Profitability And Scale Through Standardization


The simple acronym "SCALE" will help in remembering how to apply a standardized approach to an investment management practice:


  • Simplicity:  Research has shown that a properly maintained, diversified portfolio will outperform an actively managed portfolio over time.
  • Consistency:  Consistent models and procedures will help build internal infrastructure and allow for smoother transition of new clients
  • Accuracy:  With simplicity and consistency, comes enhanced accuracy. This is essential for quality control as well as SEC compliance.
  • Leading-Edge Theory:  Modern Portfolio Theory, location optimization, and tax-efficiency are the driving factors behind leading edge-portfolio management.  Investors are more tax conscious than ever and expect their advisors to be on top of best practices. 
  • Excellence:  Applying leading-edge theory consistently and accurately will result in excellent quality and service.  And – that will lead to greater client satisfaction, more business and increased profits.

The primary areas requiring standardization are: 

  • Client process
  • Models and investment strategy
  • Portfolio management procedures
  • Billing and reporting

In this current posting, I'll address how to begin standardizing your client process.  It is important to use the same process for all clients.  Advisors should not "wing it" or create a new plan for each client.  A documented process will help insure consistency. Using a checklist with clients helps to define tasks and responsibilities.


Financial plans need to be prepared and documented carefully.  Many clients have the same financial needs:  Saving for retirement while helping their kids through college, paying off their house, and living comfortably in retirement.  Creating a basic template that includes common explanatory passages and tables will help enormously when preparing financial plans.  Of course, financial planning software can be a great help!


Consistency must also be established in the area of investment expectations.  A risk tolerance questionnaire should be used with every client.  An Investment Policy Statement (IPS) is also critical to documenting clients' expectations as well as providing written parameters for ongoing management.


Standardizing your client process can set the stage prior to moving forward with standardizing models and investment strategy, portfolio management procedures and billing and reporting.

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