data but it is not necessarily two-way in terms of inputting.

“So you have got lots of good technology out there that do parts of the process, but what I do not see yet is something that could do all of that from the very first inquiry that clients make all the way through to advice delivery and ongoing service.”

Benbow stressed that the majority of advice businesses are generally fairly small businesses which have a lot of costs so in order to add value it is essential for them that their technology could help them create more time.

“Moving everything online from database to digital record keeping, simple things like all your files, in one place so if you get a query from the license and you get a query from the client it is all in one place, you have got a really good system to record things, that is all there when you need it. That way it saves you a huge amount of time.”

According to him, it is also about the consistency in how financial planning businesses are utilising technology to make the most of it as many struggle with systems that require configuration, training and upfront investments.

“Once you configure it and do your training and start using it in a consistent way, it can be a fantastic tool. I think there is a lot to be said about good technology but we as an industry are not getting the most from utilisation because people have a habit of doing things in certain way. They use the Xplan for some parts of their business, they use hardcopy for some things and for others, they use something else. 

“So you need to step back and say if I want more real-time information data, if I want to have a better understanding with what is going on then I will have to change some of the behaviour I had in the past, and adopt certain different ways of doing things to that benefit.”

So, what is one part of running an efficient business that technology cannot do?

“The relationships,” Advice Evolution’s chief executive, David Harris, said.

“The biggest problems that smaller practices have, or the least-sophisticated practices have, is that relationships rely on an adviser and the client and that is not where the relationship should be, it should be between the practice and the client. And when I say the practice, I mean it should be a practice manager or a client services manager.”

According to Lifespan FP, advisers also need to know what their top skills are and how to find a way for technology to complement those skills.

“If you look at technology that can improve something that potentially you are weak at, if you can find a technology that can complement your skills then that is great but I would also say one of the most important things an adviser can do is listen to their clients and try to understand what they are telling them and what they need. The technology can help you to do that,” Ardino added.

COMMON MISTAKES

According to Benbow, the most important question for advisers and practice managers is to figure out what drives all their decisions and what actually matters for their clients?

By a way of example, he said, many advisers have defined themselves around a particular proposition, such as stocks or managed funds, but forget why their clients came to them in the first place. At the same time, clients are often looking for the holistic sort of advice and need to learn about cashflow management and understand the movements between different superannuation, retirement and pension.

“The investment is an outcome that you can outsource to a professional investment manager where all they do is to look at managed funds and stocks, they are not doing the life coaching or cash management or keeping me up to date with the latest superannuation changes or taxes – all they are doing is looking at the managed funds,” he said.

COVID-19 IMPACT

During the global pandemic, triggered by COVID-19 and the subsequent lockdown, most businesses were thrown into a new world of entirely technology-based communication. So, what has it meant for some of financial planning firms in Australia?

Harris, who runs a highly-digitalised business that had hugely relied on technology for communications from the start, said the pandemic time was nothing new for his adviser network and the business was actually quite profitable during the pandemic as advisers came to the realisation that they could service their clients much better thanks to technology.

“What it has done is it actually freed up so much more time for my advisers, they are having more online meetings, starting to do more online reviews, videoconferencing reviews, and the advisers are realising that they can actually service their clients so much better because they can see them at much more specific times,” he said.

Speaking of transition to the entirely technology-based communications, Harris said: “From my licensee’s perspective, because I have been in that space for 10 years and now everybody else is moving into that space where we have been, I am thinking where to go next? And that is the difficult question for me know what is going to be the next big game”.

According to Ardino, while the COVID-19 crisis and the lockdown has caused many businesses to re-evaluate how they do things, financial planners are generally accustomed to an ever-changing environment. They also acknowledge that whenever there is a big market downturn it always generates and creates a lot more work for them.

“Our profession has gone through so many changes over the last 10 years that I think it has proved financial advisers work well with change. Otherwise you would not be in the business,” he said.

“The sheer volume of reforms and regulatory changes [made] to our industry and you have also got to combine that with how often the superannuation rules change and with other things like how quickly managed accounts space has evolved means that our industry is constantly changing in every way you can imagine so.”