You don ’ t have to be a slave to efficiency to be very profitable ... just put in more effort and maintain better pricing , then justify it . Better pricing requires better quality and the ability to communicate that quality to your clients and show them the difference it makes .
• Think about how some advisors complain about their smaller client accounts . Younger advisors are particularly prone to this . Yet what may be a small client on paper may be someone who trusted the firm when it was also quite small . What goes around tends to come back to hatch … or something like that .
These might seem like small things , but small things gradually lead to giant cultural shifts ( I ’ m paraphrasing Karl Marx ). That would be tragic for advisory firms , because their culture is their only lasting competitive edge .
None of this is to suggest that you should run an unprofitable business . Quite the opposite . The independent advisory industry has been very profitable precisely because it ’ s focused historically on quality rather than quantity . The intense focus on relationships has won the advisory profession the trust of the clients and the right to charge enough to be profitable .
In a time when your CPA can barely remember your name , when your doctors run through appointments because they have seven per hour , when your bookkeepers are trying to automate their entire job and when your bank ’ s customer service department is 20 time zones away , financial advisors have made themselves accessible , available and willing to give their clients undivided attention . That ’ s why clients have largely been willing to pay ongoing fees without haggling over every decimal . No one is paying you 95 basis points for a message that says “ Dear client , please call our 1-800 number and if you are Silver level and above you can download your report from our portal .”
And by the way , some of those other professions I mentioned are now regretting their past efficiency decisions . Doctors are opening concierge practices ( another way of saying : “ You actually get to meet a real doctor !”) Lawyers are charging fixed fees and retainers . Banks are launching services that cater to “ private client ” experiences .
You don ’ t have to be a slave to efficiency to be very profitable . You just put in more effort and maintain better pricing , then justify it . Better pricing requires better quality and , what ’ s more , the ability to communicate that quality to your clients and show them the difference it makes .
Obviously , no one wants to go to the cheapest heart surgeon in town or take their spouse to the cheapest restaurant for their wedding anniversary ( or save money on a burger if it ’ s Valentine ’ s Day ). When the outcome means something , the clients choose quality over price . And it ’ s the job of a ( good ) advisor to communicate what that quality is and why the work is important and why differences in quality at this level mean so much .
When advisors focus instead on efficiency they tend to start engaging in price competition , a battle where few survivors emerge . There ’ s always someone in the crowd who likes this evolutionary process and sees it as somehow desirable . I ’ ll re- mind them that evolution only cares about genetic ( not individual ) survival . Chickens are very successful survivors — we breed billions of them ( very efficiently ) for dinner . They have succeeded way better than dolphins from an evolutionary perspective . But you don ’ t want to be a chicken . ( Choose your adventure carefully .)
Also , if profitability is your aim , is it about efficiency or greed ? If you press the grapes a bit , you get juice . With some fermentation you get wine . Press the grapes a bit more with a machine and you get more juice and a bit more wine . Press the grapes too much and you get bad wine that can only sell at the bottom shelf of the grocery store . The trick is to know how much to press . There ’ s place for improvement in every business . We should automate many
24 | FINANCIAL ADVISOR MAGAZINE | MARCH 2024 WWW . FA-MAG . COM