The coronavirus pandemic has changed the financial advisory business as we know it, yet it hasn’t changed a thing. Although in-person meetings and client events remain largely off the calendar for now, the past three months have allowed advisors the opportunity to do more of what they do best—bring empathy, hope and vigilance to bear on their clients’ behalf.
A striking aspect of our interactions with Commonwealth advisors during this time has been their optimism and energy. They didn’t see the pandemic as an end-of-days event but as a time to embrace what we’ve gained from the situation. How were they able to shift their mindset so quickly? They trusted their foundation.
The Resilient Advisory Firm
In business and life, there are always setbacks. And it’s in times of adversity that resiliency meets its mettle. According to a 2019 McKinsey report, resilient firms weathered the 2008 financial crisis better than other firms by proactively tightening their financials, strengthening and streamlining operations, and shoring up reserves for the future. What does this tell us? When you have a rock-solid foundation to stand on, you don’t have to fear times of stress.
How can you work on your firm’s resilience? Consider these five areas.
1) Operations
- Document all processes in writing.
- Create checklists that new and seasoned staff can use to follow along.
- Audit processes at least annually and update them for changes in the client experience or technology.
2) Human Capital
- Define the responsibilities the firm needs to cover to deliver on its value proposition.
- Create specific roles that will be accountable for those responsibilities.
- Fill those roles with people who have the skills and attributes to succeed.
- Cross-train staff on responsibilities to provide seamless service to clients.
- Bonus: Cross-training brings different perspectives to the table that could result in more creative, efficient and effective approaches!
3) Technology
- Keep existing technology offerings up to date.
- Adopt new technology tools that will minimize manual entry and human error and, if possible, automate routine repetitive task sequences.
4) Finances
- Pay yourself a salary commensurate with the salaries paid to advisors with your experience. Pay yourself the same amount monthly or every other week.
- Audit your overhead expenses and eliminate those that don’t serve the firm and your clients.
- Define what you will do with your net operating income (NOI). Think in terms of:
- Cash flow: How much do you need to cover short-term cash flow needs?
- Capital: How much do you need to cover large anticipated costs (e.g., an investment in technology, staff or your physical space)?
- Bonus: How much do you want to reserve to pay staff bonuses at the end of the year?
- Risk premium: How much do you want to reserve to reward yourself for taking the risk associated with standing up a firm?
5) Planning
- Write down your business vision and revisit it regularly.
- Does it still resonate with and excite you?
- Does it help you zero in on the most essential paths to follow?
- Align your annual written business plan with your vision.
- What core values do you want your firm to express? How do you want to express them?
- What strategies make sense to pursue over the next one, three and five years to move you closer to achieving your vision?
- Align your marketing message and plan with your vision, values and strategies.
- Protect your business with a disaster recovery plan.
- What do you want staff to do if something happens to your physical location?
- How will you ensure that everyone stays connected and essential tasks are completed?
- Protect your firm, your family and your clients with a continuity plan that includes a buy-sell agreement that will kick in if the unexpected happens.
With this strong foundation beneath you, your firm will be better positioned to handle whatever the future brings, and your clients will enjoy a better experience as well.
It’s Not Just About You
When everything is going well—markets are up, unemployment is low, wages are rising—it’s relatively easy for an advisory firm to attract clients. But when markets turn volatile, unemployment skyrockets and confidence falters, it takes a special organization to feel secure enough in its future to be able to offer that same feeling of assurance and hope to others. Resilient organizations know it’s not just about them.
Over the past few months, Commonwealth has continued to provide unwavering support to our advisors—as businesses and as people. Our strength as an organization lies in our community and the steps we have taken over our 40-year history to build the firm intentionally, with the long-term horizon in view. We can help our advisors position themselves for success because we have done this same work ourselves. And because we focus on providing the highest-quality experience to advisors and staff alike, we are confident in Commonwealth’s resilience—today and in the years to come.
The experience clients have with your firm is a key factor in their decision to stay with you and their likelihood to refer friends and family to you. If your firm’s resilience brings confidence to your clients, it may serve as your greatest resource for future growth.
Maria Considine King is senior vice president of Practice Management at Commonwealth Financial Network.
