However, while it is always wise to have one eye on the forces shaping the environment of tomorrow, it is also prudent to understand where the marketplace is today and how well Australian advice practices are managing their current operational compliance obligations. It is here that the key findings from the recent Business Health Future Ready IV* research paper provides real insight.

*     Since 2002, Business Health has released a series of white papers providing a comprehensive insight into the health of the Australian advisory industry and its preparedness for the future. These papers have become known as the Future Ready analysis. The fourth in this series, Future Ready IV, has recently been released and is based on the consolidated analysis from Business Health’s HealthCheck data warehouse which now contains information on over a 2,000 Australian advisory practices.

As can be seen from the following graph, there has been very little movement in the “health” of Australian advisory firms in this critical area over the period 2007-2010.

One in three practices were assessed to be less than Fit (albeit against a quite stringent judging criteria) and 19% were rated as Poor or Average Health.

So what is contributing to these results? Of course it is always dangerous to generalise, and each business is unique and hence the challenges and solutions will vary between practices, we were able to identify the following flaws in many operational compliance regimes.

• 74% of practice principals stated they document/note all of their discussions with their clients (somewhat surprisingly, this down from 85% in our previous Future Ready III analysis).

In the case of a dispute (and if a client’s recollection is different to the adviser’s), the quality of the file notes can bolster or destroy a case – let’s hope this does not become an expensive problem for the one in four advisers who are not currently file noting all of their client interations.

And, while such action is thankfully quite unlikely, in the situation where the original adviser has subsequently left the business, thorough files notes will allow someone else within the practice to deal confidently and competently with the client.

• 87% of principals indicated that compliance is a specific responsibility of a director or senior manager of the practice. While compliance should be everybody’s responsibility, ASIC has indicated that a director or senior manager should be allocated the responsibility for overseeing compliance measures, and (in the case of larger organisations) to report to the governing body.
• Less than half (43%) of the practices who employ contractors to perform some of their business functions (eg: information technology, paraplanning, compliance, etc.) have a written agreement in place with their outsource service provider.

While outsourcing certain operations can be a prudent and cost effective business model, the practice principals still remain ultimately responsible for what their outsource partners do. They need to ensure that they can demonstrate that they have in place appropriate measures and processes to select suitable providers; monitor their performance and deal with any actions which may lead to a service breach. It becomes incredibly difficult (if not impossible) to do this if the relationship is not underpinned by a signed agreement.

• One in three (30%) of practices stated they do not have a key person plan in place – with principal dependency alive and well in many smaller practices, this poses a very real business risk and is perhaps indicative of “plumbers with leaky taps”?
• Given the recent media interest in our profession shows no real signs of abating, it also remains a concern that less than one in four practices (24%) stated they have a written plan in place to manage unforseen problems with the media (such as major market downturn or public criticism of their licensee or firm) and only 32% of principals stated they always proactively communicate with their clients when bad news is reported about the industry or the markets in general.

Regardless of the FoFA reforms that are eventually passed into law, every licensee and advisory practice in the country will need to review their business systems and process and ensure they are operating within the requirements of the new framework. This may also present the ideal opportunity for them to address these issues.

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The financial services marketplace has been changed irrevocably in our view – there can be no going back to the way it was. Clients will continue to regularly review the value they are receiving from their adviser, the regulator will remain as diligent in its efforts to protect the clients’ interests, product manufacturers will continue to look to increase sales of its products in the most efficient manner while licensees will still need to consider how they can help their advisers address all of these issues …profitably.

Of course sitting right in the middle of this is the adviser and his/her practice. While every adviser should review their current position vis a vis each of the areas mentioned above and decide the most appropriate course of action, it’s our experience that too few will. This is not to say that they will be sitting on their hands and taking it easy – far from this, we’re sure most advisers will find themselves working at least as hard this year, as they did last year – many will have to work even harder. But the  question really is – ON WHAT will they spend their time and effort? For whatever reason, it seems to us that most will do what they’ve done for most of their working life – they’ll again focus on the ‘stuff’ – responding to those enquiries which could probably be better handled by someone else within the practice, preparing plans which a paraplanner could better put together, checking on those commission reports, reading every email which comes into the practice and so it goes on …while all this type of work is important, the real question is – is it the best use of the adviser/principal’s time (and we already know the answer, right!)?

We’ve set out following a few of our favourite ‘not to do’ tasks in 2011. Whether you are a practice principal, adviser, licensee or product manufacturer we hope they’re helpful to you in achieving your goals in the year ahead.

Unless specifically stated otherwise, all of the “Stats & facts” used in this newsletter have been derived from  2010 analysis of our HealthCheck and CATScan databases.

Not-To-Do List for 2011

1. Don’t do ‘the stuff’ – stay away from it (refer earlier comments), principals and advisers alike should focus on the activities that bring greatest benefit to the practice (client acquisition, going to an even deeper level of relationship with their ‘A’ clients and building productive centres of influence).
   Stats & facts: Average no; of alliances per adviser: 1.8
   Stats & facts: Average no; of client-facing meetings per week (excl salaried advisers): 5.8

2. Don’t assume a quiet client is a satisfied one. There is only one way to be certain you know how your clients feel about you and your offer. Nothing else to say.
   Stats & facts: Practices who proactively seek feedback from their clients are achieving a 74% increase in profit (over those who don’t). Yet only 29% of Australian practices pay their clients the respect they deserve and actually seek their feedback in a properly structured manner.
   
3. Don’t run your practice with your adviser’s ‘hat’ on. If you want to truly maximize the value of your practice it has to be conducted as a business. If you’re unable to or simply don’t want to adopt this role, then perhaps it should be allocated to someone else?
4. Don’t take your staff for granted. Did you notice increasing commentary towards the end of 2010 about the lack of good quality people (the talent pool is shallow – to paraphrase several recent industry magazines).
   Stats & facts: In 79% of practices, the majority of staff have clearly written job descriptions.
5. Don’t try and navigate the challenges ahead, without a well thought out plan of action (a simple one-page with clearly defined goals, actions to achieve and timeframes is a great start) …it’s too hard, and you’re likely to miss some of the big industry issues coming your way.
   Stats & facts: Those practices with effective business planning are achieving 165% uplift in profitability.

The post Not To Do In 2011 appeared first on AdviserVoice.

And, very often, these principals operate in relative isolation to their profession. Outside of PD days and industry conferences, they generally have few opportunities to come together to learn from others who are running businesses similar to theirs – to share experiences and discuss pertinent issues with their peers and colleagues.

Consequently, it is difficult for most to know what is loosely termed (and for want of a better description) “best practice”. For example, in a business similar to mine:-

• What is the standard ratio of support staff to advisers?
• What is the average level of practice profitability?
• Is my practice performing better or worse than others in terms of growth/attrition rates over the past 12 months?
• How does my client satisfaction level compare to my peers, not only from within my own dealer but also to “external” firms?
• How often should staff meetings be held?

And so it goes on.

But as agents Mulder and Scully reminded us each week in the X Files – the truth is out there. It’s only a matter of taking time and making the effort to find out. So why don’t more seek out the truth and benchmark their practice?

Stats & Facts

• Those practices which proactively seek regular feedback from their clients in a structured manner are achieving a 74% uplift in profit (compared to those which don’t).
• Practices utilizing an external business adviser are achieving a 94% uplift in profit.

The post So what really is ‘Best Practice’? appeared first on AdviserVoice.

This will undoubtedly place the adviser in a most challenging position – on the one hand, yes, their services are desperately needed. On the other hand, the adviser has been under seemingly continual scrutiny, change and indeed challenge for the last few years. While the pace and magnitude of change in the advisory profession shows no real signs of abating, the anecdotal feedback we are receiving continues to confirm that market sentiment is slowly improving and confidence is on the rise.

Given all of this, it appears to us that Australian principals are now faced with an interesting dilemma. How do they react to such a market? However, perhaps an even more fundamental question should be – how well placed are they to do what they have to do, to look after their clients as well as their own practice?

Of course, there won’t be a ‘one size fits all’ answer to these questions. And while it is always wise to have one eye on the forces shaping the environment of tomorrow, it also prudent to understand where the marketplace is today and how it is changing over the short term. It is here that the key findings from the recently released Business Health Future Ready IV* research paper provides real insight.

• Since 2002, Business Health has released a series of white papers providing a comprehensive insight into the health of the Australian advisory industry and its preparedness for the future. These papers have become known as the Future Ready analysis. The fourth in this series, Future Ready IV, was released earlier this year and is based on the consolidated analysis from Business Health’s HealthCheck data warehouse which now contains information on over 2,000 Australian practices.

As can be seen from the following graph, when comparing the ‘health’ of practices today to the position in 2007, we have seen incremental improvements in some areas, but at a high level, there seems to have been little progress.

While the stronger practices seem to have gotten stronger (the number of firms adjudged in the elite Super Fit category was up from 16% of the marketplace to 20%), the number of firms rated Healthy or better dropped from 82% to 75%. On the other hand, the number of Poor and Average Health practices has actually increased over the past two years – they now stand at 25% of our data set, up from 18% in 2007.

Although in many regards this still represents a strong result (the Business Health best practice benchmarks are unapologetically set quite high), and Australian firms remain at the forefront of global practice management, the fact remains that one in four of the better firms in this country are still in need of a stronger “health” plan.

While each practice is unique and the challenges (and hence solutions) vary from firm to firm, without doubt, the tumultuous market conditions of late, have had an enormous impact. Many principals have (in most cases quite rightly) had to divert much of their management focus and attention into addressing other more immediate concerns, causing a lot of the practice management initiatives to stall.

In future issues we will take a look at various aspects of running a practice – the key profit drivers; what’s working, what isn’t. And to help AdviserVoice readers monitor the changes occurring within the advisory profession, we are delighted to announce that Business Health has compiled the first ever Australian Practice Health Index. We will be releasing the Index in the next issue of AdviserVoice and will thereafter look to explore any changes occurring to it in future issues.

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