As practices grow, their operational needs naturally change. What worked well for a two-person practice can be woefully inadequate for a 10-adviser firm. Aging technology, inefficient workflows and undertrained staff all inflate overhead over time, ultimately reducing a bottom line.
Advisers face increasing competition as well as new demands from the next generation of clients, who have high technology expectations and want 24/7 access. Will your practice be able to retain and add clients in this new landscape?
One area to focus on is operational efficiency the ratio between the output gained from your business (revenue, satisfied clients, market share) and the inputs: capital, employees, time and effort. As the output-to-input ratio improves, your practice becomes more efficient. Apply some of these basic rules to reduce costs, stay competitive and offer better service to your clients.
Use the right technology. Technology can be a huge help in approaching your efficiency goals, but it's no silver bullet. The wrong technology can assuredly make things worse. In addition, unlike fine wine, technology does not get better with age. You need to be constantly evaluating your software systems to make sure they work for your practice and, more importantly, for clients. Does it have integrated workflow, or just email? Are accounts opened via paper or electronically? Does it have a client portal or document management?
Reduce custodial relationships. I work for a custodian, and in my interactions with advisers, I'm often surprised by the number of custodial relationships they maintain. There are good business reasons for some of these relationships, but in other cases, custodians were simply inherited from mergers, new clients, etc. advisers don't want to go through the pain of transferring assets and repapering accounts. But each custodial relationship brings complexity to your workflow and complex workflows are the natural enemy of efficiency. Are all these relationships necessary? Can you consolidate your assets?
Train your staff. This should go without saying, but an untrained staff can be a productivity killer. All the great technology and workflow in the world won't make you efficient unless your staff is well-trained and buys in to your efforts. Be conscious of your staff's tech savvy; sometimes adding a more capable staff member can raise everyone's game. Most software vendors offer training and are usually motivated to train your staff to use their product to the fullest.
Making your firm more efficient is not only about making more profit. Freeing up resources that are used inefficiently can actually improve the quality of your relationships with both clients and employees. Isn't it time to evaluate your firm's efficiency?
Dennis Suppe is chief technology officer at TradePMR and a contributor to Financial Planning, a SourceMedia publication.
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