Over the years, you've likely heard many different reasons as to why some advice practices are more profitable than others – perhaps even right here at NMP.
Explanations for what separates the top performers from the rest range from segmentation – for example, sorting clients into profitability categories and tailoring services accordingly – to how firms deploy communications strategies. Should you be looking into crypto? Building up your referral networks? Dancing out basic financial concepts on TikTok?
While all of these ideas – well, maybe not the dancing – can factor into the success of your business, it's worth examining the fundamental characteristics that distinguish the most profitable practices from the less-profitable ones. And as Iress's inaugural Advice Efficiency Survey report reveals, one of the main differences involves time spent on documentation versus time spent in front of clients.
The report, developed in partnership with Business Health, examined 113 Australian advice practices and found that the top 10% most profitable firms took around 5.9 hours to produce a basic SOA as compared to the participant average of 8.5 hours. Similarly, a complex SOA took approximately 12.1 hours for the top 10%, while the participant average was 15 hours.
Perhaps unsurprisingly, the time saved on document production in the top 10% was invested in getting in front of clients. Where the average practice conducted 5.8 client meetings per week, the top-performing businesses were able to hold seven client meetings over the same period.
So: what were the most profitable practices doing differently that allowed them to cut down on SOA production time and see more clients each week?
New player advantage
As it turns out, technology played a significant role. But as Business Health principal Terry Bell has previously explained, tech adoption can be difficult in established advice businesses – which is perhaps why the report suggests a direct correlation between the "age" of a practice and time spent on producing documentation. Newly-established advice businesses, the report shows, spend an average of seven hours producing a basic SOA, while those that have been in operation for 10 years or more took 8.7 hours to complete the same task.
Does this mean older businesses are out of luck? Not exactly – in fact, what separates the top-performing advice businesses in the research (newly-established or otherwise) is not the technology in and of itself, but how they use it.
Too many cooks
The report explains: "The limitations of the technology platforms, the complexity of the client circumstances and the unique processes and procedures of each individual adviser often result in the use of multiple applications to generate advice documents."
In other words: while the use of a particular technology (or function within it) may increase the efficiency of a particular task for a particular adviser, if there's no broader coordination across the practice the use of this tech could actually reduce overall business efficiency.
Put even more simply: "more tech" isn't always better and too many cooks spoil the broth.
Reflecting this, the report shows clear efficiency gains for advice businesses using a single application to produce documentation versus multiple applications. A basic new SOA, for example, took 6.1 hours to produce in one application and 8.7 hours when the process was split across two or more applications.
What's the takeout, then, for advice businesses looking to increase efficiency through the use of technology – and, ideally, boost profits at the same time? While there's a lot more information in the report itself, the basic lesson is this: any adoption of tech in advice should be done with simplicity in mind and consideration for how it harmonises with all business functions. There's no point adding another layer to the "tech stack" if it's just going to create more work for everyone involved in the long run.
If you'd like to hear more about the efficient use of technology in advice and how it can be applied to your business, you can get a copy of the report here.
The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice Education Pty Ltd or its related entities. All content is intended for a professional financial adviser audience only and does not constitute financial advice. To view our full terms and conditions, click here
23 November, 2021
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