Is your IFA practice sustainable?

Jeanette Marais, director of distribution and client service at Allan Gray.

As a financial adviser, it’s easy to get caught up in the day-to-day running of your practice, but it’s vital to occasionally take stock and make sure that your business is sustainable, especially in the wake of increasing competition and a more pressurised regulatory environment.

“Treat your business as a client, review its health regularly and make enhancements as required. These efforts will help to get your business on a path of steady long-term growth and sustainability,” says Jeanette Marais, director of distribution and client service at Allan Gray.

The recent Future Ready IV Report, which assessed the health of the advice industry in Australia, found that a high number of practices are vulnerable to future crises.

“The learnings from the report are useful to local independent financial advisers (IFAs), who need to make sure their practices can withstand future demands, including the pressures of a constantly changing regulatory environment,” says Marais.

For example, the pending Retail Distribution Review (RDR) will see stricter regulation coming into play, specifically when it comes to commission and advice. She says that it is vital that you assess how your practice will weather these changes in order to stay ahead of the curve.

Below Marais gives six tips to ensuring your practice’s long-term financial future:

1. Devise a succession plan

“One of the biggest issues many successful advisory firms face is key man dependency. Have you considered what will happen to your practice if you die or become permanently disabled? It is critical to get a succession plan in place,” says Marais.

She says that training and developing staff members is essential, as a practice that encourages employees to grow fosters loyalty and commitment.

2. Invest in yourself

Your training and development is as important as skills transfer is for staff.

“Practice management programmes, such as the one offered by Allan Gray Adviser Services and financial services consultancy Fundhouse, help you gain valuable insight to grow and develop your practice, which is vital to stay abreast of best practice and to help you to increase profitability,” says Marais.

3. Document your business plan and value proposition

Most IFAs have a plan for their business – but that plan is in their heads. It is important to put your plan down on paper and to share your vision with your staff. Outline your value proposition if you have not already done so.

“A value proposition is a crucial piece of business strategy, which gives existing and potential clients a sense of your expertise and sets you apart from your competitors. Documenting your business plan and value proposition will not only help with key man dependency, it will also create focus and discipline across your business,” says Marais.

4. Use technology effectively

“Use technology to your advantage in your financial planning and investment management process and in your client relationship management. Investing in technology will save you time in the long run and free you up to spend more time servicing your clients and growing your business.”

5. Recruit the next generation of clients

People close to retirement naturally worry more about their finances than those starting out. While this segment of clients presents great opportunities, there are inherent risks in having an ageing book.

“A segmentation exercise may reveal that you could stand to benefit from an emerging market of younger clients.”

6. Improve your marketing efforts

The Future Ready Report revealed that 20% of Australian advisory practices do not have a website, less than half have a presence on social media and regular communication with clients is generally sporadic. It is quite likely that local figures are similarly weak.

“Recruiting new clients takes effort; retaining clients takes effort too. It’s a good idea to make your practice more visible with a website, increase your communication with clients through a newsletter and, at the very least, to make your annual client reviews count,” concludes Marais.