As a financial advisor, the idea of building a business plan can feel a bit like getting a physical. Ninety percent of the time, it’s not on your mind. Every six months or so, the topic comes up and you know that you should take care of it, but you also know that it’s going to be uncomfortable. And just like avoiding your annual physical or other health appointments, not creating a business plan can really hurt further down the road.
Fortunately, this is where the similarities end. A lot of the anxiety financial advisors have over building a business plan is entirely unfounded. If they invest their time into building a plan, they could see a significant ROI; research shows that businesses that plan grow 30 percent faster than those that do not. Despite these results, a study by the Financial Planners Association showed that only 28 percent of advisors actually have a business plan.
The first thing you need to do is ditch what you think you know about making a business plan.
In this article, we’ll explore some of the common myths surrounding financial advisor business plans. We'll also highlight some signs to watch out for that could indicate your practice is in need of a business plan. Lastly, we'll discuss what elements you need to incorporate into your new plan for the future of your financial advisory practice.
This myth is a common one because it is, in certain circumstances, true. For example, if you were just starting your financial advisory practice and wanted to secure a loan from the Small Business Administration, you would want to build a highly comprehensive business plan that covers everything from a market analysis to your financial projections.
Fortunately, most financial advisors’ business plans will be for internal use only and serve a narrower scope of purpose. Realistically, building a business plan doesn’t even have to take a full day.
Plenty of financial advisors have settled into a lifestyle practice, plan on retiring soon, or have any number of reasons why they may not want to grow their business. In fact, our data suggests that a full third of advisors aren't actively growing—and that they prefer it that way.
But there’s no law that says a business plan needs to have growth as its goal. Ultimately, the purpose of your business plan is up to you. Succession planning is an excellent reason to craft a business plan, as is wanting to maintain the same level of assets under management (AUM) or client load as you have now. If you want to grow, that’s great; if not, that’s fine too.
Having goals is important, but a business plan isn’t just about defining goals. It’s about making a plan to obtain those goals, a definite set of objectives and expectations you can hold yourself to, criteria for measuring success, and defining those goals in detail.
Even if building a business plan was just about defining goals, it would still be a worthwhile exercise. External pressures and the difficult reality of making changes make it easy to allow goals to slip or morph into something that feels more attainable. Six months down the line, and you might discover that the goal you’re currently pursuing bears no resemblance to the one you set out to achieve. Writing your goal down formally ensures that you have something to refer back to when the going gets tough.
Now that you’re familiar with the common misconceptions surrounding a business plan, the next step is to determine whether you need one. At AssetMark, we believe that any financial advisor—no matter where they are on their journey or what stage they’re at in their career—can benefit from a business plan. Furthermore, it’s better to have a plan and not use it than to need one and not have it.
That being said, there are some common signs of distress in a practice that a financial advisor business plan can help with. Specifically:
Knowing when you need a business plan isn’t much good if you don’t know how to put one together. For most financial advisors, there are 5 key elements to include in their business plan.
Where are you trying to go? If you don’t have some desired future for your practice, then it doesn’t matter what you do and you don’t need a business plan. But, if you want to bring in more clients, grow AUM, maintain your current caseload, or transition your practice off to a promising junior advisor, then defining that vision will give you the Point B to your Point A.
Take your vision and break it down into achievable goals. This could be, for example, increasing your AUM by 15% next year or onboarding 3 new high-net-worth clients. As a best practice, follow the SMART framework—that is, define goals that are specific, measurable, attainable, relevant, and time-bound.
In order to achieve these goals, you’ll need to establish a plan of action. Assign responsibilities to different members of your practice, set priorities, identify requirements, and document all of this so that whenever the wires get crossed, you’ll know who is supposed to get what done and when.
You need to schedule out your plan of action, of course. But, you also need to schedule out regular reviews of and management sessions for your business plan. As you progress towards your vision, it's important to evaluate whether that vision still seems realistic or desirable, whether you need to tweak any metrics, reassign duties, and so on.
Arguably the most important element of any financial advisor business plan is the inclusion of metrics. Define what key performance indicators (KPIs) you’ll track on the way to achieving your vision and goals. Evaluate your progress against these KPIs and, using those measurements, determine whether you need to take corrective action or stay the course.
A financial advisor business plan doesn’t have to take weeks to craft together, nor is it only useful for advisors interested in growing their practice. The important thing to takeaway is that a business plan should be tailored around your goals. Whatever form it takes should be in service of those goals.
If that prospect seems a bit overwhelming, reach out to an AssetMark business consultant to walk you through the process. Any given financial advisor might make a handful of business plans over the course of their career, but our business consultants have worked with thousands of advisors on their business plans, so we’ve learned a few things about the practices that work best.
Take, for example, financial advisor Kit Tiell's experience. "At the onset of working with AssetMark, my goal was to spend 80 percent of my time in front of clients," said Tiell. In addition to outsourcing administrative tasks to AssetMark, Tiell also took advantage of our business consulting services:
I have also taken advantage of their practice management resources and business coaching to streamline office workflow, create business goals, and develop employee career ladders (among other things). My continued engagement with AssetMark’s elite practice management team has allowed me to continue building the practice that evolves with the current business environment.
If you're interested in building a business plan that—like Tiell's—sets a foundation for your practice, get in touch with us today to get started on your business plan, no matter what your goals are.
AssetMark is a leading provider of extensive wealth management and technology solutions that help financial advisors meet the ever-changing needs of their clients and businesses.
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AssetMark, Inc. ("AssetMark") is a leading provider of extensive wealth management and technology solutions that help financial advisors meet the ever-changing needs of their clients and businesses. The information on this website is for informational purposes only and is intended as an overview of the services offered to financial advisors, not a solicitation for investment. Information has been drawn from sources believed to be reliable, but its accuracy is not guaranteed and is subject to change.
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