Two Industry Studies: What Can Be Learned and How This Information Can Transform Your Business

Two studies were recently released.  The Future of Practice Management from the FPA Research & Practice Institute, and Financial Planning (December Issue) magazine’s 2013 “What’s New In Advisor Tech?”

The Future of Practice Management study included nearly 2,400 professionals from various positions and levels within financial planning firms.  The FPA Research and Practice Institute will conduct quarterly studies in 2014 that will delve deeper into analyzing the gaps in advisory businesses.

A number of findings jump out from the study that can help firms identify areas to target for improvement:

·         50% of financial advisors do not have a written business plan. 67% say they have a formal business planning process in place.  Larger firms are more likely to have a plan in place.  The good news is that a majority of those who have a plan review progress relatively frequently, with about one-third reviewing monthly.

·         46% of advisors don’t have a retirement plan for themselves. However, 40% responded that they planned on retiring within the next 14 years.

·         Only 25% of financial advisors have a succession plan in place to transition their business when they retire. 31% for advisors ages 60-64, and 41% for advisors 65 or greater.

·         49% indicated they are considering selling their business but not for at least ten years. 18% are looking to sell in the next five to ten years, and 6% are actively looking for, or negotiating with a buyer.  Looks like a lot of businesses will be sold in the next ten to fifteen years.

·         Only 25% of advisors have a formal definition of their ideal client. However, 86% say they have a general idea of the kinds of clients they want to work with.

·         41% have not established a standardized business development process.

·         61% of respondents have segmented clients based on value. Only 27% have a formal, written service agreement to help manage client expectation.

·         Advisors are currently offering a wide range of services to meet the needs of clients. Many firms are beginning to offer specialized services to handle specific client needs

·         Only 42% of advisors say they have a written operations manual that documents processes and procedures.

·         Less than half of advisors (47%) have formally assessed capacity. However, 74% believe they are operating under capacity and can comfortable add new clients.

·         67% of firms are gathering some sort of feedback from clients.

These should have you thinking….do I fall into the wrong % side of one or more of these categories. If so, how do you plan to resolve these in 2014?


Financial Planning magazine’s “What’s New In Advisor Tech?” featured in the December 2013 issue is a yearly technology survey of various categories of Financial Planning software usage.  This year’s survey included more than 1,100 responses.

Here are a few interesting findings from this year’s study:

·         60.6% of advisors do not use any rebalancing software, lower than last year’s 69%. And less than 50% of firms with more than $500 million in AUM do not use rebalancing software. This is surprising, since rebalancing software can provide a good ROI, particularly for larger firms.

·         30.6% of advisors responding to the survey do not use financial planning software, which increased from 26% last year. 57.5% of commission-based advisors don’t use financial planning software.

·         The portfolio management software category included 23 products this year. The study points to the price tag for this software as the reason for the large number of vendors.  Reporting features in PM software appear to be lagging the needs of advisory firms and their clients. Given the competition in this software, reporting capabilities should improve in the near future.

·         Technology satisfaction among advisors using custodian or B-D technology , although improving, is still low. Among custodians, TD Ameritrade leads with only 47.6% of respondents “satisfied” with their technology. Among B-Ds, Raymond James was tops with 42.7%, doubling last year’s satisfaction results.

The positive take-away from this study was that the results suggest that advisors realize that technology is an investment in the firm opposed to an expense and that investing in technology will benefit their growth and efficiency.

As you plan for 2014, digging into the results of these studies can help remind us of areas- strategic planning, advisor/owner retirement planning, succession planning, marketing, operation, and technology that need to be focused on to build a stronger future for the firm and the founders/owners.

Build your business wisely.

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