Many top advisors have grown their assets under management (AUM) to unbelievable levels by using their relationships, industry knowledge, and charismatic personalities to build a successful practice. But some advisors are hindered by that singular focus of growing their AUM. While it’s beneficial to increase revenue and achieve a certain income level, it’s also imperative to design a clear long-term vision, strategize to maximize enterprise value, or develop a perpetuation plan that ensures the viability of your business for generations to come.
As a financial advisory business owner, you’ve dedicated your career and made sacrifices for your business. It’s important to keep that momentum as you near the finish line, whether that’s an external sale or internal perpetuation. It’s never too early to start thinking about the future of your business. By doing so, you’ll help to continue to improve the value of your business and, ultimately, what you’ll take to the bank.
Here’s five ways you can start building a more valuable financial advisory business:
1. Focus on organic growth
Financial advisors who improve their marketing and business development strategy more frequently achieve growth-based goals. The motivation for growth may be unique to each firm, but industry dynamics including aging ownership, the expansion of services, and the desire to find the best talent facilitate the need for many firms to grow faster than their peers. Growth creates opportunity for you to re-invest in the business, hire and develop your people, and create an enterprise that becomes more attractive to potential investors and buyers. Continue to drive growth of net new assets to your firm above and beyond assets under management (AUM) growth from the markets.
2. Think like a buyer
Over the last few years merger and acquisition (M&A) activity has been strong for financial advisors. Whether you are considering a transaction in the near future or many years down the road, it’s important for you to put yourself in the buyer’s shoes and enhance the elements that are attractive to buyers. There are many factors that can enhance the overall enterprise value of your firm including strong organic growth, high recurring revenue, having a strong team with next generation talent or appealing services and technology. As a business owner, thinking strategically about your firm ultimately creates better outcomes for your business, employees, and clients.
3. Create a strategy to stand out
Over the years, the industry has moved from a fee-for-return model focused primarily on investment management to a fee-for-time model where advisors become the trusted resource to entire financial lives. In this environment, it becomes more difficult for advisors to differentiate themselves and it’s important for you to be able to understand your clients and clearly communicate how you stand out. Many times, this may be your brand, unique expertise, expanded service offering or better alignment with clients’ values. You should be able to clearly communicate why clients typically hire you, why you are different than your peers, and what are the key challenges you can solve for clients.
4. Be intentional about succession
When you are great at selling and serving it can be a challenge to also have enough time to run your business. You become focused on the day to day of growth and retention and may start to lose sight of a vision for the future. A strong vision and company mission compels your team to align and meet goals. Human capital and next generation consistency are vital to ensure competitive valuations and interest from the right strategic partners. You must be intentional about developing and communicating a strategy that both incentivizes your team to serve clients with excellence and stay with your organization for years to come.
5. Expand services to be more attractive
To remain competitive, many advisors have expanded the scope of their service offering to demonstrate value to clients. This includes adding services such as tax planning, estate planning, cash management, among others. As you consider expanding your services it’s important to understand your client demographics. Segment your business so that you can create a service offering that meets their needs and partner with outside service providers if your firm doesn’t want to build in-house. In doing this, your clients not only receive additional value, but this can help your business become more attractive to outside acquirers looking to add complementary services with a team that already understands how to implement successfully.
It can be difficult to focus on the business when you are in the business. You’ve poured your life into building a successful enterprise and it’s very personal. Incorporate these ideas to help you build a more valuable business that allows you to achieve your financial goals and enables your clients to be served with excellence for generations to come.
Thought Leadership Events
At a MarshBerry event, the outcomes are just as important as the experience. Attendees leave with the most advanced data, cutting-edge insights, new relationships, and key takeaways that will help them innovate their businesses. Join other insurance agencies and brokerage executives, along with MarshBerry advisors, at a MarshBerry event to explore strategies that will help you lead your firm to growth and profitability and learn how to maximize shareholder value.
