We want to help firms build great businesses and sustain them. Being future proof is a critical part of that. Over the last months we focused a lot of our blogs on the topics of people and processes but to build future proof businesses firms need to do a lot more. We see the following areas as critical for success:
- Being agileAgility is the organisation’s ability to respond quickly and flexibly to change, which could be driven by various factors, such as changes to client demands, markets, regulations, or other unforeseen events like pandemics. To remain at a competitive advantage adaptation to such changes needs to be timely, efficient, and cost-effective but without compromising quality of outcomes.
- Strategy focusedIf you focus your vision on the tip of your nose, you will miss everything that is ahead of you. Focusing only on your ‘business as usual’, isn’t enough to run a successful business- it’s like focusing on the tip of your nose and thinking that you are looking ahead. You need a clear strategy in place with well defined milestones and a process for monitoring and measuring progress to keep you focused. Here is a great article from Brett Davidson on the topic of Make the main thing the main thing.
- Great peoplePeople are the foundation of your business, so who you choose to work with is critical for ensuring success! In Ray Kroc’s words “you are only as good as the people you hire”. Is your team made up of A players across all roles/departments? If you haven’t read our blog about the 7 things you need to do to create a top team, we suggest heading to it now.
- Process orientedGreat processes result in happy clients, happy teams and healthy margins, so instead of resisting them, try to embrace them and enjoy the benefits. Whether you know it or not, you are following processes all the time. Even making a cup of coffee is a process. In this article, written for the Personal Finance Society, we explain the power of process. We go through what processes are, how they provide clarity and what questions to consider when you’re creating a framework for success. Having robust processes in place is the only way of ensuring that you can create consistency, repeatability, and scalability.
- Technology driven If you think that you can run a future proof business without embracing technology, we suggest a re-think. While most systems have numerous limitations, it’s important that you make the most of available technology to eliminate unnecessary manual tasks, which can be very time consuming. This isn’t about creating a ‘robo’ based business model but instead using technology to create operational efficiencies. As you may remember from one of our blogs a 2 minute task undertaken 10 times per day for 228 days in a year takes 76 hours, which equates to 10 business days per year. Now multiply this by 10 people and you could save yourself a staggering 100 business days per year by simply automating some of the lower ‘value’ yet frequently undertaken tasks.Independent Financial Solutions is an example of a technology driven business. If you ever get a chance to see David Stamp (the Founder of IFS and Centology) speak, I suggest finding out more about how they use technology to deliver their service proposition. They are what I’d describe in innovation terms as ‘disruptors’, which is great to see.
- Financially soundHere are a few questions to ask yourself to measure your firm’s financial soundness. Please assign yourself points between 1 to 10 for each statement (1 being ‘completely unfit’ and 10 being ‘super fit’):
- Our pricing is suited to all market conditions
- We work to at least 25% net profit margin and continue to improve on it
- We have a good handle on the firm’s financial position
- We understand the cost of delivery of our service propositions
- We have up-to-date cashflow forecasts reflecting the business plan and illustrating various scenarios e.g. another 25% decrease in ongoing revenue or planned and unplanned changes to the team
- We have a good handle on the firm’s budget, expenses and areas that savings could be made on, if necessary
- We have accurate, relevant management information (MI) that we refer to at least monthly
- We hold sufficient levels of cash reserves to weather unforeseen circumstances (this isn’t intended in relation to capital adequacy levels set by the FCA which are a ‘must’)
- Our fee and income reconciliations are automated and easy to report on
- We have documented accounting and bookkeeping policies and procedures
- Our accounting system, including payroll is linked to our HR system
What pricing structure do you use at your firm?
Fixed fees versus a percentage of funds under advice are often debated but, there are more pricing models to consider than just those! They include:
⭐️ Retainer + Funds Under Advice (FUA)
⭐️ Subscription
⭐️ Menu of services & bolt-ons
In our view, there is no wrong or right here, especially if you have a strong conviction for a particular way of working with the client’s best interest in mind. Here is a great article on the topic The Future of Fees. Each model has strengths and limitations but very few firms assess their pricing structure in relation to robustness. It’s good to questions if your pricing structure is fit for today, tomorrow, and for all market conditions.
Surprisingly, even fewer firms understand the cost of delivering their proposition(s).
In my experience, a lot of firms don’t know this key information. That’s why, in the MPC we have a comprehensive calculator for our members to work it out! It takes into account:
✅ Fixed Costs
✅ Time taken to deliver each service component
✅ Tested hourly rates (for profitability) for each revenue generating individual in your firm (not just Advisers)
Only once you know the cost of your service delivery, you can work out whether your pricing is profitable – or not, as the case may be.
How many service propositions do you offer?
Of course, in order to work out the cost of delivery, you first need to know exactly what it is that you offer clients. When asked to assist clients and MPC members with process mapping, I always start by asking a) how many service propositions do they have, and b) are they defined?
The answer is typically one proposition, called ‘Comprehensive Financial Planning’, however more often than not, this service and its components are adapted for different clients across different demographics. This means that operationally there is more than one proposition, but the variations often aren’t defined.
It’s critical that firms understand and define the individual components of their service propositions, if this isn’t done, it can be chaos and makes it impossible to understand the cost of the delivery of your service.
Top tip! Before documenting your client related processes, such as onboarding, it’s critical that you explicitly define your service propositions. This is because processes are merely an infrastructure for delivering your proposition(s). If there is ambiguity in these areas it causes a lot of issues for creating, implementing and delivering processes, which can lead to frustration and poor client outcomes.
So, is your firm financially sound and future proof?
Reflecting on the ideas presented here what do you need to do to make your firm more financially sound and future proof? It always pays ‘to look before you leap’ into the future.
If you are a member of our Master Practitioners Club, here are some of the relevant resources you can find in our library:
Videos
- Is your firm future proof? With Dominika Sieradzka
- Service propositions & pricing from an ops perspective with Dominika Sieradzka
- Operations at IFS: Behind The Scenes
- Are you making the most out of your Microsoft Office 365 licence? With Jack Wetson-Catt
- How to ensure successful selection of a Back Office System by Sarah Challenor
- How to manage my tasks in Intelliflo Office efficiently by Informed Training
- What’s the latest in Technology? with Jigsaw Tree
- moneyinfo Demo with Sim Sangha
- Introduction to macros with Jenny Melvin
- Best Practice Advice Flow in IO: 2 hours training session with JigsawTree
- Document Designer Tips with Joanne Morgan
- Introduction to Business Finance & Forecasting with Amanda Burns
- Business Finance 1: The Profitability Ratios by FP Advance
- Business Finance 2: The Productivity Ratios by FP Advance
- Business Finance 3: The Client Selection Ratios by FP Advance
- Business Finance 4: The Quarterly MI Spreadsheet by FP Advance
Templates
- Business Fitness Questionnaire
- Cost of Ongoing Servicing Calculator
- Back Office Scorecard by Adviser Outsourcing
- Back Office Reference Questions to Ask by Adviser Outsourcing
- MI Report Details & Exported Fields in IO by Adviser Outsourcing
- Worksheet 1: Calculating your Key Ratios by FP Advance
- Work Sheet 2: The Quarterly MI Spreadsheet by FP Advance
- Quarterly MI Analysis Workbook by FP Advance
If you are not a member why not consider joining us now 👉 htps://rie.solutions/services/master-practitioners-club/.