Financial advisors spend too much time “running their practices like practices instead of like businesses,” says David B. Loeper, CEO of Wealthcare Capital Management, a Richmond, Va. a firm that provides services to advisors. And doing so decreases the number of clients they can serve and the overall value of the business, he says.
Loeper contends advisors attempt to wear too many different hats and should focus, instead, on the core value they bring to the business – in many cases, the relationship they can build with clients, and their ability to find prospects.
“We think it’s completely feasible for a single advisor to have a billion dollar practice,” he said. “You just have to let go of everything that’s not valuable.”
The problem is that the skills required to run a practice are often contradictory, Loeper said. “You don’t find people who have great attention to detail, and sophisticated analytical skills, that are also extroverted high-gravitas networkers,” he said. Most advisors take responsibility for all of the services their clients require, which absorbs time and energy that could be spent building the business. Others try to work in teams, but still end up with the wrong skill sets trying to run different aspects of the business.
“Your typical management problem is someone that is not good at delegating,” he said, but advisors who are willing to outsource a lot of their back-end practices can open up huge opportunities for growth in the depth and breadth of clients they can serve.
Advisors who align with Wealthcare Capital use a process that incorporates software tools to set financial planning goals for their clients and build an appropriate plan. The client is then introduced to a “Wealthcare Confidant.” These people are not advisors, but are trained in client relationship skills. In the background is a team of planners who can make adjustments to the plan, or help the confidante answer questions. The advisor is always available as well, in regular client events and meetings, but once the plan is in place more of his or her attention can be turned towards new clients and practice growth.
Giving up this much control can be hard for some people, Loeper admitted, but some of advisors who work with Wealthcare Capital say it’s worth the payoff.
Jack Cully, senior vice president and investment manager of the Cully Wealth Management Group in Pittsburgh, says he left Wachovia Securities because he felt that the planning tools and approach offered by Wealthcare Capital provided a better proposition for his clients and freed him from the chores of constantly rebalancing portfolios because of outside imposed constraints. “I’m not interested in running a firm, I’m interested in helping clients,”
he said. He said that the Financeware planning tools he uses as part of Wealthcare Capital are better than any tool he’s used before at helping clients reach specific goals.
Cully says too many financial advisors – and their clients – spend time talking and worrying about the markets. Since aligning with Wealthcare Capital, he said, “I can’t remember having a meeting with a client where we talked about the markets.” Instead, he said that using the Wealthcare Capital tools he can talk to clients about their goals and dreams -- where they would like to be in five years; when they want to retire. He said that the endless focus on the markets detracts from what is really important to clients, and he likes being able to use tools that can show clients how to make their finances work for them.
Mowry W. Young, CEO of Young Financial Group, in Canfield, Ohio, agrees. He says that in most cases, advisors are preventing clients from making mistakes and making investing a little easier, but that’s it.
“Other than those two things all the advisor is doing is delivering products that the client could buy themselves,” he said. He thinks that advisors can offer more value than that, using their own skills to help clients figure out what it is they want to do and the Wealthcare Capital tools to translate those desires into a workable financial plan. He said too often people talk about their return as compared to someone else’s, but “that’s a shell game,” he said.
Really, what is important is how the client is working towards his or her life goals.
Loeper said that advisors can also increase the overall value of their practice, now, and for eventual succession, by having all the clients on one system. “If there’s one thing I would encourage any advisor, it is to think about what is your main value proposition, and stick with that and get all your clients into that process,” he said.
Too often advisors think “an ideal prospect is a person that’s breathing that has money,” but that attitude ends up constructing a client list that includes too many disparate types of clients. Some advisors are “thrilled by the hunt,” he said. But “the client needs to be a good fit on both sides.”
If they don’t when the advisor looks to sell at retirement, he or she will find that most buyers are only really interested in a subset of the business, he said.
Loeper’s firm helps advisors who work with his system by buying their practice when they retire. Since all the clients are on the same program and are already comfortable with the Wealthcare Confidants, it makes for a more seamless transition, and the advisor can get the full value for his or her business, he said.