Positioning Your Firm To Profit In Lean Times. Extraordinary Insights From Mark Tibergien

Transcription

1 Positioning Your Firm To Profit In Lean Times Extraordinary Insights From Mark Tibergien

2 Advisors are facing an environment characterized by unprecedented money in motion. What does this mean for advisors in terms of business opportunity and threat?

3 Overcoming Obstacles Environment Hazards Operational Risks Symptoms of Strain Operational Solutions Growing client loads Wider span of control Training deficiencies Multiple office locations Talent shortage Compliance burden Experience gap Low esteem of operations staff Underutilization of technology Management void Workflow kinks Outmoded pricing Culture dysfunction Service errors Rising expenses Compliance violations Failing client satisfaction Turnover Profit drain Declining productivity Inefficiency Dedicated management Clear roles and career paths Workflow definition Operations equal in stature to advice Targeted training Meaningful benchmarking Right people in right jobs Source: Moss Adams LLP, 2008 Financial Performance Study of Advisory Firms, Sponsored by Genworth Financial Wealth Management

4 Percentage of Firms with Individual or Firm Goals Tied to Incentive, % 45% 41% 47% Individual Firm Source: Moss Adams LLP, 2008 Financial Performance Study of Advisory Firms, Sponsored by Genworth Financial Wealth Management

5 How does an advisory business grappling with lower revenues find the resources to capitalize on the opportunities created by high-net-worth individuals searching for new advisors?

6 The Capacity Challenge Create Capacity Serve More Clients Serve Fewer Clients Build Teams Acquire Practices Refine Focus Change Experience Source: Moss Adams LLP, Mission Possible II: The Link Between Operational Efficiency and Human Capital, Pershing Advisor Solutions 2009

7 Where Advisory Firm Owners Spend Their Time Client Service 37% Portfolio Management 18% Other 4% Operations 10% Business Management 14% Business Development 10% Source: Moss Adams LLP, Mission Possible II: The Link Between Operational Efficiency and Human Capital, Pershing Advisor Solutions 2009

8 One obvious answer to the margin squeeze problem is improved operating efficiencies. But implementing cost savings programs are often easier said than done. What are some of the leading firms doing?

9 Understanding What the Financial Statements Tell You Direct Expense Revenue Gross Profit Overhead Expenses Operating Profit Source: Moss Adams LLP, Mission Possible II: The Link Between Operational Efficiency and Human Capital, Pershing Advisor Solutions 2009

10 Employee and Technology Spending Salary Expenses Technology Expenses Non-Salary Employee Expenses Other Overhead Expenses 0% 20% 40% 60% 80% 100% Source: Moss Adams LLP, 2008 Financial Performance Study of Advisory Firms, Sponsored by Genworth Financial Wealth Management

11 Overhead Costs as a Percentage of Revenue Under $250k $250k $500k $500k $1M $1M $2M 44.7% 42.9% 42.5% 40.9% $2M $3M $3M $5M Over $5M 37.6% 37.3% 39.0% Source: Moss Adams LLP, 2008 Financial Performance Study of Advisory Firms, Sponsored by Genworth Financial Wealth Management

12 Distribution of Overhead Expenses by Firm Size Under $250k $250k $500k $500k $1M $1M $2M $2M $3M $3M $5M Over $5M 16.4% 20.6% 9.1% 54.0% 19.6% 22.2% 6.4% 51.7% 27.8% 19.4% 6.9% 45.9% 28.3% 20.9% 6.3% 44.5% 31.8% 24.1% 5.3% 38.8% 31.7% 20.8% 5.1% 42.3% 37.5% 16.5% 5.5% 40.5% Salary Expenses Non-Salary Employee Expenses Technology Expenses Other Overhead Expenses Source: Moss Adams LLP, 2008 Financial Performance Study of Advisory Firms, Sponsored by Genworth Financial Wealth Management

13 Retention Rate by Position Type Professionals 92% % 2005 Support/Technical 78% 81% Administrative 77% 81% Source: Moss Adams LLP, 2008 Financial Performance Study of Advisory Firms, Sponsored by Genworth Financial Wealth Management

14 Advisors of all types are confronting increased regulation and compliance costs. How can they build these additional costs into there business structure and is there a way to use technology to simultaneously meet compliance requirements and increase the operating efficiency of the firm?

15 Transformations Occur With Size Streamlined Delegation Committed Delegation Tentative Delegation Do-It-Yourself Source: Moss Adams LLP, Mission Possible II: The Link Between Operational Efficiency and Human Capital, Pershing Advisor Solutions 2009

16 Advisory firm growth is ultimately limited by the number of advisors it employs. What are some of the best ways to develop and retain human capital?

17 Firms With Dedicated Managers Experience Higher Growth Compound Annual Growth Rate % 18.4% 16.5% 16.4% 9.4% 7.6% Revenue Clients AUM With Dedicated Manager Without Dedicated Manager Source: Moss Adams LLP, 2008 Financial Performance Study of Advisory Firms, Sponsored by Genworth Financial Wealth Management

18 Advisory Firm Rate of Growth by Firm Size Compound Annual Growth Rate % 5.0% 5.5% 6.3% < $500k $500k $1.5M $1.5M $3M > $3M Source: FA Insight, 2009

19 What are the elite firms doing?

20 Clear Positioning Aligning Business Organization With New Vision Managing to Profitability Implementing a Human Capital Strategy

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