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Practice Management in a Recession

Revenues are falling and the phones aren't ringing. What should you be doing?

David J. Drucker, 12/30/2008

This economy hurts!

If you're an hourly planner to clients of modest wealth, it's likely that your phone has stopped ringing. If you provide comprehensive planning and money management for better-heeled clients and charge a percentage of assets under management, your revenues are probably falling faster than you can compensate for with revenues from new clients. And if you charge clients retainers, your revenues may be intact but expenses are nonetheless "sticky." What's a financial advisor to do?

Who better to ask than the heads of several broker-dealers who see their many reps grappling daily with these decisions? Chris Radford, CEO of VSR Financial Services (www.vsrfinancial.com) of Overland Park, Kan., and Ken Hyman, President of Partnervest (www.partnervest.com) of Santa Barbara, Calif., discussed what their reps are doing to reclaim their businesses after the devastation wrought by our current economy. (Partnervest is an entity with an RIA, a broker dealer, and an insurance agency that helps fee-based advisors enlarge their practices through greater operating efficiencies).

"How does practice management change in a recession?" I first asked Radford, whose broker dealer serves approximately 260 reps. He responded, "What I'm finding in speaking to our advisors the last few weeks via advisory roundtables and one-on-one discussions is that they're continuing to spend." It seems that advisors have learned what one of Radford's top producers said to him recently. Radford said, "He was talking about working on his own budget and strategic plan." Normally, Radford said, this rep gets 70% of his business from existing clients and the rest from new clients. But next year, with business off about 20%, he believes 50% will need to come from new clients.

Which means spending on marketing will be key.

"This same advisor is noticing that this may be the best client acquisition time he's experienced in many years," Radford said. "So I'm seeing reps asking about seminar programs and other new ways to get clients, although referrals are still the number one source of new clients."

Some reps, Radford said, are choosing to go the seminar route but are doing so more intimately by populating their seminars with referrals from other clients.

"It's a matter of asking existing clients, 'Who should I speak?' to versus mass marketing their seminars" as they might have done in the past, he said.

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