Want to know how your firm stacks up against the competition? A new tool from Boston-based Cerulli and Atlanta-based Invesco can offer some answers.
The product, called The Practice Innovation Index, is part of Invesco Total CX, an all-in-one platform that includes content and coaching designed to help planners communicate with clients and maximize both client returns and business results. Cerulli, which has been collecting wealth management data for more than 30 years, supplies the data that powers the comparison. Invesco provides resources that help planners strengthen their practices’ weaker points.
The Practice Innovation Index works as a questionnaire. A planner spends about 20 minutes answering 35 questions in the areas of practice management (which includes succession planning, billing and technology), new business development (new clients, referrals and external strategic partnerships), client services (client experience and communications), and wealth management (service offerings, assets under management, and portfolio construction and results). The index then ranks a planner versus her peers by assigning a percentile for the overarching and subtopics explored in the questionnaire.
Armed with the knowledge of the practice areas that could benefit from attention, planners then have access to an online library of articles about how to shore up anything from back-office technology to client experiences. They can also get personal coaching. Index use and follow-up resources and services, company representatives said, are free of charge.
A soft launch of 300 planners completed the index in early May, but none of them scored in the 100th percentile on any of the four categories, said Asher Cheses, Cerulli’s associate director of wealth management. “Every advisor has areas they need to improve,” he said.
Three points of differentiation
Paul Brunswick, who is head of Invesco Global Consulting, said most advisors know there is room for improvement, but they aren’t necessarily able to pinpoint the weaker areas of their practices. Moreover, they aren’t always clear on what they can do to fix problems.
“The index closes the gap between knowing and doing,” Brunswick said. “It’s closing the gap that creates success.”
There aren’t many diagnostic tools on the market, Brunswick said, adding that this product has three points of differentiation.
First, its calculations are based on Cerulli numbers. That company already has a significant amount of data about wealth management firms and the amount of information will increase as more people use the index.
Second, the index works for every kind of planner, from solo practitioners to large broker-dealers.
Finally, Brunswick said, the index tool connects planners to a set of solutions.
“Maybe your practice would be better if you had a wealth management checklist,” he said. “We link to one of those.”
Planners can access about 100 articles and other tools that help improve various aspects of a practice.
So far, planners who use the index have seemed particularly interested in whether they’re delivering a full wealth management experience to their clients.
“They like the checklist,” Brunswick said.
Planner interest has also been strong around understanding and connecting with clients, stratifying client groups, performing effective client reviews, optimizing employee performance and leadership, running meetings effectively, career development and succession planning.
“We haven’t had any areas that people find uninteresting,” Brunswick said, though some index users are less interested in technology. That’s at least in part because circumstances of employment can control planner decisions about technology.
What kind of practice do you want?
A person who wants to play basketball well probably cares more about her free-throw average than someone who is mostly interested in ice skating. By the same token, planners who use diagnostic tools to see how they compare to their peers will have more productive experiences if they first develop a sense of what they want from their practices, said Cameo Roberson, founder of Atlas Park Consulting in Union City, California.
“Products like this one are good at telling you how well you’re operating,” Roberson said, “but I don’t know if they’re good at helping you figure out what you want to do in the first place.” A financial planning practice should be based on the owner’s values, goals and lifestyle. “Once that’s identified, you can figure out what you need to build to help you reach those goals,” she said.
Many people, including those in the wealth management industry, tend to think that every practice wants to maximize assets under management and build a firm that’s as large as possible. For some, particularly wirehouses, that’s still true, Roberson said, adding that there’s nothing wrong with that model.
But she also sees a shift toward planners building practices that make sense for them and their values.
“I have a client who wants to work with single people who are approaching retirement. He’s building a lifestyle practice. I also see clients who grow assets under management and let that income subsidize passion projects,” Roberson said.
When planners use a product that compares them to their peers, they should keep in mind that the peers may share their size or other demographics but may not share their vision.
“Don’t decide that you’re not successful because you’re not like them,” Roberson said. “Your vision centers you, brings you back to what you think is important and how you want to build your practice.”
