Los Angeles: "It's been a difficult six months," says Gerald, "We had to let one of our support people go last week, and now we're reevaluating everyone's role—and we could sure use your help."</p>

Gerald is not alone in today's economic environment. Everywhere you turn revenues are down, which is forcing advisors to take a hard look at their costs. As Warren Buffett has said, "Only when the tide goes out can you see who's been swimming naked." A year ago, when the tide was in (markets were up), Gerald and his partner added two new members to their team: a junior advisor with a modest book and a third administrative person. His team had just finished a strong year in 2007, bringing in $60 million dollars in new assets with production reaching a high water mark of $3.5 million.

In the spirit of full disclosure, Gerald had consulted with Stephen, one of our team coaches, before adding these two individuals to his team. Stephen had suggested Gerald sit down with his partner to get more granular with their team organization chart and then work through a process of clearly defining areas of responsibility for each team member. Although he had good intentions, Gerald did neither.

Why? At the time, Gerald was able to get his firm to pay the salary of his new administrative person and bend firm rules so that the junior advisor got paid out at Gerald's higher level. Because the team was making money off the junior advisor (he got a small increase in payout while the team kept the rest) and they weren't paying for their new support person, little attention was given to defining roles or establishing performance expectations.

Now everything has changed. Although both of these new positions have been eliminated, Gerald still isn't certain he made the correct decision. After all, he mused, "We really need a third full-time support person as we have a lot going on. But we never really needed an advisor with a book of smaller clients."

What I'm about to share with you needs to become standard operating procedure for all financial practices and teams. In good times and bad, you need to focus on achieving three things:

1.) Net New Assets (rainmaking): Increasing affluent client acquisition is the number one indicator of increasing future revenues of a practice.

*Each advisor needs to commit to bringing in a specific number of new ideal affluent clients. Be sure to define the ideal client for the upcoming year first.

*Each client needs to be fully monetized. Provide him or her with comprehensive wealth management services.

*** Gerald's junior advisor did neither.

2.) Review Costs: This is a constant, but becomes essential during tough times.

*Eliminate any unnecessary fixed costs: salaries, extra office space, unnecessary leases, ineffective contact management systems, seminars and marketing initiatives that aren't working.

*Lower variable costs by leveraging the delivery of your services, improving delegation, and eliminating non-revenue generating lunches at the country club, the outside coffee service, etc.

3.) Correct or Eliminate Underperformers: This includes non-revenue producing clients that are taking up bandwidth in your practice as well as personnel/partners who are not performing up to expectations.

*Non-revenue clients should be contacted for revenue generating possibilities or jettisoned.

*Underperforming team members need a performance review with a clear 60-day performance expectation action plan; either they perform or they're out.

At this stage, Gerald's team had only made a half-hearted attempt to address #2 above. Neither Gerald nor his partner had engaged in many rainmaking activities throughout 2008. As a result, the team lost assets. The junior advisor looked good on the org-chart, but had not been involved in any financial planning for the team and did not bring in a single new relationship.

All the above brings us back to Buffett's prescient comment, "Only when the tide goes out can you see who has been swimming naked." Many teams have fallen into the trap of getting fat and happy during prolonged Bull markets: hiring additional personnel, adding junior advisors, investing in expensive brochures and other marketing initiatives, creating impressive org-charts that are totally disconnected from reality, and so on. When the markets are up and everybody is making money, nobody pays much attention, but when the "tide goes out," every advisor is forced to pay attention.

Whether you are a sole practitioner or part of a team, paying attention to these three key areas outlined above will have a positive impact on your profitability.

Once again, we want to thank all of you who have emailed comments and questions to us. We will continue to do our best to answer each one. If you have any topic suggestions or special requests, please contact Rich Santos, publisher of Registered Rep. and Trust & Estates magazines, at rich.santos@penton.com.