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A win-win strategy for a sustainable practice – Part 2

14 February 2021 Myra Knoesen

Daniel Russell, Managing Director at Verbatim Asset Management, recently shared some interesting words of wisdom for advisers. He believes business owners should ask themselves three fundamental questions. In part one, we looked at the first question, ‘what business am I in?’ 

Looking at a bigger picture

The next question Russell deems important is to ask yourself “why you are in the business?” He mentioned that some people build a career around their hobby, but you often do not find many people whose hobby is dealing with other people's finances. 

Firstly, there is the issue of finding clients and gaining trust from clients, then there is the issue of investing the clients’ money in sustainable and profitable vehicles thus, assuming this a hobby most people find unattractive.

Therefore, Russell emphasises that you need to ask yourself what you are doing this for. “Is it to pay the bills? Is it to grow an empire, or to take on the challenge of seeing what you can achieve?” He said.

He further stated that understanding the motivation for running an advisory business is key, because then you can focus on the third question which is “what do you want to achieve with this business?”

Russell asked, “Do you want to grow, expand and bring in more people? Do you want to sell up and sail off, literally on your new boat, after a few years? You cannot build a focused business strategy unless you really know what you want to achieve.” 

A long-term goal

“Write down the targets. It could be a date for retirement, an ongoing income you want to achieve or a capital lump sum you wish to receive,” he stated. 

Of course, Russell said that you then need to break down the plan of how you are going to achieve these goals. “Regardless of whether you want to acquire other firms, sell up or grow organically, there is one thing in common across all these goals - none of them will be achieved without a plan,” he said. 

All of these potential strategies require a few key building blocks in order to succeed and Russell said they are:

  • A clear, unambiguous client proposition; we charge these fees for this service and we can articulate that very succinctly.
  • A focus on the consumer, not on financial services; there is no research to suggest that clients care which platform, funds, or product you use. They care about the clarity of their plans; how credible it all appears and how consistently you will deliver.
  • A clear, robust supply chain; you need to be both compliant and profitable. This starts by having a supply chain of solutions that match your clients' needs, especially their approach to risk, and you should be able to change these suppliers overnight without it affecting the service you offer your client. They should be buying you, not the funds or platforms.
  • Get the IT sorted; a mismatch of systems and spreadsheets does not help with either expansion or sale. A streamlined and efficient flow of information from front to back office does.

Sealing the deal

With these things in place, Russell noted you are in position to generate sticky client fees; fees that are paid because clients value the service, regardless of who is delivering it.

“So, it is worth taking time out from the noise, from the day to day grind and to step back and work out the method you will use among all this madness to achieve what you want to achieve,” concluded Russell.

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