Practice management a preservation option
For several months now the Reserve Bank Governor, Tito Mboweni, has been warning South Africans to tighten their belts. Unable to halt rampant spending, he has been forced to raise interest rates and further increases are on the cards. Prevailing market conditions favour the financial services industry but there are definite signs out there that things are getting tougher.
Have you, as financial adviser and practice owner, heard the warning? Not to cut spending, necessarily, but to make sure that your house is in order. If the economy shrinks, so does our market and the opportunities.
Unfortunately, ours is an industry in which we frequently close the stable door after the horse has bolted. Some important questions to ask yourself as you consider the future of your practice are listed below.
Pertinent questions
* Is your current (or next years) business plan based on prevailing conditions? Does it include contingency plans in the event of a downturn in the economy?
* Is your target market likely to be adversely affected by a change in the economy? * Does your planning cater for any outcome of the fees versus commission debate?
* Are high fuel prices and rising inflation beginning to impinge on your business efficiencies? Are most client meetings held in your offices?
* Are you spending most of your time with your most valuable clients, or do you find the 80:20 rule working against you?
* Is the service you offer your clients profitable or does the cost of service exceed revenue for certain segments of your client base?
* Do you know precisely what your big expenses are each month, and have you developed cash flow forecasts catering for variable income streams over the next year? Remember that your scenarios should allow for conservative, probable and aggressive rather than good, better and best.
Proactive approach
For years, we anticipated FAIS and related legislation yet experienced a last minute frenzy of activity to become compliant. Many have yet to come to grips with the added costs and administration necessary to remain compliant.
A similar scenario threatens us today and the trick will be to be to act immediately when (and not if) things change. Being proactive is part of learning to work smarter, not harder.
Proper planning
Survival under difficult economic circumstances is dependent, more than ever, on spending time in front of your most valuable clients. That requires making the time to do so, and can only be accomplished through careful planning and the support of a smooth running practice. Proper planning today will mean that when you want to be out there and in front of clients tomorrow, you will have the time to do so.
Assess your practice to ensure that it is running as well as it should. Check that you are optimising scales of efficiency and that you can amend your strategy if necessary. If you feel that a change in plans or modus operandi is required, start moving in that direction today. There is no reason why you shouldnt run a dual business strategy as an interim measure.
Speak to a consultant, if necessary, but get your house in order so that you can be where you belong: in front of your client, delivering financial advice, when it matters most.
Esm Davies
Head: Practice Management
Celestis
