When the going gets tough the 
tough get going

Occasionally every stream needs a flood, to wash away the silt and uncover the stones. It seems that the world markets have had a flood washing away some silt and sludge

It’s amazing how often the same thing happens to small businesses. And let’s face it every advisor is first and foremost a small business. You may take great pride in your systems and processes and the quality of advice that you provide to your clients, but unless you can survive as a commercial enterprise you are largely just an academic irrelevance.

So maybe its time to take stock of where you are at, and how you are reacting to the very sudden change in both market and sentiments.

The waves just keep rolling in; it started some time ago with the issues with the finance companies, escalated to issues with compliance and governance, and now world wide turbulence. The gentle on shore breeze has become a full blooded storm. And what are you going to do about it?
Well first of all I think you need to make the decision of whether you are in or out. You will be aware that our business is involved with sales, purchases and mergers of financial advisors, and without a doubt the current strains are starting to throw up new business opportunities for us! As the old saying goes from a golf perspective, every stroke pleases somebody! It is causing people to review their situation and decide whether they are fully committed to their career for the long term, or whether they should either down size or sell out now. On those subjects I believe that a review is always important, after all if our discipline is financial planning then the first person we should be planning for is ourselves. The issues are very complex. You only have to have a look around at the average age of an advisor to realise that a significant number will be planning to retire sometime in the next five years anyway. Maybe this is the time that they should bring that date forward. Others again see it as a great opportunity, from a couple of perspectives. Firstly there are a number of disgruntled clients who are seeking advice from somebody and it may as well be you. Secondly once the storm has subsided, people will still be fearful for their money and will be looking for quality advice that they can trust, to a greater degree than ever before.

It’s also a time when you need to review the financial survival of your advisory business. Many advice businesses have grown up all topsy turvy, different types of clients, with different needs and demands. At a recent IFA meeting I was pushing the point that this is a good time to review how you run your business and turn it in to something more targeted than it may have been in better times. There is nothing like a bit of adversity to bring to your attention any inefficient or uneconomic aspects to your practice.

Here are some suggestions for the survival of your practice into the future. They are simple; all they require is a clean sheet of paper, and an open mind. (Regrettably open minds seem to be in short supply at the moment!!.)

Firstly where are you at? Make a short list and grade yourself on the performance of your practice. I am not talking here about the quality of advice, but rather more your practice as a business entity.

Secondly do you do the common sense things well? Good communications with your clients, good control of your fixed and variable expenses, a marketing plan to grow your business and its brand.

Thirdly what are you going to do about it? Is this going to go in that bottom drawer where you keep all the plans from the past or are you going to implement some or this entire plan?

Fourthly get yourself in the right frame of mind. Dream a little bit. Some of the greatest businesses in New Zealand were started at the toughest times. One of the businesses that has been a huge success was Sovereign Assurance. I do remember the day they opened their doors almost every industry critic would have said it was the worst possible time to start up a new insurance business!

Personal discipline is the key to all of this. Recently we began giving out pedometers, because these were a very useful tool for those who wanted to improve their physical health. 10,000 steps a day is almost a certain guarantee of improving both your shape, and your head space. What do you use to measure your business? Many advisors need to have a clear picture of the current value of their business, so they can plan for it to increase in value and take the pleasure that’s derived from a job well done. The only way that you can know that a business is improving is to value it on a regular basis against what somebody would pay for it in a fair market.

Again we are receiving a number of enquiries from people who would like to value their business, but sometimes for all the wrong reasons. They may be valuing it for share transfers, estate planning purposes etc. I only wish we had more clients who asked us to value their business, so that they could pat themselves on the back when they grow it. There is nothing like looking at an increase in balance sheet to give you a feeling that the work you are doing is well worth while.

Simple question, are you going to ride out the storm and be no better off when you finish, or are you going to see these times as the opportunity to reflect on your business and improve on it substantially. The challenge is yours.