Evolutionary Growth: The Firm that Evolves Together Grows Together

Evolutionary Growth

We spend a lot of time here talking about growing advisor practices. I’ve repeated (although I can’t remember where I heard it) that an advisor’s practice is like a piece of fruit, it is ether growing or dying.  Referrals, segmentation and events, etc., are a core part of the conversation. I think it is time to talk about a different kind of growth.  Based on some conversations last week – and announcements in the news – I want to talk about evolutionary growth.

It’s in the news

Now that we’ve cleared the holidays, there are stories everywhere about brick and mortar retail stores and popular chains that are not surviving in today’s environment.  In just the last few weeks, a major toy retailer announced it is liquidating after failing to meet the changing needs of consumers.

We, the consumer, are doing things differently. For example, this week, I read my “newspaper” on a tablet, paid my bills online, had groceries delivered at a convent time for us, and am currently writing this post while speeding at 500 knots, 30,000 feet in the air. I could not have dreamed any of this 15 years ago. The speed of change seems intensified over the last decade, yet many of the businesses I meet are doing the same thing they were doing when they were founded.

Case in point: last week I had a conversation with two firms, both second generation and both with a desire to grow their assets.  Each is very different in its approach to growth and ability to change. The first was eager to identify growth ideas, implement technology and solidify their niche. They were passionate about proving value to their clients and wanted to be prepared for the next 30 years. Their office is focused on change and evolution, the staff and advisors embrace the vision.

The other firm is stuck in the old way of doing things. Growth is minimal and many in the senior management team are focused on keeping things the same – the way the founder had set it up.  The firm is struggling to figure out why they’re not growing. While some in the management team are trying to push the envelope, others are comfortable responding with the age old, kiss of death “this is the way we’ve always done it” mentality.  There is a culture problem, a “me vs. them problem.”

The firm that evolves together grows together Click To Tweet

Lip service or real evolution?

It is easy to look around the business environment to see firms that embrace change and innovation. Unfortunately, it is also easy to find firms that only pay lip service to change, yet continue down the same old way of doing things path.  You can see those same habits in the financial advice business. Many firms are paying lip service to planning, yet still really focus on the investment offering.  Sure, they may have good performance but guess what?  After almost 10 years of an up market, just about EVERYBODY has good performance.  Account values are up and no one is banging down an advisor’s door looking for investment performance.  Evolutionary firms are leading with advice and proving it with facts.

Are you innovative?  Are you evolving?  Alternatively, are you going the way of the brick and mortar retail stores? Here are a few questions to get you thinking:

  1. Can you name at least two major innovations that your firm has identified and executed in the last 5 years?  I am not talking about a software purchase, unless it was accompanied by a major process or behavior change for the whole firm.
  2. When is the last time you tried something that failed? Innovation is sometimes trial and error.  Not everything will work but if you don’t have a failure, you haven’t tried anything.
  3. Do you have time set aside for conferences, meetings and industry events that push you to think outside the box?  What do you do when you attend and how have you implemented ideas when you get back? Or, do you only go to the sessions that will confirm your decision to stay the same?
  4. When is the last time you asked clients what they think you can improve?  Whether you look at focus group or an advisory board, how do you know what your clients are thinking without asking them?  Are your interests aligned? Do they appreciate what you place value on?
  5. Can you describe in detail (in today’s terms) the vision of the firm in 10+ years?  What does your vision of the future look like and how do your clients/staff fit into that future?

Of course, many of the giving-lip-service advisors could answer most of those questions and still feel good about the direction of their firm. But the proof is in the P&L. The firms that are not evolving have:

  • Little spending on client-facing technology
  • Larger amounts allocated for overhead such as back office technology, investment expenses (including salaries for non-client-facing staff)
  • Smaller than average marketing budgets
  • Limited spending on advisor and business (evolutionary) growth i.e., conferences, networking, publications, coaching and study groups.

One of my all-time favorite quotes is from Bob Veres who said, “The biggest risk to an advisor’s business isn’t robo advisors, market gyrations or some other competition, it is simply complacency.” Doing something the same way just because you have always done so can be a sure way to failure.

Think about your practice, is it innovative or complacent?  Do you want to be the big box toy retailer going out of business or the businesses that supplanted it?

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John Anderson

John Anderson

John Anderson is the creator and lead author of Practically Speaking blog and Managing Director of Practice Management Solutions for the SEI Advisor Network.

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