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Top 5 Practice Management Mistakes Advisors Make
Monday, April 7, 2014
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Based on my past life as a financial advisor and my current role in which financial advisors are my clients, I have seen a lot of best practices by advisors — and witnessed their biggest mistakes. Here are five things that advisors do wrong, so you can get them right.

1. Underestimating the value of a team approach.

Three out of 10 financial advisors go it alone (according to Cerulli's 2012 Advisor Metrics report) and are often at a disadvantage compared with full-fledged advisory teams. For solo advisors, their time and expertise are limited.

Clients want specialists — a tax advisor, estate planner, asset allocator and portfolio manager; you get the idea. The notion of being a jack-of-all-trades is simply outdated. It takes a full-fledged team to assess clients’ unique situations, identify and handle their diverse financial needs, and help them reach their financial goals.

Full-fledged teams are not just simple arrangements between advisors who refer clients needing accounting or tax services. Full-fledged teams are those with several individuals right there as part of the practice with distinct expertise and roles in serving the client.

What do you think it looks like when a prospective high-net-worth client walks into a private bank and meets with a trust officer and an accountant, among others, and then walks into your office to meet with just you? That prospective client will think, “You can’t do all of that.” As a result, solo practitioners may be limited in their ability to work with higher-net-worth clients.

Bottom line: You have more opportunities to connect with more individuals when you are part of a team. Meanwhile the client benefits from a higher level of expertise and continuity of the overall relationship should one team member retire or leave the firm.

Watch:The Worst Mistake Advisors Make

2. Lacking a sophisticated client service model.

Advisors often create a client service model by segmenting their clients based on assets under management or revenue and then applying service levels. However, clients with the same assets but from different generations may view their service needs differently. A boomer might want more face time, while a Millennial is comfortable surfing the web for answers to some questions. In determining service levels, the advisor should consider assets and revenue but also include financial objectives, risk tolerance and service level, type and frequency.

Many other advisors simply react to clients’ needs and have not incorporated a structured proactive client service model made up of personalized service through in-person meetings or teleconferences, e-newsletters, telephone check-ins and appreciation events. What happens is advisors take care of clients who demand the most attention and forget about those who are not calling, emailing and texting all the time.

Your connection to clients you neglect will weaken over time and those clients might find an advisor who is more hands-on. Don’t give your clients the chance to ask themselves, “Why hasn’t my advisor called me?” and to conclude, “My advisor must not care about me.”

Be thoughtful and consistent about when you reach out to clients so that you don’t miss opportunities in their lives to be of value. Is your client buying a new home, changing jobs, expecting a child or grandchild or getting divorced? These are the times when you call or meet. This is when it makes sense to review a client’s portfolio, rethink asset allocation and more.

3. Failing to respond to a client in the client’s time frame.

In this era of 24/7 texting, clients want immediate access to information, and for questions they can’t Google, they want answers from real people as soon as humanly possible. Many advisors will say they return phone calls within 24 hours, and that’s just not good enough anymore.

Make sure you have an up-to-date, interactive website, perhaps with a “Frequently Asked

Questions” section and a way for clients and prospects to send an email and receive an automatic reply thanking them and letting them know how and when you or someone in your office will respond. Sometimes client requests can be handled by a member of the advisor’s team without the advisor being involved, speeding up service to the client. Advisors with clients across multiple time zones may need to employ different models for office hours and responsiveness.

If your firm permits it, consider allowing clients the ability to book meetings via your website. And give them different meeting options—in person at your office, in person at their home or office, by web chat or by phone.

4. Waiting too long to integrate a new advisor into the retiring advisor’s business.

(3) Comments
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Posted by Charles H | Monday, April 07 2014 at 10:13AM ET
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Posted by RICHARD L | Monday, April 07 2014 at 10:14AM ET
SPOT ON WAYNE! As a former advisor, all of these points are so important that it's odd that it took being out of the business to really see the light. Hopefully advisors still in the business can learn from your insight. Cheers! Victor Gaxiola @VictorGaxiola
Posted by victor g | Monday, April 07 2014 at 10:53AM ET
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