What 2020 Has Taught Us That Will Position Your Advisory Business for Future Success

Uncertainty is the only certainty there is and knowing how to live with insecurity is the only security.  – John Allan Paulos

If there’s one thing 2020 has reminded us is that uncertainty is abundant. Black swan events like COVID-19 happen (and will continue to happen). In an ever-changing world, adaptation and innovation is the new currency of success. 

Reflecting on the past six months these six lessons stand-out as necessary to consider to position your advisory business for future success.

1. It’s time to reset investor investment expectations

The 10-year bull market lulled many investors (and financial professionals) into a state of unrealistic expectations. If you haven’t already, now is the time to check in and reset misguided beliefs around returns, income and risk. 

According to a 2019 Natixis Investor Study, investors say they are comfortable taking risks but really value safety over investment performance. Managing fear through uncertainty is an invaluable service you provide. 

The same study reveals that investor versus advisor return expectations are misaligned. Investment professionals average return expectations were 5.5% above inflation. Yet, of the 9,100 investors in the study, over 70% has long-term return expectations of 11.7% above inflation. Short-term expectations were not much better, investors expect 10.7% above inflation. 

Knowing your investors likely have less tolerance for downside risk than they realize now is the time to revisit expectations. 

With more volatility ahead, addressing short-term fear but focusing on your long-term investment perspective and strategy with confidence goes a long way. 

2. Revenue diversification and protection are necessary

One-dimensional revenue is risky. If your business relies on revenue from assets tied to the markets it’s time you consider diversifying that risk. Taking cures from other industries there are many ways to supplement traditional asset-based fees. Supplemental income could come from a minimum annual fee, subscription fee or product-based business, such as educational workshops, courses or one-off financial plans, maybe there’s a niche you fill and can sell your expertise to a new audience in a different way. 

Another means of protecting long-term revenue is to diversify your client base. What’s the demographic of your clients? If they are concentrated in older age ranges consider adding new younger clients. Those younger clients may be the children or grandchildren of your best older clients. Especially with younger clients, who may have different needs, there is opportunity to consider monetizing on your business in new ways not ties to the markets. 

You know this but especially in uncertain markets, protect your fees – do not discount them. If you don’t have confidence in your value, neither will your clients. If a prospect or client requests a discount they either don’t value your services (which is a bigger issue) or they need to be reminded what they are paying for. You and your team have a limited capacity, fill it with people who value your services and are willing to pay for them.

3. A client service model is necessary in hard and good times

Every advisor claims to provide exceptional service. Yet, service is almost never a differentiator, it’s an expectation. Investors expect great service and the more you provide, the more they expect. 

If you didn’t have a client service model going into 2020 you likely were overwhelmed by the need to quickly and proactively figure out, what do I say? Who to communicate to? What platforms do I use to reach clients remotely and how much is enough? 

A client service model provides clarity around:

  • How often you communicate to clients and professional partners 
  • What you deliver, content that’s relevant and valuable 
  • The platforms you use (calls, email, social, meetings, text, etc.)
  • Client feedback
  • Expectations related to deliverables and communications – a schedule around when reports and updates are sent, a consistent format, where to find information on demand and how to get ad hoc questions answers quickly
  • How you adjust in good versus difficult times

Being clear with your internal team around who’s responsible for what and the level of quality you’re expecting for helps empower your people. Externally, setting expectations with clients enables you to automate and delegate, which helps you move from reactive to proactive, and provide consistent and scalable service. 

4. Contingency planning is necessary for owners and staff

Contingency planning is one of those important but not urgent to dos, that most business owners never seem to have time to get done. 

Beyond traditional contingency planning, COVID has shined light on the importance of the day-to-day business essentials. What are the business critical processes that live with one person or require someone to be in the office to complete? What processes do you depend on others outside of your organization?

A great project for an operational focused employee or a good intern summer project is to create a Standard Operating Procedure (SOP) library that is accessible to all team members. To identify how you’d keep the business essential functions running in an emergency. Keeping reoccurring processes up to date should be everyone’s job but can be something you review annually. 

You don’t have to do this work alone. There are tools and services such as Truelytics, TrueContinuity, to help advisors capture core business information and processes in a secure place. 

5. Remote and flexible work is a need to have, not nice to have

One of the greatest impacts of COVID is the advancement in remote work, which has been a long time coming. It’s been easy as an industry to focus on all the reasons why remote and flexible work doesn’t make sense – compliance, security, lack of access to technology and hardware at home, etc. 2020 has taught us those are simply excuses. Most of us can work remotely. In some cases, remote and flexible work is actually better for business.

Beyond having to work from home due to a pandemic there are a lot of good reasons to allow your staff flexibility and remote work. Ensuring your team can work from home and business critical processes can continue is part of good continuity planning. 

As a woman who has worked in finance for the past 15 years, this is a topic that’s near and dear to my heart. With two young children my ability to be productive and successful was directly correlated to my employers’ ability to be flexible and supportive of my needs outside of work. I’ve advocated for work from home and flexible work options for years. Companies and managers that are willing and able to support employees from different backgrounds, with different needs will increase their ability to attract and retain diverse talent, which is good for business. 

6. Now’s the time for change in our industry, answer the call for diversity 

Equality and diversity has become an urgent issue in our communities. In our industry, racial and gender diversity it’s even more dire. The death of George Floyd and other black Americans has ignited a powerful movement and long overdue call for change within our society.

There is an enormous amount of research supporting the benefits of diversity and inclusion in business. Within the financial services industry, the knowledge and representation gaps are wide.

The CFP Board’s racial diversity in financial planning white paper is a good resource to understand where we are in the planning community with racial diversity. The CFP report highlights that black planners make up less than 2% of all CFPs and less than 3.5% of the 80,000 CFP® professionals in the U.S. as of 2017 are Black or Latino. These percentages are significantly less than the percentage of blacks and Latinos across the U.S. population — standing at 13% and almost 18%, respectively. A 2018 ThinkAdvisor article highlights that women make up 16% of financial advisors yet women make up over 50% of the population. 

I encourage you to start by understanding the state of our industry and your organization. 

Outside of the financial services workforce there’s an enormous opportunity to provide financial and educational support to millions of people who need your help. An RIA who’s committed to supporting change through financial literacy is Jason Ray of Zenith Solutions. By partnering with schools, foundations and organizations Ray is bringing to life his mission of empower minorities through financial literacy education. 

What have you learned?

In the depths of uncertainty and diversity we find valuable lessons. As you look back on the first six months of 2020 what lessons will you take forward and implement? 

What you do with those lessons will shape the future of your business and our industry.

I partner with RIAs and financial professionals looking to unlock their potential. Outsourced CMO, sales and marketing strategist, accountability partner, change maker – those are some of the names I’ve been called over the past 15 years. If you are looking to take your business to the next level, I’d love to help. Learn more resources at www.shaunamace.com or contact me at shauna@shaunamace.com.

Related: Why Financial Advisors Should Stop Focusing on AUM