Are you running a practice or a business?
Do you run an advisory practice or a financial services business?
There are differences between the two, and advisors should know what they are.
The vast majority of RIAs are practices, and that may not be the best model for advisor or their clients.
Experience has shown that businesses are more efficient, grow faster and typically deliver superior client experiences. Even more important in the long run is that businesses carry a higher valuation when the time comes to monetize a lifetime of work.
The chief reason that businesses are more successful is their access to human capital. Businesses have well-rounded management teams with all four managerial disciplines (strategy, operations, marketing and finances) skillfully deployed.
Without the skillful implementation of these critical competencies, advisors will be unable to reach their fullest potential. Being handicapped by a lack of competency in any of these disciplines can cause the practice to become marginalized.
The result is “business” performance that is not optimized and falls short of expectations or possibilities.
But owners of advisory practices do have options to transform themselves if they have the ambition. Of course they can hire the necessary talent directly, but this approach could be costly or downright prohibitive.
A more pragmatic solution may be through partnering with outsourcing platforms that can fill the gap in talent and services. Think of it as an outsourced C-suite of executives who have the talent, pedigree and experience to complement the advisors/owners own abilities, all from the same platform entity.
The vast majority of practices, as an example, don’t need a full time chief financial officer. They only need fractionalized services from such a skilled professional.
This allows this same CFO to work with other entities, also part time, thus allowing multiple firms to share the costs of this critical managerial position. The advisor loses no control and gains the human capital necessary to optimize results.
This idea can be repeated with each managerial discipline noted earlier.
These outsourced platforms typically offer other services as well that can help any advisor evolve from practitioner to business owner.
But the first step is for advisors to ask themselves: “Do I have a practice, or do I have a business?”
It could be a million dollar or more question.
This story is part of a 30-30 series on savvy ideas on modernizing your practice.