There is a ton of value in my June 1st post on “Building Value in your Firm.” Do read it if you missed it earlier but even otherwise, I would encourage you to read it again. Building value in your firm is extremely important and you know that. However, if you are like most people, you do not have the time to work ON your business because you are busy working IN your business.

I know you are busy. Some of you are so busy being the Chief Everything Officer instead of being the Chief Executive Officer that your firm truly deserves. Someone who can take decisions, someone who can set the direction of the firm, someone who can lead in the face of change and many other things.

This post expands on some of the points covered in the “Building Value in your Firm” post. Specifically, I am sharing some thoughts around Clients, your relationship with them and your value proposition.

One of the most important drivers of value (beyond the personal satisfaction that you would get by making a happy difference in the lives of people) in a firm IS based on the type of clients the firm has.

1. What is the typical age of your clients? Are they accumulating assets or decumulating (made up this word but you understand what I am referring to) assets? There is a difference in having clients who are in the age group of 25-30 and have relatively less to invest versus catering to clients 55+ who will have a sizeable amount to invest for a longer period of time. Most firms will have a portfolio of everything but tracking this metric and building an intentional business leads to creation of an enduring firm with real value.
   Many also have this mistaken notion that retirees typically withdraw from their portfolios. Nothing could be further from the truth, and I have come across many retirees who do not withdraw much from their portfolios as they still have alternate streams of income from their profession or business. This has been an experience of many retirement professionals too. Valuation calculations will typically factor this when determining an appropriate value of your firm.


2. Are you catering to the entire family or just the man/woman of the house? Are you catering to the next generation? This brings me to the point of whether you are managing the client’s money or a part of part of their money or being a Real Financial Professional to the entire family. There are many nuances here, but I am sure you get the drift based on my previous posts. Many women let go of their husband’s financial go to person and find someone they are comfortable with. The same is the case with children. These points are overlooked by many in our profession. Do you have relationship across generations, and do you oversee the entire family wealth versus just a small portfolio?


3. How deep are the relationships that you have built and what is your true value proposition? The Future of Wealth Management is all about Client Experience, Guided Transformation and Life Planning. This is a key moat in this business but one that is rarely understood by even the most seasoned professionals, who are still stuck on Market Performance, Product Sales, Transactions and Asset Allocation (in a very technical sense). Like I have said earlier “Personal Finance is more about Personal than it is about Finance.”


4. If you are one of the financial professionals in a client relationship, your revenue is at risk at all points of time, and it is not as sticky as you might think it is. Thus, an important point is to look at is the stickiness of your assets and revenue. What are the likely risks here and what are you doing to mitigate this risk?


5. Is the firm growing in clients and revenue besides mark to market? Growth is an important driver of valuation and thus it is important to see the organic growth of a firm. Majority of the firms in this space hit a growth plateau but continue to believe in the illusion of growth because their assets are growing thanks to mark to market.


6. Referral Strength Index (RSI) is a made-up acronym but again a powerful one. What does your Referral Ecosystem look like? How many clients are referring you? How many referrals do you get per client? What type of referrals are you getting? What is the potential for referrals in the firm? These are some of the questions to get answers too but there is a ton of work that is required to run a world class referral program. Referral Metrics are a key component of your valuation too and a brilliant implementation of this program is likely to enhance your value.

There are many other points to consider but the above points along with my previous post will be useful for you as a starting point. As always, we are happy to answer any questions that you have. I read every email and respond. So, feel free to write with any questions or thoughts.