Let's hope most advisors are better at planning their clients' futures than their own.
Just 17% of respondents in a new study -- largely focused on advisors who have strategic plans for their firms -- say their strategic planning factored strongly in their recent success.
"Our findings are consistent with those other studies saying that firms aren't getting the mileage from strategic planning that they could," says Dan Inveen, director of research at FA Insight, which produced the study for TD Ameritrade.
"These plans need to be rounded out in terms of detail and more accountability," he adds.
NO ACCOUNTABILITY
So what's going wrong? In most cases, advisors are not linking team members' performance to specific strategic outcomes, the study found -- nor are they promoting internally to give team members greater responsibility in areas that need attention.
They aren't using leading indicators, such as client satisfaction surveys, to gauge their progress, Inveen says -- and most aren't proactively hiring to bring on better skill sets.
FA Insight's Growth by Design study, fielded between February and April, initially attracted 1,000 respondents. But only 342 firms completed the survey, which took about 45 minutes to fill out, Inveen says -- suggesting that those who did respond had a strong interest in the subject of strategic planning.
Indeed, most of 342 firms, or 85%, said they do have strategic plans.
ACCIDENTAL OVERACHIEVERS?
The study explored strategic planning against a backdrop of "stellar" performance for all firms over the past year.
The typical firm that responded to the survey expanded its client base at a best-ever rate of 6.7% in 2013, according to an FA Insight release. Both revenues and AUM growth were at second-highest in the six years that FA Insight has been doing benchmarking research, the company said.
Strong markets fueled most firm growth, but so did improving management practices, the study found.
Median productivity, in terms of revenue per professional, hit a record high as well -- while capacity levels showed no increased stress. Costs were kept under control, so that overhead expenses as a share of revenue reached a record low.
These forces combined to produce record profitability in 2013, with the typical operating profit margin at 22% -- double that of 2009, when markets hit a bottom in the recession, the study found.
Despite the recent success, firm owners cannot afford to be complacent, Inveen says, adding that only firms that learn how to plan effectively for their success will remain competitive over the long term.
"I think the main takeaways," he says, "are the importance of doing strategic planning right -- in terms of setting objectives, focusing on leading indicators rather than lagging indicators, detailing out how these objectives will be achieving and assigning accountability."
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