Getting the best from your advice practice for 2023
Cost control, efficient business processes, smart data management and a strong client focus are four non-negotiable features of a sustainable advice practice, and financial and risk advisers who want to make 2023 a standout year will do well to cover each of these points in their operational planning.
“It is not profitable to try and be everything to everyone,” says Ricardo Teixeira, CFP® and Chief Operating Officer at Wealth Advisers. “By choosing who you want to work with, deciding what you will do for them and clearly defining your service offering you ensure that you work smartly, efficiently, and of course, profitably”. He advocates for being clear about what you do and for who you do it, and, most importantly, to do it well!
How to survive economic turmoil
As we head into 2023, small and medium-sized enterprises (SMEs) and small, medium and micro-sized enterprises (SMMEs) in South Africa’s financial services sector face a challenging operating environment. High inflation and interest rates, the ongoing socioeconomic impact of the COVID-19 pandemic and a wide range of domestic issues will make for tough going, even for well-established financial advisory practices. As such, FAnews turned to two respected financial planners for some ‘tips for 2023’. Not surprisingly, both mentioned the importance of retaining clients.
“Client retention is key to growing a financial advice business,” says Teixeira. “As much as winning new client relationships is important for business growth, retaining existing clients that are a fit for your firm is a critical factor for success”. There are a few important questions that financial and risk advisers can use to carry out an introspective exercise and ensure that their client focus is on point. Example: are you listening to your clients? It is not uncommon for advice practices to fall into the trap of being too product focused; product and services should be based on clients’ needs rather than what the adviser believes is the next ‘big’ thing.
Another important consideration is whether you are engaged and connected with your clients? This may seem like a silly question; but you will be amazed how easy it is for a financial adviser or advice practice to lose that connection, especially as they scale. Two years of pandemic have also shaken relationships to the core and forever changed interactions between advisers and their clients. Finally, you should consider whether you really understand your clients’ concerns insofar their financial security. It is extremely dangerous to draw conclusions about clients’ concerns from personal experience, and just as risky to assume all clients’ concerns are similar.
Three suggestions for 2023 prosperity
Kobus Kleyn, CFP® and director at Kainos Wealth, offers three suggestions to assist small businesses in the financial services sector survive the current economic turmoil. First and foremost, he suggests a strong focus on brand building to ensure that you stand out from your competitors in an increasingly crowded market. “Building a solid brand helps to set your practice and advisers apart from the competition,” Kleyn says. He recommends investing in marketing and public relations (PR) efforts to build a robust online presence and, wherever possible, to establish your advisers and / or practice as thought leaders in your advice niche. Producing authoritative and insightful content is a great way to build brand credibility and increase your brand’s visibility.
The second suggestion is to embrace technology and the digital world to help streamline your operations, improve efficiency and reach a broader client base. “Investing in digital tools, such as automation software, can help you manage your practice more effectively,” Kleyn says. “You should leverage virtual platforms and technology such as MS Teams, Zoom and other video conferencing tools to help build a deeper, more meaningful relationship with your clients, cost effectively”. Remote working, enabled by various technologies, also allows employees to work more efficiently, regardless of location, reducing the need for expensive brick-and-mortar office space. This can be especially beneficial for SMEs and SMMEs that have limited resources.
Associations still play a valuable role
The third suggestion is that networking and collaboration go a long way to building relationships with other financial service providers (FSPs) and affiliates. “These FSPs / affiliates can help you to access new opportunities and better understand the market and profession; joining groups associated with the profession and attending networking events can also help you to connect with other professionals who can offer valuable advice and support,” Kleyn concludes. Professional financial planners and risk advisers have long benefitted from their association with the likes of the Financial Planning Institute of South Africa (FPI) and Financial Intermediaries Association of Southern Africa (FIA), to name but two associations.
Teixeira made a few comments around cost and data management and efficient business processes, which are worth considering. Starting with cost management, he says that “the cost of operating a financial advisory firm is escalating and aligned to the onerous compliance environment that you operate in; measure your gross profit, understand your overheads, both fixed and variable, and spend money in the areas that will improve your efficiency,” he says. This is valuable advice given the looming compliance costs associated with the Omni Conduct of Business Reports (Omni-CBR); licensing under the soon-to-be-enacted Conduct of Financial Institutions (COFI) Bill; and the costs associated with the draft Joint Standard: Cybersecurity and Cyber Resilience Requirements for Financial Institutions, 2023. FAnews reckons that the last-mentioned could cost mid-sized FSPs up to ZAR1.5 million per annum to comply with!
Data can make or break your practice
Excellence in data management will prove non-negotiable for future legislative compliance too. According to Teixeira, the pending enactment of COFI will result in significant changes to the operating environment that financial advice firms practise in. “The reporting and compliance obligations are going to require access to reliable data, and you should get a head start by introducing core business systems that will allow you to draw on data from all aspects of your client and advisory processes,” he says.
Ensuring that your practice has efficient business processes begins with documenting and developing specific processes for the services you provide your clients; having a checklist of what needs to be done, by who and when, is also extremely valuable to achieve efficiency within your practice. “Having documented processes will avoid staff tripping up on each other’s actions, or worse yet, dropping the ball because they thought someone else had it under control,” concludes Teixeira.
Writer’s thoughts:
The New Year is an opportune time to reflect on your tried and tested business processes and ensure that your financial or risk advice practice is running optimally. Do you agree with the points raised in today’s newsletter? And what specific steps have you taken in your practice to get the most out of 2023? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected].
