Positioning Your Firm To Profit In Lean Times Ext raordinary - PowerPoint PPT Presentation

Positioning Your Firm To Profit In Lean Times Ext raordinary Insight s From Mark Tibergien

Advisors are facing an environment characterized by unprecedented money in motion. What does this mean for advisors in terms of business opportunity and threat?

Overcoming Obstacles Operational Environment Operational S ymptoms of S train S olutions Hazards Risks � Dedicated � Experience gap � S � Growing client loads ervice errors management � Low esteem of � Rising expenses � Wider span of � Clear roles and control operations staff � Compliance career paths � Training deficiencies � Underutilization of violations � Workflow definition technology � Failing client � Multiple office � Operations equal in � Management void satisfaction locations stature to advice � Talent shortage � Workflow kinks � Turnover � Targeted training � Outmoded pricing � Profit drain � Compliance burden � Meaningful � Culture dysfunction � Declining benchmarking productivity � Right people in � Inefficiency right j obs S ource: Moss Adams LLP, 2008 Financial Performance S t udy of Advisory Firms , S ponsored by Genworth Financial Wealth Management

Percentage of Firms with Individual or Firm Goals Tied to Incentive, 2005– 2007 54% 47% 45% 41% 2005 2007 Individual Firm S ource: Moss Adams LLP, 2008 Financial Performance S t udy of Advisory Firms , S ponsored by Genworth Financial Wealth Management

How does an advisory business grappling with lower revenues find the resources to capitalize on the opportunities created by high-net-worth individuals searching for new advisors?

The Capacity Challenge S erve Create S erve More Fewer Capacity Clients Clients Build Acquire Refine Change Teams Practices Focus Experience S ource: Moss Adams LLP, Mission Possible II: The Link Bet ween Operat ional Efficiency and Human Capit al, Pershing Advisor S olutions 2009

Where Advisory Firm Owners S pend Their Time Client S ervice 37% Portfolio Management 18% Other 4% Business Management 14% Operations 10% Business Development 10% S ource: Moss Adams LLP, Mission Possible II: The Link Bet ween Operat ional Efficiency and Human Capit al, Pershing Advisor S olutions 2009

One obvious answer to the margin squeeze problem is improved operating efficiencies. But implementing cost savings programs are often easier said than done. What are some of the leading firms doing?

Understanding What the Financial S tatements Tell You Direct Expense Revenue Overhead Expenses Gross Profit Operat ing Profit Source: Moss Adams LLP, Mission Possible II: The Link Bet ween Operat ional Efficiency and Human Capit al, Pershing Advisor Solut ions 2009

Employee and Technology S pending S alary Expenses Technology Expenses Non-S alary Employee Expenses Other Overhead Expenses 40% 60% 80% 100% 20% 0% S ource: Moss Adams LLP, 2008 Financial Performance S t udy of Advisory Firms , S ponsored by Genworth Financial Wealth Management

Overhead Costs as a Percentage of Revenue Under $250k 44.7% 42.9% $250k– $500k $500k– $1M 42.5% 40.9% $1M– $2M $2M– $3M 37.6% $3M– $5M 37.3% 39.0% Over $5M S ource: Moss Adams LLP, 2008 Financial Performance S t udy of Advisory Firms , S ponsored by Genworth Financial Wealth Management

Distribution of Overhead Expenses by Firm S ize Under $250k 16.4% 20.6% 54.0% 9.1% S alary Expenses $250k– $500k 22.2% 51.7% 19.6% 6.4% Non-S alary $500k– $1M 27.8% 19.4% 45.9% 6.9% Employee Expenses $1M– $2M 28.3% 20.9% 44.5% 6.3% Technology $2M– $3M 31.8% 24.1% 38.8% 5.3% Expenses $3M– $5M Other Overhead 42.3% 31.7% 20.8% 5.1% Expenses Over $5M 37.5% 16.5% 40.5% 5.5% S ource: Moss Adams LLP, 2008 Financial Performance S t udy of Advisory Firms , S ponsored by Genworth Financial Wealth Management

Retention Rate by Position Type 92% 2004 Professionals 91% 2005 78% S upport/ Technical 81% 77% Administrative 81% S ource: Moss Adams LLP, 2008 Financial Performance S t udy of Advisory Firms , S ponsored by Genworth Financial Wealth Management

Advisors of all types are confronting increased regulation and compliance costs. How can they build these additional costs into there business structure and is there a way to use technology to simultaneously meet compliance requirements and increase the operating efficiency of the firm?

Transformations Occur With S ize S treamlined Delegation Committed Delegation Tentative Delegation Do-It-Yourself S ource: Moss Adams LLP, Mission Possible II: The Link Bet ween Operat ional Efficiency and Human Capit al, Pershing Advisor S olutions 2009

Advisory firm growth is ultimately limited by the number of advisors it employs. What are some of the best ways to develop and retain human capital?

Firms With Dedicated Managers Experience Higher Growth Compound Annual Growth Rate 2005–2007 21.2% 18.4% 16.5% 16.4% 9.4% 7.6% AUM Revenue Clients With Dedicated Manager Without Dedicated Manager Source: Moss Adams LLP, 2008 Financial Performance S t udy of Advisory Firms , Sponsored by Genwort h Financial Wealt h Management

Advisory Firm Rate of Growth by Firm S ize Compound Annual Growth Rate 2006– 2009 8.8% 6.3% 5.5% 5.0% < $500k > $3M $500k – $1.5M – $1.5M $3M S ource: FA Insight , 2009

What are the elite firms doing?

� Clear Positioning � Aligning Business Organization With New Vision � Managing to Profitability � Implementing a Human Capital S trategy

For a recording and to view the slides of this presentation please go to www.fa-mag.com/ tibergien