How to get out of Trouble!

Whilst it would be great if everyone’s practice worked efficiently at all times, the reality is problems do pop up. The sort of thing that can really mess with your head and take you away from being 100% there for your clients.

Let me just give you a few of examples and some of the solutions.

You got it wrong!

You failed to act promptly with a group of clients and as direct result they are not necessarily in the best product. On top of that you have been so busy that you have left them on the back burner as being “too hard”. Now you need to clean up your act. Mainly for the benefit of those clients but also to ensure you do not run into problems with the regulator. So what to do?

In our business, we have a number of tools at our finger tips. First and foremost, if these clients do not fit your profile, then sell them on to an advisor who would see them as a fantastic opportunity. We know a few investment and insurance advisors who will happily take on someone else’s problems and see them as opportunities. Once they have been sold they are subject to a brand new face and a complete re-run or re-set of their position. The new advisor will need to sort out any old issues, give them a new plan and advice and implement it. That is fine, in that process they are transferring the loyalties to themselves and most clients would benefit from a fresh face and fresh process.

You are working harder than ever, but going backwards as an advisor.

Staying on top of all your regulatory obligations, running an effective and efficient back office and continually revisiting your clients’ issues is time consuming and in many cases does not generate any fee.

As we frequently advise, better to be fantastic for your key clients rather than average for them all. The solution is sort out your top 200 clients and sell the rest. It makes good sense both commercially and to benefit those clients being sold. They end up with an advisor who sees them as “A client”. You end up with more time to assist your “A clients”. Win win all around, not only reducing your time expenditure and expenses, but also generating some capital back into the business.

Another frequent problem is succession planning.

Years ago there was a trend towards looking out for the bright eyed, bushy tailed advisor to join your practice and ultimately take over from you. The only problem is that in almost every situation, it has not worked. Why is that? If you think about the odds, at the time that you want to either slow down or get out, how likely is it that your apprentice is not only perfectly on top of things and ready to take over, but also has enough cash to be able to buy you out? Given that most advisors that we deal with do not have a plan to retire on X date, the concept of training up someone to take over is very much a timing issue. A common theme for people selling is the four D’s. You know the ones I mean, Death, Divorce, Disability or Despair. Often they do not come with a date but simply out of the blue.

Our observation, after 12 years assisting advisors sell their client bases, that it is the open market that provides your best opportunity to realise the value of your practice. Other people have already proven themselves at their own expense, and are now ready and waiting to buy your client relationships to further expand their opportunities. It also means that you are positioned to react to any of the four D’s quickly.

Are you solvent?

It is amazing that in a financial advice business the number of people who become wealthy as a result of their work is relatively few. Regrettably there is a significant number of advisors who over the years have developed the odd debt or two with mainly suppliers and do not pay them back out of cash flow because they are assuming that at some time in the future, new business will off-set it. The reality is that once again if one of the four D’s strikes, all those debts need to be settled. That gets a bit tricky as most of the supplier companies will not release the client data to anyone who is not a registered advisor with them and will not let you on sell anything until you have paid them back.

We deal with that by standing in the middle and on more than one occasion have agreed with various carriers to settle their debt, as part of the sales process. Luckily our long term reputation is such that they all accept that and we can tidy up the whole thing leaving the vendor with a net payment and a great reputation and the purchaser with no skeletons in the closet.

Selling to a colleague.

You have decided to sell you client base to a colleague but are not sure how to go about it. Ignoring our obvious self interest it is a pretty good idea to get an independent person to assist you. There are never ending stories of grief and recriminations, when two advisors sell clients between them. Not because of bad intent, but rather through lack of knowledge of the intricacies of write backs, wordings of agreements, market prices and communication issues. There used to be saying do not lend money to family or friends but selling a client base to them is just as fraught with potential difficulty. It is really a shame where people who are acquaintances or even friends can fall out over such matters.

But let us forget about the problems and look at the opportunities. We are finding that advisors are becoming more sophisticated, efficient and profitable. In the old days advisors took on every client who would say yes and in a life time of hard work ended up with a very mixed batch. These days there are lots of good platforms and computer systems to allow you to run your business efficiently and to ensure that you are complying. If you looked at it as compared to lots of paper files and unintelligible reminder notes, most advisors that we deal with have very good businesses indeed. Not only from a professional point of view but also from a cash flow point of view. We are gradually building an impressive cohort of great advisors, with great businesses. Years ago the typical advisor was living from hand to mouth sometimes with great gross income, but often with poor net profit and almost no capital value. Now the reverse is almost universal, building long term assets on the back of positive systems, and with the ability to sell part or their entire client base for a capital gain when the time comes. The transition period is almost over, there are very few of the old style personality sales people out there, rather more advisors are better farmers than hunters.

So, Onward and Upward.