How to Build the ‘Perfect’ Advisory Firm

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Sports athletes strive to perfect their talent to achieve the highest levels, and there are a number of ways to define that pinnacle. Typically, it’s based on a set of difficult criteria that athletes must complete to be considered “perfect.”

For example, in baseball, that perfection is a perfect game — 27 up, 27 down — no walks, no hits, no errors, no hit batters and no fielder’s interference. In bowling, it’s 12 strikes in a row for a score of 300. In golf, it’s a hole in one. In tennis, it’s a love set.

There’s no prescription or required methods for accomplishing perfection in any of these endeavors. You just have to get there. The hole-in-one that landed right in the cup counts just the same as the wayward tee shot that hit two trees, a rock, bounced off the sand trap rake and rolled in.

If we were to extend this model of perfection in sports to the business of advice, here’s how it might manifest itself in a theoretical “perfect” advisory firm that can stand the test of time.

The Right Name

First, we need a brand and a name for this high-promise operation. This seems simple enough, however, it’s probably the most difficult and arduous challenge. The brand and name must convey the experience that we want clients, staff and the community to experience, while differentiating us in a sea of competitors.

We can’t use our last name, since there’s no real enterprise value in it for future owners. Plus, we have to stay away from the thousands of clichéd names using wealth, capital, management, asset, advisory, etc. — we won’t stand out in that crowd.

Also, we don’t want a made-up word, or an ancient Greek or Latin phrase. We would constantly have to explain what it is, what it means and what we do.

But through much research and diligence, we’ll come up with a name that’s compelling, differentiated and communicates how our brand will resonate with our target market and can resonate across its digital and social media channels.

Set a Target Market

Underlying our branding is the selection of our target market, meaning who we want to work with, who most needs our services and who’s willing to pay a premium price for them. While we are dedicated overall to helping people, we do need to have a highly profitable business so that we can fund ongoing operations and growth.

Our target market can be defined by many factors — demographics, wealth levels, occupations, financial planning needs, technical specialties and more — all of which we need to sort through to determine which niche to pursue.

It has to be a niche that helps us stand out and enables us to become specialists and experts in our target market. That way we become memorable, differentiated and referable to our specific target clients — we can’t be all things to all people.

By specializing in a niche, we drastically simplify our operational footprint, staffing levels and corresponding overhead costs. This move also allows us to establish a defined set of services for our client niche, leading to a virtuous cycle of referrals to similar people.

Technology Stack

Next, we need an operational technology stack. Of course, there are many fabulous options of unified systems, wealth platforms, turnkey asset management platforms, established RIAs and other outsourced technology providers we can rent the stack from.

Many are cloud-native, affordable and cybersecure. We can immediately white label with our chosen tech partner and go to market with it.

Not having the burden of a technology stack that we have to procure, manage, integrate, update and operate on our own, will free up countless hours of staff and advisor time to drastically increase our capacity, profitability and scale.

A Virtually Independent RIA

To truly custom build our advisory firm to our unique specifications, our entity will be organized as an independent RIA. These firms have the most flexibility in terms of business models and services offered, while also having a fiduciary standard of care, aligning our mission with our clients’ needs.

Most notably, we will establish the firm as a virtual enterprise, with no physical office spaces to staff or manage. If there’s any silver lining to the pandemic, it’s that we have learned that clients are more than comfortable meeting with professional service providers over video conferencing and collaboration tools, relieving us of the burden of having any physical, geographic location.

In fact, many staff and clients may never want to return to an office setting again. Mmanaging a remote workforce is no longer the exception; it is rapidly becoming the rule.

Removing the constraints of geography also means that as a virtual firm, we can recruit the best advisor and staff talent anywhere in the world, while pitching our services globally. This significantly increases our target market size and potential reach, while saving money on overhead and gaining access to human talent regardless of where it’s based.

Pricing Model

Unlike most of the advisory industry, we will not be based solely on an assets-under-management pricing model or have any asset minimums. We’ll offer our financial planning and investment management services on a true fee basis, enabling subscription models, hourly engagements and retainers, in addition to an AUM model for those who want to work with us that way.

Clients can choose to pay us anyway they like — via credit card, electronic transfers, other digital channels or through basis points on their AUM balance. We’ll be able to digitally onboard and facilitate these choices automatically by using the latest digital billing and payment processing technologies.

As noted by many industry experts, the AUM model prevents advisors from working with high-earning professionals who don’t yet have enough assets to manage. They do have plenty of income to pay for professional advice that they need, but they just can’t pay it through an AUM fee and thus are not prospects for most firms in the industry that require minimum asset levels.

This will be the perfect grand slam in expanding our potential target market to the 98% of investors who aren’t being served by advisors simply because they don’t already have a sizable nest egg.

Core Offering

We’ll lead our advisory firm with financial planning as our core offering, charging a premium fee for our valuable advice while bifurcating our investment management services as a separate fee, at cost.

Investment management has become so commoditized that it’s now being offered for “free” at many of the larger institutions. That is not where we’ll be able to add value, nor what we want our brand to stand for.

Marketing and Sales

On the marketing and sales front, we’ll go all in on digital marketing — publishing valuable content through social channels and search platforms to engage our target market and position ourselves as experts in our target niche. These efforts should attract significant media attention and exposure, resulting in powerful brand building and lead generation opportunities.

To connect the dots on the importance of our brand name in the market, we need to own our brand name via our website URL (or domain) and the associated handles (or usernames) on all digital and social platforms.

Ultimately, what we’ll build is an advisory firm that has the brand, operational excellence, client centricity and compelling value proposition for a defined market, as well as a powerful growth engine and global reach. These are the key components to building a sustainable enterprise that can be easily passed on to the next generation of owners as we look to move on to our next perfect game.

Timothy D. Welsh, CFP, is president, CEO and founder of Nexus Strategy, LLC, a consulting firm to the wealth management industry and can be reached at [email protected] or on Twitter @NexusStrategy.