financial advisory firm, technology, software

Are Small Independent Financial Advisor Firms Nearing Extinction?

Are Small Independent Financial Advisor Firms Nearing Extinction?

If you believe the latest rhetoric from the heads of the largest advisory firms in the nation, you would conclude that the days of the small independent firm are numbered.  Some of the reasons they cite offer valid premises but are far from being predictors of the inevitable. After all, while most successful advisors are great salespeople theyoften know precious little about running a business. The business of business is frequently overwhelming and cornerstones for successful business development; strategic planning, budgeting, forecasting, goal setting and operational efficiencies are too predictably ignored due to time constraints and gaps in fundamental business knowledge.

The current push is for consolidation or merger with larger firms, which may increase an advisor’s ability to grow, but at what sacrifice?  Many independent advisors left the big wire houses or discount brokerage firms so that they had the freedom to serve their clients as they thought best and to deliver that service in a way that fits with their underlying beliefs.  The idea of merging or joining a billion dollar firm is a return to the same structure and rigidity of the very business model they left when the decision was made to go independent.

The problem, nonetheless, still remains.  How can advisors run a successful independent practice in today’s complex, competitive,increasingly compliance regulated, and tech savvy environment?  What can an independent practice with limited resources of both time and money do to continue to grow and thrive in the current business paradigm?

As a serial entrepreneur I have the perspective of not only having worked in the financial services industry but of also starting and running a variety of small businesses both here and in Europe and the Middle East.  In my view the key elements to successful entrepreneurship can be summed up in the following five key principles.

  1. Discover your meaningful differentiator

In the scramble for assets to manage and clients to serve, advisors try to be all things to all people.  This is not only impossible to do well, it creates a sameness that will do nothing to promote your firm.  What do you offer that will compel a client to choose your firm over another?  We are often blinded by our own self-worth and believe we are offering services that are important to a client that others don’t or can’t offer.  Yet, how can we know?  So, your differentiator must resonate with clients, appeal to what is important to them and meet a need that is not being served by other advisors in your area.

Most importantly, however, your differential must align with your underlying beliefs and values.When doing what is truly important to you, what you believe is right, passion is generated and sustained.  As a result, your ideal client emerges because the energy generated by your passion attracts those clients to you.  Simon Sinek says it succinctly, “People don’t buy what you do; they buy why you do it.”


  1. Figure out what you do best and outsource the rest.

Figuring out what you do best requires a modicum of self-awareness, which is one of the most influential predictors of successful leadership.  Take time to honestly reflect on your strengths and weaknesses.  Do a personal SWOT analysis.  Are you really as good at managing portfolios as you think you are?  Do you find creating financial plans tedious and time consuming? Are you the best person to design and create a website?

Many advisors would benefit from a business coach or mentor to help find their personal strengths.  We often don’t see what others see in us and an outside perspective will help mitigate that perceptual challenge.  It’s worth the cost.

In addition, online freelance service companies such as Fiverr and Elance will do creative work and marketing for less than imaginable.  Financial planning can be outsourced to qualified CFP©professionals.  Compliance and asset management both have suitable options available. The prevalence of virtual assistants, many of them local, can help with data entry and other administrative tasks in a way that is cost effective and reliable.

Of course outsourcing comes at a cost so finding the balance between off-loading those areas of your practice that you do not do well and keeping your budgetin line are key.

  1. Focus: Time control is mind control

According to a survey by the Financial Planning Association (2014), only 13 percent of 750 surveyed advisors feel they are in control of their time, and 35 percent work over 50 hours per week.  The financial advisor business is complicated with many moving parts and therefore seemingly myriad distractions.  Who hasn’t found themselves lost in a deep dive on the internet researching some aspect of financial planning or distracted by a reporter on one of the financial news programs?

Focusing on what is most important creates efficiency and productivity. An understanding of priority, and notice I used the singular form of the word, allows you to control your thoughts and accomplish the one thing that needs to be done now.   Completing a series of focused tasks ensures a day of achievement.  The key lies in your ability to determine and executethe top priority as it manifests when goals are set and roadmaps designed.

Beginning each day by reviewing your carefully thought-out goals and objectives and determining what needs to be done now will set your practice on a trajectory toward success and growth.

  1. Maximize the use of Effective technology

So many choices, so little time! With new systems and software entering the market every day choosing the right technology is a fundamental if vexing task.

Among severalfactors to consider in determining the right technology for you is to choose the system for the practice you want not the practice you currently have. The reason lies in the difficulty involved in migrating data to a new CRM and training staff and yourself in its use.  The better solution is to invest in a system that can increase capacity as you need it but offers a reasonably priced solution for now.

Another important aspect to consider is the age of the system.  Nothing exemplifies the expression “like lipstick on a pig” better than software firms with old systems working to update their programs by building on a base of outdated code or technology. The problems compound as older systems tend to be slow and difficult to integrate.

The most common systems financial advisory firms need are a right-sized CRM, online appointment scheduler, billing and performance reporting software, email delivery infrastructure, financial planning software and a trading platform.

  1. Establish processes and rigorously implement them.

The structure that well-defined processes bring to a financial advisory practice not only saves time but also ensures accuracy and accountability- essentials in managing other people’s money.  Processes also create order and structure producing higher levels of client service and satisfaction.

Processes are needed for client meetings, prospecting and lead generation, sales, ongoing client support, client welcoming, financial planning, investment management and account opening.  Successful firms do not ignore strategic planning and goal setting which although time consuming will be completed faster and more accurately with a process and a commitment to complete.

In order to implement processes effectively, the firm’s employees need well-defined roles. Even if you are a one-person shop, your day should be compartmentalized into different roles for handling tasks.  When you are ready to hire staff, it will be easier to decide which role needs to be filled.