Many financial technology companies promise to make the advisory business more efficient and expand their advisory models in their customer bases, but the actual portion of the advisory business cannot be scaled, says Michael Keats, head of planning strategy at Buckingham Wealth Partners and Chief Financial Planning Maniac at Kitces.com. The technology can be used to scale the back-office aspects of the consulting business, but not the financial advice and planning part, according to a Kitces study. But there are steps that counselors can take to expand their experience.
“I’m all about technology, but technology isn’t what drives it,” Keats said at a WealthManagement EDGE conference at The Diplomat Beach Resort in Hollywood, Florida. “It’s great to manage the back office, but what actually drives the effectiveness of the meetings with clients is much more about investing in our experience, more systematizing our results, reducing our own variability of clients, which we impose on ourselves and putting other human beings behind us to support us for all the middle office tasks that may not be supported by technology. “
One of the ways counselors make the ongoing process more effective is by finding some common practices. Many advisors create an annual customer service calendar that describes all the advice they will make for the customer. This calendar sets out all the unnecessary investments for the client.
Kitces gave an example of a two-year service model process in which, in the first year, the adviser will review insurance policies and update retirement forecasts. In the second year, the advisor will review property planning documents, update college forecasts, budget and cash flow.
“That’s why it matters: When you do this as an annual service calendar that’s systematized, a few things start to change,” he said. “The first is that customers know it’s coming.”
This is a more proactive approach, he added, and helps avoid emergencies that could be devastating for the adviser.
“There is this crazy excitement about what is happening. “It’s extremely destructive for us,” he said. “Once this annual calendar of services is defined, planning becomes more proactive because we have created a structure for it and suddenly many disasters are not disasters.
“We are still doing the service; we still provide value; we still provide the expertise. But we gain more control over our time and our ability to serve customers because we are not in a constant response mode, waiting for this to become an emergency for them and only then dealing with it when they call an emergency. . “
An added benefit is that when there is a more systematic approach, all staff and staff are also involved, he said.
Advisors can also become more effective about how they deal with different types of clients and the variability of clients.
One way to solve this is to have a specialized offer and take something that customers want as an exception, and put everything into it.
Consulting firms can also be more efficient by using their own time and can do so by hiring more support staff and associate advisors.
“We are simply expanding our capacity not by drastically redistributing how time flows, but by having less time per customer because we use our support team,” he said. “It simply came to our notice then. This is that lift of support staff. “
Kitces research shows that advisors need to hire their first administrative staff at about $ 250,000 in revenue or 40 clients. They typically hire an associate advisor on $ 400,000 in revenue or 75 clients.
Councilors’ incomes will also increase as support staff is added. For example, solo advisers make an average of $ 300,000 a year, Keats said, but their high-income incomes double after hiring support staff around them.
With regard to taxi models, Kitces argues that it is not so much how counselors charge, which creates value for clients, but rather how they appear in meetings.
“In the simplest sense, it’s on the agenda,” he said. “Many consulting companies that charge an AUM fee, their whole agenda is a review of portfolio performance.
“This is how we are starting to move from this area to sales people who sell products and services, general advisors who sell their time and what I call advice services, who actually do advice and sell experience and wisdom. “