Strong revenue and market share growth don't guarantee a financially healthy independent investment advisor practice -- but being focused and deliberate about the types of clients served and the services offered can drive profitable growth, according to a study of the top firms by Schwab Institutional and Moss Adams.
Being focused and deliberate about the types of clients served and services offered, institutionalizing business processes, and establishing a strategy for serving clients are the keys to growing profitably, according to the Schwab-sponsored report, "Best Management Practices of Independent Advisory Firms: The Path to Profitable Growth."
According to the report, the most successful independent advisor firms:
· Pursue ideal opportunities only. Successful advisors institute disciplined methods for identifying and pursuing only select types of new business that fit with their overall strategy and that contribute positively to the bottom line.
· Structure their firm around their strategy. The best-managed firms employ a wide range of methods for consistently aligning their decisions and practices with their overarching strategies, resulting in stronger profit growth.
· Institutionalize their business. Delivering a consistent experience both internally and externally can be crucial to maximizing efficiencies, managing costs and providing a superior level of service to clients -- all of which help generate greater profitability.
· Delegate to maximize effectiveness. Successful advisors focus on those areas of businesses where they add the most value, instead of getting bogged down in non-core concerns. They delegate and allowing specialists (both internal and external) to handle appropriate responsibilities, reduce expenses, and allow owners and senior partners to concentrate on boosting profits.
The report identified 28 of the best-managed firms -- based on quantifiable financial and non-financial standards -- from more than 500 independent fee-based advisor firms that participated in the 2004 FPA Financial Performance Study of Financial Advisory Practices. The best-managed firms' profits per client averaged $1,596 -- 10 times that of the typical practice ($167).
To see the list of best-managed firms, visit
