First, says Paul Saganey, founder and president of Integrated Financial Partners, bring your database into the 21st century. “You want to organize that back office and get the database in the best possible shape,” Saganey tells PLANADVISER.
The first step is dumping those file cabinets full of paper. “Get away from paper as much as possible,” he says. “Nobody wants file cabinets full of paper.”
Jay Wells, an adviser at Foresight Wealth Management, agrees, noting that most advisers who are thinking about transition are old school. “They love their filing cabinets,” he tells PLANADVISER.
But when Wells bought a practice that had all client records on paper, he immediately thought, “We have to hire some part-timer to scan this stuff and put it into the system, and throw the paper away.”
Wells points out that the cabinets hold a great deal of vital information, but says his practice is almost completely paperless, which he maintains increases the value of a practice.
Cutting down on paper and last-century equipment is part of the general spruce-up that advisers who are selling need to pay attention to. “They need to do a better job or presenting their data to their prospective buyers,” says Danny Sarch, president of Leitner Sarch Consultants.
One possibility Sarch suggests: An up-to-date list of clients, without names, shown in a presentable and organized way, that shows household size, number of years as a client, frequency of conversations and meetings, and the age of members of the household can distill all the key facts about the client base.
The database should be ready to go, Saganey says, an example of how the practice operates efficiently and effectively. “The more organized you are, the more revenue can increase from a more efficient back office,” he says.
Wells says that not being completely familiar with the practice’s clientele can hurt valuation. “Clean up the books,” he suggests. Some advisers don’t know all their clients, and they don’t know the numbers. “Some books are full of old clients that are more maintenance than profitability,” he says, which is a definite negative. Someone may have 300 clients, but only 50 are actually generating profit. And one client with $3 million in assets will take the same amount of time as one with $200,000.Client Relationships
Make sure there is more substance to the practice than just the personal relationship, Wells advises. Some clients are more loyal to the relationship with the adviser than to the practice, and may be difficult to bring over in a transition. Sometimes it’s the adviser’s methodology and practice management that clients like, which is easier to replicate than a personal relationship.
Advisers should make sure they are versed in current technology, such as making efficient use of the database, according to Saganey. “They can absorb and contain so much more client information than ever before,” he says. “They’re truly an extension of the practice, but all too often they’re just used for the most basic functions.” He suggests using the database to keep segmented data on clients, from assets, to activities they like to do, to what their accounts look like.
“Use the database to get your marketing message out there,” Saganey says. “They have the ability to continually keep your name in front of your clients.” This function can be adjusted to “set it and forget it,” sending information automatically so that it performs the functions of a marketing systems to keep the adviser’s name in front of clients and prospects.
Saganey is a proponent of establishing client financial websites that aggregate their account information and provide document vaulting. Clients can access these sites 24/7, and they are proving to be one of the most effective communication tools, he says. The information is not just the assets managed by Saganey’s firm, but all their financial information: wills, trusts, insurance policies.
He explains that just as most people have a junk drawer somewhere in their homes, so do they often treat their financial lives. Uploading all the information and having it organized in case of a catastrophe or emergency increases the adviser’s value to the client and increases the value of the practice, because of the level of detail and information on clients’ financial websites.Keep an Open Mind
The websites are very popular with clients, Saganey says. One caution: he warns that financial planners and advisers should try not to bring their own biases to the table when it comes to new technology or practices. “Just because I wouldn’t like it, doesn’t mean my clients wouldn’t like it,” he says. The personal websites can also bring some efficiency to the practice by minimizing the number of face-to-face meetings.
“Many advisers believe that being busy is being productive, and that simply is not true,” Wells says. Inefficient use of time is one of the most common practices Wells says can keep advisers from expanding or improving. Noting that time is an adviser’s most valuable resource, Wells says it should be used to maintain and build client relationships.
“An adviser only generates revenue by meeting with clients,” Wells says. “All other activities should be outsourced as much as possible.”
But just because they can do the work themselves does not mean they shouldn’t hire an assistant, Wells says.
Saganey quotes a high-performing planner who said, “If you don’t have staff, you are staff.” He suggests that advisers get help in the areas they are less competent in, and try to maximize their abilities in the areas of their business in which they are highly competent.
Overall, Saganey says, he looks at the level of organization a practice displays, whether the financial planning is up to date and if the clients are well cared for. “The more organized you are and your practice is, the higher your valuation will be,” he says. And he emphasizes the need for older advisers to keep up with the current technology and tools that younger people use. “The more turnkey your operation is, the better valuation you’ll get,” he says. “And the new school of younger advisers is incredibly tech savvy.”