Streamline Your Advisory Business with These 4 Best Practices

Posted by Brian Lampron, AIF

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October 28, 2014 at 10:00 AM

Streamline Your Advisory BusinessCertain efficiency-promoting processes can enable you to add new clients without adding a significant amount of management time, cost, or work to your practice. Sounds great, right?

To determine the right processes to streamline your advisory business, I suggest implementing the following four best practices. All advisory firms can benefit from these methods, but they're especially vital if your practice is growing.

1) Evaluate Pricing

Many advisors settle on a 1-percent fee for everyone and everything. This could be a mistake because different prices for different account sizes may help maintain and improve profitability.

Establishing a fee schedule should be a key component of your business. By doing this, you'll help explain your fee structure to clients, provide transparency, and help maintain profitability. Before developing your fee schedule, take a moment to consider the average fees charged by your competitors, as well as the value of your time and the services you plan to include in your fee.

There is a delicate balance between charging rates that are appropriate and charging rates that are profitable. You need to charge fees that are generous enough to support your company's infrastructure but that reflect a quantifiable value to clients. For an example, take a look at this sample fee structure for financial advisors.


When evaluating your business's pricing, it may be worthwhile to consider categorizing your clients, creating a tiered service matrix, and calculating how much an hour of your time is worth.

2) Establish Account Minimums

To ensure that you continue to attract the most profitable clients, it's important to determine a minimum account level for your fee-based business. This can help you:

  • Focus on building stronger relationships with larger and more valued clients
  • Avoid losing key clients who feel they are underserved
  • Increase profits without adding additional staff
  • Ease the burden of maintaining smaller accounts
  • Raise your clients' (and prospects') perception of you as a professional

Many Commonwealth advisors typically set their fee-based minimums at $100,000, $250,000, $500,000, or even higher, especially if their business consists mostly of Preferred Portfolio Services® (PPS) Custom clients. Custom business can be time-consuming, as the advisor is responsible for all the management, research, rebalancing, and account servicing needs. So the more Custom accounts you have, the more of a time burden that management can become.

If you don't want to turn away smaller clients, consider leveraging a turnkey asset management program, which allows you to outsource product selection, asset allocation, and rebalancing. Alternatively, you can use commission-based asset allocation mutual funds for these assets. The time you spend on investment management services for smaller clients should be minimal, leaving you with enough hours in the day to address other questions and needs while remaining profitable.

3) Build Model Portfolios

By building model portfolios, you can save time and resources as you grow your fee-based practice. Why reinvent the wheel for every client who walks through the door, when you can select the predetermined model that best fits his or her financial objectives and risk tolerance? Model portfolios allow you to:

  • Be more consistent in your client interactions
  • Optimize efficiencies and systematize your processes
  • Delegate responsibilities as you grow your practice
  • Reduce the number of investments you track
  • Spend more time with clients and prospects

4) Outsource Portfolio Management

Many advisors are hesitant to outsource investment management. But think of all the tasks you perform in managing your advisory accounts. How much of your work week do you spend researching funds, determining asset allocations, tweaking portfolios, trading, and rebalancing? By outsourcing investment management, you can drastically streamline your advisory business.

With the time that you save, you can dedicate more hours to customer satisfaction, and you might find that this improves client retention. Moreover, you can offer more services, such as distribution planning, financial planning, estate planning, and more.

Despite these benefits, many financial professionals are uncomfortable with the idea of outsourcing portfolio management. They feel that clients are paying them to make investment decisions, and some find it difficult to give up control and flexibility. (Remember, if you outsource, the wrap manager now has the control.) These are valid concerns, but the time you can save and the increase in services you can offer will likely offset these challenges.

Also, the decision to outsource is not an all-or-nothing proposition. You can outsource certain clients, certain types of accounts, or even only a portion of a client's assets. It is a tough decision, but with the financial industry becoming more complex, you need to concentrate on planning and advising and get comfortable delegating as much as possible.

Have you implemented any of these best practices in your business? Have you seen any positive results? Are you experiencing any challenges? Share below!

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