Every year about this time, I find it prudent to go back to the basics of my business. New assumptions and new challenges have emerged over the course of the year, and upon assessment, I may have found that not everything I set out to do in the current plan was completed. Additionally, competitors may have introduced new innovations or tactics that could threaten my business and new opportunities have likely emerged.
For financial advisors, it's easy to assume that the business is much simpler and not much has changed over the course of a year. However, experience tells us this is delusional thinking. If your practice is one that is not growing or evolving, chances are the seeds of destruction were planted long ago. On the other hand, if your practice has been going through dynamic change including rapid growth, the risks to your business could be growing exponentially as well. It's possible your pursuit of growth may have caused you to miss new opportunities. It is even more common that the pursuit of new opportunities may have inadvertently caused you to alter your strategic course.
Key to reviewing the basics is to remind yourself of the framework you created for making strategic decisions in the first place. In other words, what's your vision for what you want your business to become? Did the choices you make throughout the year move you closer to your vision or detract from it?
For example, assume your stated long-term vision was that you wanted your firm to be recognized as the leading provider of comprehensive wealth management to business owners in your region. However, most of your growth this past year came from a jump in assets from foundations and retirement plans; so much so that you hired two people to support this activity. Would you say that your investment in the business and your deployment of resources moved you closer to your vision or detracted from it? Further, would you say that this dramatic growth may have even changed the strategic direction of your business?
Many advisors would argue, "Who cares? We grew revenue and we have more assets. Does it really matter where it came from?" If you measure success in short-term movement, it probably doesn't matter. But if you developed your vision and strategy thoughtfully based on a reasonable set of assumptions, then your active pursuit of non-core business is like violating the guidelines of your investment policy statement. If you made the same type of opportunistic decision with client money after agreeing to a strategy, how would you justify it?
Now one thing I am certain about is that entrepreneurs, including financial advisors, tend to recoil whenever they hear "consultant speak" that includes words like vision, mission and culture. As a result, many firms tend to avoid the time-consuming process of strategic planning and the discipline to implement it effectively. Rather, they deal with issues as they arise. That's just like your clients who want you to implement an investment strategy without going through the process of goal setting or assessment of risk tolerance. The reality is that it takes just as much effort to tread water as it does to execute a business strategy, so why not do the latter?
A refresher
