Will freedom and choice boost the equity release market?

Charting a clear business course for advisory firms is a common conundrum faced by many owners operators out there.

Owners are so consumed with the demands and pressures of dealing with ‘today’ they are short of time to focus on ‘tomorrow’.

But time and clarity of focus is essential to steer businesses forward in a new or changed direction.

Whether it is small scale transition or full-on transformation, determining how to translate ideas into action can seem a huge challenge. Addressing the following questions should help get you on your way.

1. What is the purpose of your business?

It can seem an off question to ask but be honest: why are you running your business? Is it primarily a job that you have control over and gives you an immediate income? Or are you ambitious to create a practice with long-term capital value, perhaps with a view to selling it?

If you do want to build long-term value, then priorities shift from what you like doing as a job to what will help create a sustainable high value business. That requires a vision for owners and employees to pursue, as well as a quantifiable framework against which decisions can be made, efficiency maximised and progress measured.

2. What is your brand proposition?

Brand is not just about your logo. Your brand helps you to set out and control how you are perceived and who you appeal to.

To build a robust brand that reflects the direction you want to take, you need to determine what types of client you hope to service (young professionals, retirees, high-net worth individuals, mass affluent, etc.) and what different services you will offer (wealth management, financial life planning, mortgage and so on).

Brand also touches on the issue of whether you are presenting your firm as a generalist or specialist. If specialist, you need to be confident of current and future demand for your specialism.

If generalist, consider how are you going to differentiate your firm in a competitive market. Price, service standards, local reputation, heritage or professional connections can all be used to create a distinction.

Once you have defined the clients you want to serve and the propositions you will offer, you can address your brand identity.

Remember that brand is reinforced in every client interaction. The way you work needs to resonate with the client.

That can be as simple as making an office family friendly for clients with small children or providing step-free access for elderly clients. It could be as ambitious as developing online apps and remote servicing for tech-savvy and time-poor entrepreneurs.

Your strategy for growth should also look at how you reach out to new business. Should the focus be on marketing to existing clients or to new clients and professional associates? Then decide whether you should invest primarily in ‘push’ marketing (traditional advertising and social media) or ‘pull’ marketing (providing insight through speaker engagement, interviews, regular newspaper columns or white papers).

3. Where will your future growth come from?

If your priority is to build a long-term business with intrinsic value, it is vital to look ahead and consider where future growth can come from. This could require service diversification.

For example, you may want to consider an additional lower-cost self-directed service to attract younger, lower-earning investors who could be your advised clients in the future.

Extending the scope of the expertise you already offer is another growth strategy. Say you have a large client base relying on you for post-retirement planning: would moving into family practice be a logical evolution?

In this way, you can build relationships with the children of your retired clients, helping to ensure your services remain relevant as assets move down through the generations.

4. Do you have the right team, structure and processes?

Once you have an idea of your business goal, your brand proposition and future growth opportunities, you can step back and consider if your firm is structured and resourced to deliver everything you want. That demands some tough questions about your people and operations. For example:

• Capability and efficiency: Do you have a full team of experienced, competent and productive people whose individual skills are being used? What should be done in-house and what would be more efficiently outsourced?

• Client experience: Do you have a clearly defined client experience that details every step and how you want it to be implemented? Can you identify where routines can be automated, delegated or outsourced?

• Roles and responsibilities: Is everyone in your firm clear on their responsibilities to clients, to the business and to colleagues? Are roles clearly defined? Conversely, do your reward structures, discourage a ‘jobsworth’ mentality and nurture collaboration?

• Leadership and communication: Are you providing clear leadership and direction to the business and your stakeholders? Is there an effective communication framework to share good news/progress, review and jointly learn from bad experience, hear what clients want and gather team feedback?

• Revenue and assets: Can you deliver a sustainable profit margin? A quick and simple measure is to calculate the total expenses of running your business (fixed, variable, salary and benefits) and make sure that the owners’ salary within this is realistic.

Then divide this by the total assets under advice your firm is servicing in millions. If, for example, your business expenses are £760,000 and you advise £40m of assets, every £1m of assets is costing you £19,000 a year to service. So, in revenue terms, you should be charging at least 2% recurring to make profit.

An ongoing task

Taking control of your future direction ultimately requires a clear vision, plenty of inspiration and persistence to maintain momentum.

Business owners who invest time in their own financial planning understand their business is an investment that should provide them with a worthwhile return.

Knowing what that return should be – whether it is increased revenue/capital value or a better work/life balance – and what needs to be implemented to achieve it, is a good place to start.

Andy Coleman is director of distribution at Cofunds