Practice management tips: Start playing football, Pt. 2
By Katherine Vessenes
This is the second in a three-part series of articles explaining how practice management for financial advisors and broker/dealers is a lot like sports. To read part one, click here.
It is fairly easy for successful financial advisors and planners to move from golf to basketball. The reason is, they still get to do what they like, when they like. In a sense, the practice is still revolving around the star, the financial advisor or producer. This is not only fun for the advisor; it is great for the advisor’s ego.
Unfortunately, the star-based practice is also extremely stressful for the advisor. It becomes impossible for the team to score a goal, or generate income, without the star advisor. The advisor finds it impossible to take any time off, devote energy to other hobbies, and frequently even the family suffers. Equally important, a star advisor doesn’t create a business with value that can be sold in the future.
So here is the choice every financial advisor or planner must make: Do they want to stay playing golf or basketball, or do they want to pay the price to move to football? Do they want to treat it like a business, or do they want to continue to be a salesperson with helpers?
When we coach financial advisors this often becomes the most difficult question. As the advisor’s business consultant, we understand some advisors don’t want to leave the prestige of being the star and in reality they are not cut out to be part of a team. Frankly, we never state this to them directly as we are consulting them, because no one wants to think of themselves as a prima donna who is not a team player.
For those advisors who for one reason or another are committed to being a golfer, or even a golfer with an entourage, we recommend a simple retirement strategy: start socking away extra money now into their retirement plans.
The reason? They won’t be able to sell their practice for much more than one times annual revenue — which for most advisors will not last long in retirement.
Even though in the short run it will be more expensive and more stressful, we believe it is critical for most financial advisors to move to football, to stop being a sales person with helpers and move to treating it like a business. Here is what it will do for you:
1. Your business will become more valuable — a lot more valuable. In fact, we have seen this move double, triple and quadruple the value of the business. Sometimes, it increased the value even more.
2. It will increase your profitability. Not only should your company have increased revenues, when you are playing football, you should also be making more money and more profits — a lot more profits.
3. Your stress will be decreased. The problem with golf or football is the game doesn’t go on without you. When you are playing football, you can spend quite a bit of time on the bench, or even in Hawaii, and the business will not only be operating in your absence, it will still be making money for you.
4. It becomes attractive to future buyers and is more likely to have a quick sale when it comes time to transfer the practice to the next generation. A star-based business is almost impossible to transition because all the clients are stuck on the star, not the team. Once the star leaves, the business evaporates. This can leave you with less income and your new buyer quite unhappy.