In our recent video series, The Five Things, we are taking a deep dive into the things that top-run wealth management firms are doing to compete and win in the future of financial planning, ultimately driving revenue, expanding business, and increasing the enterprise value of your business.
In this episode, AiK2 CEO, Jay Hummel, discusses the FOCUS acronym, AiK2’s shorthand for what independent advisors should think about (and not think about!) to facilitate their growth. As Jay has gone across the country to talk to wealth managers, he’s built this acronym based on many fallacies and pitfalls that are all too common.
Forget about M&A.
In our conversations with wealth management firms, the truth is, that there are very few of them who should be buying firms. To be considering buying another firm, you need capital and major differentiation in your platform. We’re breaking the news as gently as we can: that isn’t most of you. We suggest you spend your time going to get clients instead.
Get out of the tech business.
We know that the technology can be a struggle. Overall, we see firms spending too much time thinking about tech and ideal workflow. Our advice is to use one of the great, existing off-the-shelf options that were developed over many years by professionals.
Maybe it’s a truth you don’t want to hear, but people are motivated by what you pay them. So, when it comes to compensation, make sure you get it right. Your partnerships will be more successful when the people you’re working with are fairly compensated and incentivized.
Understand how margins and profitability work.
From an accounting standpoint, a common misconception is that margins and profitability correlate; they don’t. In fact, all your margin gain will be in the last 30% of your revenue. Even though we know this is a little nerdy, it’s something firms often overlook that can make a big difference in the bottom line. Our advice is to pay attention to ways to save money. When you get above that breakeven point, that’s where the growth potential is.
When firms encounter areas where they need additional personnel, we’ve noticed many seem to automatically assume a manager is needed. We see these issues a little differently; consider hiring a junior-level expert to handle the day-to-day tasks that are overwhelming the business currently and allow the current manager to actually manage and lead.
Firms are growing, and with more FOCUS, we think there is still untapped potential and room for more growth and development. At AiK2, we’re a partner for independent wealth managers. Give us a call, we’d love to talk to you!