Since the great depression, dips, downturns and nosedives in the financial markets have set investors on edge. In the wake of Covid-19, the razor’s edge has never been thinner. As financial advisors well know, sleepless nights often transform into decisions that are more ill-conceived than prudent. Coaching investors through these uncertain times — before, during and after a crisis — is critical.
When the market drops, conversations with your clients become vital. The importance of those exchanges does not wane as a crisis abates or, in the case of the coronavirus, isolation becomes standard operating procedure. “Financial advisors need to connect with their clients to find out what concerns them,” says April-Lynn Levitt, a certified financial planner and business coach with The Personal Coach, which offers customized business coaching for advisors, in Oakville, Ont.
Dig deep, advises Chris Hornberger, a certified executive coach in Halifax. “You need to understand your clients’ specific concerns. Identify what they are worried about.”
Forward projections help you do that, Hornberger adds. Determine where clients want to be financially (and otherwise) in five years’ and 10 years’ time. Review their financial plans to see if, even in the midst or the wake of an economic upheaval, those goals still can be attained. If not, discuss how a plan could be revised to make them attainable.
Taking a step back in time with a client also can be beneficial, says Hornberger. “Ask them to recall a similar time previously when they were concerned. Ask them how they got through it. Ask them how their life — and their finances — were affected.”
Coaching clients is fundamentally about building trust. Will clients naturally turn to you after the storm has passed? “That is a measure of their trust in you when they reach out,” says Hornberger.
Hornberger adds that not receiving calls from clients is not necessarily a good thing before or after a crisis. “Do not assume if you are not hearing from clients [that] it is because they are not worried. If they do not hear from you, it can create distance.”
Looking at the issue from more than one angle and time frame can also help clients put any declines in financial markets in perspective. Covid-19 aside, market downturns are status quo. “Remind clients that we [recently were] in the 11th year of a bull market, which is historically much longer than normal, so downturns shouldn’t [have been] unexpected,” notes George Hartman, CEO of Market Logics Inc. in Toronto.
Coaching clients through uncertain times is about more than pointing to longer-term projections. “Play a leadership role when things are bad. Go beyond the investment information. See the big picture,” says Levitt. Coaching is ultimately about building a relationship that will stand the test of time and tumult. That relationship requires ongoing touchpoints as situations change, often at breakneck speed. “Communicate before, during and after,” says Levitt. “Define your market philosophy.”
Clients need to know you are there when they need you — and even when they don’t. But during downturns and their aftermath, visibility is paramount. “It’s about sharing. It’s about being proactive,” says Hornberger. “Reach out. Communicate early and often. Reassurance is central to this process.”
In situations such as market downturns, when you may be concerned that clients may blame you for poor performance, there’s a natural tendency to be guarded. “Our first instinct is often to defend,” says Levitt. “Our recommendation is to step back. Ask the client what concerns them; then you can offer solutions and advice.”
Stepping back can be hard, Levitt adds: “Clients can be confrontational. There is so much uncertainty, and it is not just financial.”
Clients aren’t the only ones who have anxious nights when the markets go in unwanted directions. You’re adversely affected in two significant ways. First, you’re worrying about your clients and their concerns. Second, you’re worried about your own business in both the short and long terms. Frightened clients can go elsewhere or exit the investment market altogether.
You also must focus on yourself when the going gets rough. “You need to take care of yourself. Meditate, exercise, get out in nature,” says Levitt. “You need to handle the stress and not get sick.”
You can feel better knowing you’ve laid a solid foundation for whatever crisis — natural disaster, market crash or pandemic — clients are in the midst of weathering. Indeed, your coaching role begins before there is anything to worry about, says Hartman: “The key to mitigating concern in market downturns is to prepare clients ahead of time for the inevitability that markets will likely be volatile during the time [clients] are invested.”
Hartman suggests you make a point of talking with your clients about the ups and downs of market performance during every annual review: “This should include historical performance illustrations, magnitude of decline [and] recovery periods.”
Managing clients’ expectations is essential, agrees Levitt: “Everyone will see a slowdown. Before anything happens, you should be talking to your clients about downturns.”
It is important to ensure you have a current market meltdown plan in place, Levitt notes: “This does not have to be complicated. If something happens, how can you be ready to reach out and to whom do you reach out personally? This is not a case of sending out just one email.”
Your meltdown plan will contain such information as which clients need to be on speed-dial for reassurance and which clients like to buy during a downturn. Your plan also will contain draft emails and templates that can be sent quickly to all or certain clients with little revision. Where appropriate, the information can reaffirm that there is insurance in place and/or a rainy-day fund.
“Emphasize [to] clients [that they] are working toward a goal — not reacting to market downturns,” stresses Levitt.
Post-crisis is an ideal time to update your plan: review what worked well, what worked as planned and what needs to be revised and rethought. As a crisis wanes, it also is an optimal time for you to identify gaps in your market meltdown plan and ensure those gaps are addressed for next time — because there will be a next time.
Your updated plan also must spell out how you will connect with clients, and continue to connect with them if you can no longer get to your office, if power service is more than sporadically interrupted or if concerned clients cannot meet with you face to face — perhaps because much of the community has been shuttered. Literally.
Having spent over 30 years in the financial services industry, I have found two things to be true; everything and nothing has changed with the day-to-day challenges advisors face.
Everything has changed with technology and moving from paper to electronic, regulatory requirements, fee disclosure, anti-spam requirements, the amount of back-end support, medical underwriting, saturated marketplace and competition, and the list goes on.
Nothing has changed with one simple fact; advisors need support to survive and thrive.
I’ve always enjoyed working with financial advisors. My most satisfying experiences have come from helping advisors turn their businesses from struggling to thriving. Being an advisor can be a lonely business, and often the piece of the puzzle that’s missing is having someone in your corner.
Since joining The Personal coach last Spring, I’ve been implementing practice management strategies into advisors’ businesses. It’s also been a privilege to be featured in Forum Magazine discussing COI relationships, representing the team at Advocis meetings, and addressing closed audience sessions with Faith Life Financial. Coming up next is sharing insights on understanding your finances at our Fall TPC GeneratorTM event.
Having The Personal Coach’s support to pursue my adventure is motivating and exciting. Most importantly, I’ve had the pleasure of being part of an incredible team that leaves no stone unturned with the depth and breadth of their expertise. The Personal Coach has fantastic resources; HR support, team development, succession planning, marketing, and branding. As a team, we provide full-spectrum support for advisors. We often refer to ourselves as an extension of an advisor’s team. It’s rare to find a support team that has so many arrows in the quiver. This allows me to start each day with enthusiasm to help advisors find their way and fully develop their businesses and enjoy the fruits of their labours. I believe strongly that success in business is more likely to be achieved and, more importantly - savoured if it’s integrated with a fulfilling personal life. When we work together and clear out the clutter, we achieve success.
Our office has been working with Pat Giesbrecht for the past six months, and I am so happy with the results we are getting. We have completed many projects; DISC profiles, re-segmentation, written procedures, Contact Management changes, new technology implemented, job descriptions reviewed and solidified, the opportunity for all to share our progress, challenges, and successes. The best part is the teamwork this has inspired, the sharing, the helping and overall coming together for a common goal. It’s been far more comfortable for us to share the workload when our goals were clear. The staff took much of it on, were accountable, and excited about the changes.
Every once in a while, thankfully not that often, we get a stark reminder of the one factor that is so very critical to building a sustainable advisory practice: TRUST. It is fundamental to client acquisition and developing those clients into positive long-term relationships. Our view, of course, is that trust has to be “table stakes” as you build and manage your practice and that it is a currency to be fiercely guarded by yourself, your organization, and your suppliers.
In his book, The Speed of Trust, Stephen M.R. Covey offers many great thoughts about trust that might serve as food for thought on the topic.
First, the reality is that where trust is high, it increases speed and lowers cost. Where trust is low, it reduces speed and increases the cost. For an advisory practice, that often means ensuring that you have the right people in the right roles working with strong knowledge and well-developed practices and procedures.
That trusted formula is: (Strategy x Execution) x Trust = Results
The element of trust can be a tax or a dividend and, clearly, distrust has a cost attached to it. If your team members, or yourself, don’t trust your knowledge, your processes, or each other, the cost can be high.
It’s worth saying that self-trust is a crucial factor; if you don’t trust you, why would anyone else?
As you think about this topic, keep in mind that there are four critical elements to trust:
1. Integrity: Be honest, stand by your principles, and do what you say you’ll do. Increasing integrity starts with making and keeping commitments to yourself, standing for something, and being open.
2. Intent: Have good, positive motives. Let those motives inform and populate your agenda and ultimately, your behavior. You can continuously examine and adjust your motives and declare your intent.
3. Capabilities: Develop knowledge and abilities that evoke confidence and keep learning! Covey suggests that we use the acronym TASKS (Talents, Attitudes, Skills, Knowledge, Style) as we think about capabilities. Always be working on your TASKS. Increase your capabilities by running with your strengths, keeping yourself relevant, and knowing where you’re going.
4. Results: Establish a track record. Results are an indicator of how well you are doing in the other vital areas and you can think of them as the fruits of your efforts. They can also give you credibility. So, take responsibility for your results, expect to win and finish strong.
There is much more to the trust conversation but it all starts with ourselves. Looking inwards before pointing fingers elsewhere can often set the tone for making positive impacts.
At The Personal Coach, we utilize our Velocity IndicatorTM as an exercise for self-assessment on your business practice. We couple that with a Complimentary Consultation which confirms and clarifies some of your thinking and potential next steps. We believe that the advisory business can be a very lonely one when it comes to managing and leading your practice and it is beneficial for you to have a sounding board and another set of eyes and ears to help you set your course.
To learn more about your business and where you fall on the trust scale, request our Velocity IndicatorTM exercise by connecting at email@example.com.
Heather Amlin is helping teams address gaps in their processes and workflow.
Our Operations and Efficiencies Coach, Heather, has created a Back Office Checklist to identify the gaps in advisor team processes and workflow. Heather has divided the Checklist into 3 key areas; Technology, Office Procedures and Client Services. When is the last time you reviewed your own processes? The timing could be perfect to finish the year strong. Book your back office assessment with Heather today!
Welcoming our newest team member.
The Personal Coach team has grown again! Our Marketing Specialist, Kelly Maxwell, delivered a beautiful boy this month. Welcome to the world Parker Michael Maxwell and congratulations to Kelly, Paul and big sister Aubrey.
Are you looking to grow your business? Save the date for our Generator Event! Tuesday November 26, 2019
This TPC event is for advisors who are looking to grow their business, double their revenues, and achieve time and money freedom. For full event details and registration information, visit www.tpcgenerator.ca.
Want to Stand Out in a Crowded Market? Maybe it's Time for a Brand Strategy.
Now that summer is here, you may have some extra time to review your brand and see if any enhancements could be made. Do you think your brand communicates what makes your business unique?
Remember, you want to be your clients' and prospects' only choice. A unique brand that encompasses your business values and the overall client experience helps to ensure that your messaging will set you a part from the rest.
As we have always said at The Personal Coach, branding is much more than simply your marketing materials. It is integrated into every aspect of your business and affects how you communicate and do business. It helps you maintain a consistent message, strong reputation and gives people a good understanding of what they can expect when working with you.
You can however, do a preliminary review of the quality of your brand by going over your marketing materials or "TouchPoints."
1. Business name - your business name should be interesting and communicate what you provide in an intriguing way, leaving people wanting to ask more questions.
2. Slogan - do you have a catchphrase and if so, is it memorable?
3. Descriptor - this should clearly state what your business provides and for you?
4. Logo - this symbol should connect the message between your name, slogan and descriptor as well as spark interest through imagery.
5. Stationery - does the font, design and layout align with your brand message?
6. Greeting - answering the phone, meeting face-to-face and email communications, do your client interactions exemplify your business values and are they consistent across the team?
7. Website - Does the design match your brand? Is the text clean and concise with a strong call to action? Do you feel proud to show people your website?
Enhancing just a few of these items can make a big difference in your overall brand. If you find you don't have a brand or your brand isn't consistent across marketing materials, or doesn't truly feel aligned with what you and your business are all about, do not hesitate to reach out.
First, comes the brand identity and then comes marketing materials you can be proud of! To learn more, let's pencil you in with our Brand Coach, Fortunato Restagno. Happy Planning!
Fortunato Restagno., Brand Coach
T: 519-576-2262 X4
If you want to grow your advisory business, mark our workshop date in your calendar!
Tuesday November 26, 2019, Cambridge ON
This TPC event is for advisors looking to grow their business, double their revenues and achieve time and money freedom. Full event details and sign up information can be found here: www.tpcgenerator.ca.
Kim Poulin is helping teams, of all sizes in all industries, empower their people to engage, connect, and thrive in the workplace.
Start your organization on the path to personalized insight and cultural change today. Join us in our belief that an organization’s true potential lies within its people. Learn more details about building your team effectiveness and productivity at the website: kimpoulin.com.
Welcome Sue Block, Administrative Assistant
We are excited to have Sue join The Personal Coach team. Sue has valuable industry experience including time at both Manulife Financial and Arca Financial Group. Having worked with several of our team members in her prior roles, we know firsthand the professionalism and quality of work that Sue brings to the table. We look forward to her supporting our team and our clients.
Welcome Alison Ottewell, Marketing Coach
Alison joined our team backed by 10 years of marketing experience - 8 of those focused in the financial services industry. Alison has the skills to build a tailored and impactful marketing strategy that will work for advisors. She has helped advisors coast to coast build marketing strategies that are clear, realistic and work with their team’s capacity and budget. We are happy to have Alison on board.
Bridging the communication between advisors and their support staff.
Monday, June 17, 2019
Heather Amlin, Operations & Efficiencies Coach
I can’t believe it’s been a year since I started with The Personal Coach. Since starting, I have felt blessed to be able to take the time I needed to figure out how to use my “unique abilities” (cue Art Schooley’s voice inside my head) so I can best help guide advisors and their teams. I also have Fortunato Restagno to thank. He speaks to his branding clients about their compelling story which inspired me to discover my compelling story.
I spent many years in the financial services business as a Marketing and Operations Assistant in the trenches. Subsequently, I was a co-business owner of an advisory firm who purchased 2 other advisory firms. Finally, I became an ex-business owner transitioning clients and myself into a new role with our merger. You can imagine the many hats that needed to be worn for the merger to go smoothly.
I’ve really enjoyed the challenges of each role. I have especially loved the fact that each role has given me an opportunity to create processes, procedures and work with advisory support teams. It’s something I am passionate about and I enjoy bridging the communication between advisors and their support staff. With that being said, I’ve decided to focus my coaching on developing better operations and efficiencies with advisory teams.
I know first-hand the challenges an advisor has to deal with. It can be challenging to find time to listen to your support staff without distractions. If both the advisor and the staff member(s) are receiving calls, emails and texts, when do you find the time to get ready for meetings, process paperwork, keep an organized office AND create processes and procedures so that things run smoothly? Every advisory firm is unique and different - from the advisor doing it all themselves to the offices with 2-3 advisors and a support team for each. No matter the size, you still need to have processes and procedures in place. Every person in the office should know what those are, even if they don’t have to use each one.
I use a back-office checklist, which focuses on technology, administration, client services, and investment and insurance procedures. Reviewing this with advisory teams has led to great discussions around weaknesses in existing processes and identifying where there are no processes at all. We also review strengths and affirm the areas that are running smoothly.
As I embark on my second year with TPC, I’ve expanded this process to include the integration of new employees into an advisor’s office. We call it the Coaching for Integration Success Program. One of the challenges of working in small/medium team environments is how to set your new employees up for success as you try to train them in the many areas of your busy office. Having a clear agenda for their first day, their first week, and their first quarter is a great step! So, I keep Kim Poulin’s motto in mind and off I go….”Hire for attitude, train for skill.”
Are you an advisor who sees the value in podcasts? Are you wondering if creating podcasts is worth your time and effort? Podcasts are an inexpensive way to position your business and add value.
For the technically disinclined, a podcast is an episodic series of digital audio or video, which a user can download to listen to. If you are already creating content for a newsletter or e-campaign, or have hired The Personal Coach to create content for you, why not summarize your written communications in a podcast.
Consider this before doing so:
Check your dealer’s compliance regulations. Some may have specific guidelines and others may not allow it.
2. Ideal Client
Will a podcast be valued and listened to by your ideal clients? Age, region, occupation and psychographics play a major part in what works and what doesn’t when it comes to your marketing strategies.
3. Hire a Social Media Expert
You may wish to hire a social media expert who has the ability to effectively share your podcast with your network. Send your podcast to your clients, centres of influence and prospects.
4. Compelling and Engaging Content
Your podcast should be educational and help position you as the expert. Avoid bragging or directly selling your services. Any tips or ideas you share should be followed with a sample client story that will resonate with listeners.
5. Other Tips
Have a catchy intro piece with music. Use your slogan if you have one. Use a novel strategy - create curiosity, develop your characters, have a climax and a memorable ending. Make sure your microphone is clear.
Our Coaches, Kim and Heather, have been working away on further developing our hiring and integration programs offered to advisors and their teams. Hiring a team member can be a long and onerous task, especially without guidance or experience. We have discovered that many advisors prefer someone else handling certain aspects of the process – and often, the entire process. Our hiring programs allow you to continue to focus on what you do best and delegate the hiring to us. We become an extension of your team - your human resources and hiring team!
Key elements of the coaching process include, attracting, hiring, retaining and compensating the right team members; understanding each team member’s competencies, skills and responsibilities; having each person in the right role and building team effectiveness, efficiency and cohesiveness.
Services available include:
Identifying the candidate pool
Narrowing the candidate pool
Due diligence – screening final candidates
We also have a Coaching for Integration Success Program that will help you hit the ground running from day one with your new hire. Your customized program includes the following:
A copy of the Right Fit II Booklet - Integration and Development of a New Team Member
A customized agenda to follow for your employee’s first day and their first week
A comprehensive training checklist with a focus on the first 3 months of your employee’s development
On-site training the first day followed by video conference/phone and email consultation with the advisor, training team and the new employee, as required
Failure to hire right can be very expensive and time consuming. To learn more about these exciting services and how to hire and integrate an exceptional team member, please connect at firstname.lastname@example.org.
I was invited to speak at a dealer conference to discuss the importance of having the right people around you and how to create a great team. All of the attendees at the conference received a complimentary copy of The Personal Coach booklet, The Right Fit, which is a guide to help advisors make great hires.
At the end of the presentation, “George,” one of the attendees, approached me and asked if I could help him with a hiring project. We booked a conference call for the following week so I could learn more about why he felt that he needed to make a hire for his team, which already consisted of four support staff.
During our call, George shared with me that because of his large clientele and significant asset book, his current team could not handle all of the transactions and client requests. George had concluded that he needed to hire another team member.
I asked George one of my favourite questions, “Do you have too many clients or do you have too many non-ideal clients?” George had never heard this question before and asked what I meant. I shared with him that, as coaches, we see many advisors like him building a large clientele. However, as they evolve and mature as a financial advisor, many of the clients do not fit their ideal client profile. I suggested to George that before we move forward with a new hire, we complete an exercise called Best Case Scenario from Cotton Systems. This exercise examines the 10 best sales that an advisor has made over the last 6 to 12 months. George agreed to complete this exercise with the help of his team.
At our next meeting, I could tell that George, having completed the Best Case Scenario exercise, had experienced an epiphany. He was happy to have spent time reflecting and better understanding who his top clients are and more importantly, was excited to see how we could apply this information to his business model. We used the information from the exercise and completed an Ideal Client Profile (ICP), which we committed to paper. We referred to this for the next exercise by starting to use this ICP as part of our referral/introduction process.
I asked George, “Tell me about how you’ve built your contact management system and when it was last updated?” George said that he has a program called Act! and has been using the system for 8 years. I shared with George that a contact management system is not just a technology tool. It needs to be viewed as a business process encompassing 4 steps:
Building a relationship management strategy for each segment
Identifying a champion to manage the system
Using technology to manage the process – in this case,
it was Act!
George said, “This is all fine but I really need your help in making a hire.” I said to George that I understood this but before we made a hire, we needed to “right size” his practice. I shared with him a number of stories where we had completed this exercise with advisors with large clienteles and in many cases, the advisor decided to right size the practice and by doing so, decided that he/she did not need to make an additional hire. I asked George to go along with me on this one and work on his contact management system before we discuss hiring. George begrudgingly agreed to take this step. I then showed him some sample customized segmentation scorecards that we had created for other clients and I suggested that we build a customized segmentation scorecard for him. He agreed and we built this scorecard with a particular focus on the following items:
Size of assets
How clients value the services
The client history of providing referrals
One of our support team members at TPC created a scorecard with the above items and a rating system to grade each client from 1 to 5. We had 7 items with the maximum score on each item being 5, which meant that the best client score could be 35. We then created a rating system using the numbers so that we could create 5 different segments – platinum, gold, silver, bronze and lead. I left this exercise for George and his team to complete and within a month, George sent me an email outlining that he had the following clients in each segment:
With this exercise behind us, I arranged to book my next face-to-face coaching meeting with George and asked him to have his employee responsible for booking appointments to join the meeting. This employee, “Kathy,“ is very engaged in the business and was quite intrigued with what we were going to achieve during this meeting.
Next, we built a relationship management strategy with each segment. I showed Kathy and George some sample relationship management strategies. We spent the balance of the morning outlining a relationship management strategy that Kathy thought she could implement for each of the segments. Our most concentrated relationship management strategy would be focused on Platinum clients and minimal for Bronze and Lead clients. As part of this exercise, I asked for names of clients that fit in each of these categories so George and Kathy could think about these clients when delivering their strategy. Putting client names to the categories helped us immensely in creating strategies for each segment.
The third step in building the contact management system is identifying a champion. Kathy was up for the challenge and she was excited that she had clarity around managing clients going forward.
The next step after completing this project was to focus on helping with a new hire. George was no longer as eager to work on this project because he discovered what so many advisors discover after this exercise – he felt that a number of clients should be sold off because they did not fit the ideal client profile and decided he wanted to focus on “right sizing” his business.
After having a thorough review of the business, not surprisingly, George and Kathy determined they could sell off 25% of their clientele. This would only reduce their revenue by 10% and then they could focus on bringing in more Platinum and Gold clients. We helped identify advisors that would be interested in buying these clients.
At the next meeting, we shared with the full team what we had been doing. After announcing that we had right sized the business, the other team members were in total agreement with selling off 25% of the clientele. Guess what happened next? They decided that adding a new team member was no longer necessary if they pulled the trigger on the sale!
I suggested to George that we take a coaching break and give the team time to implement what we agreed upon. I followed up in six months and George shared with me that he had almost replaced the 10% of lost revenue because he was now focused on his best clients. Additionally, those best clients are providing him with introductions to people just like them. His team is now more energized, has less stress and everyone is feeling like they are running the business whereas previously, they felt like the business was running them.
Good advisors do an excellent job of building their clientele but quite often, they do not take the time to review their clientele and see if these clients are a good fit for their current practice. Also, some advisors have “FOMO” - a fear of missing out. In other words, they think that they will miss opportunities if they release some of their non-ideal clients when in fact they will find more opportunities when adding Platinum clients in their place.
Here are 5 key business areas that every advisor must review as part of their acquisition due diligence process.
It is not an overstatement to say that due diligence, or the lack thereof, can ultimately define the success or failure of any business acquisition. Simply stated, due diligence is the process of investigating certain key aspects of a target firm’s business, including its finances, client base, operations, regulatory risk profile, technology and culture. Its primary purpose is to help the acquiring advisor answer 3 fundamental questions:
1. Should I buy?
2. If so, how much should I pay?
3. How should I structure the payment price?
One of the most frequently asked questions we hear from advisors is, “What areas of a target firm should I review and what questions should I ask?” Since most advisors are looking to acquire firms that are well managed, compliant and positioned for growth, here are 5 key business areas that every advisor must review as part of their acquisition due diligence process.
1. Strategic (or Cultural) Fit with Seller
One of the most overlooked aspects of any acquisition is the degree to which the acquiring advisor aligns with the seller’s values, business and investment philosophy, and commitment to client service. Generally speaking, the closer the fit, the greater the likelihood of a seamless transition of the business. Imagine the likelihood of success where two advisors have diametrically opposite views on issues such as the value of financial planning, investment philosophy, fee transparency, client service standards, etc. How easy do you think it will be for the buyer to retain clients used to and comfortable dealing with an advisor who has fundamentally different way of looking at these issues? We typically recommend to clients who are buyers that they first satisfy themselves as to the strategic fit and “chemistry” with the seller prior to moving forward in the transaction process.
2. The Target Firm’s Client Base
Buyers should then undertake a detailed review of the target firm’s client base to ensure alignment with their own “ideal client profile,” to understand potential growth opportunities, and to identify potential underlying risks to the business. Specific areas of inquiry should include:
The number of clients that have assets greater than $500K, between $250K and $500K, between $100 and $250K and less than $100K
The average asset value per client
Demographic split by age and gender
The percentage of assets in registered vs. non-registered accounts
Whether there are any product gaps that present growth opportunities
The number of clients that have a financial plan
The number of high-risk clients as well as high-risk product offerings
The target firm’s client base is the lifeblood of its business. Take the time to deeply understand its composition and the quality of the relationships with the seller.
3. The Target Firm’s Regulatory Risk Profile
Buyers should take a hard look at the target firm’s regulatory risk profile by asking, “Does the firm’s workflows, processes and procedures align with regulatory rules and expectations?” We recommend to clients that they select a random sample of the seller’s files and assess the following as part of their regulatory review:
The suitability of each client’s investment holdings
Any improper use of embedded commissions (i.e. instances of churning or use of DSC with elderly clients)
Instances of KYC uniformity across accounts
Sufficiency of notes in the file and instances of signed blank or altered forms
Any client complaints or regulatory sanctions
Whether the advisor has dealt appropriately with elderly clients
Instances of high-risk product offerings
Clearly, the greater the regulatory risk, the less valuable the target firm will be to a buyer. Reviewing the seller’s files from this perspective also gives the buyer a good sense of the seller’s approach and commitment to client care and service.
4. Operational Effectiveness
Buyers should examine the target firm’s operational effectiveness and efficiencies with respect to processing trades, client service, financial management and human resources. Consider the following:
Does the firm rely on one or more key individuals to get things done or is there a set of systems and clearly defined processes and procedures in place that are effective, reliable and scalable?
Has the firm invested in technology such as a CRM system that will make it easier for the buyer to seamlessly connect with and service clients?
Do team members have clearly defined roles, responsibilities and competitive compensation structure in place and a desire to continue to work with the buyer?
Firms that operate based on a system of best practices and procedures are much more valuable than those that do not.
5. Financial Health of the Firm
Buyers need to determine that a target firm is financially well managed and able to deliver stable, predictable cash flow. The higher the percentage of revenue that will continue after a deal closes, the better. Key areas to review include:
Revenue analysis over preceding 3 year period
Expense ratios including expenditures on team members, benefits, technology, rent, etc.
Annual budgets and monthly P&L statements
Whether there are any outstanding debts, taxes or other obligations owed by the seller’s corporation
How a firm manages its finances and profit margins will directly affect its perceived value to a buyer.
Our advice to clients is simply this: do not underestimate the value of due diligence. Most advisors fail to pay enough attention to this part of the acquisition process, which is unfortunate because it is only through rigorous due diligence that an advisor can truly understand the practice they are about to acquire and its true value. If you would like to speak to a coach about business acquisition, please connect at email@example.com.
Afsar Shah, Business & Regulatory Coach at 9:48 AM