"Given the superior level of service required by sophisticated clients, it's critical to develop a staff that can effectively support your investor focus."

Obstacles on the Road to the Elite Level

By John Bowen

We have found that advisors across the country who are intent on launching an upscale investment advisory business often encounter the same set of obstacles. You can smooth your own transition to the elite level by anticipating these problems in advance, allowing you to resolve them quickly or, better yet, side step them altogether.

Following are the most frequently encountered obstacles and how you can successfully avoid them:

Difficulties with cash flow. Large client portfolios take longer to close, requiring you to wait longer for compensation. However, this is nothing good planning cannot solve. The key is to anticipate time lags and take the appropriate actions. In addition, a well-crafted business plan will ensure that both your short- and long-term goals are ingrained—and compensated for—in every business decision.

Lack of support structure. Many financial advisors worry that they do not have the support structure in place to deal with the more sophisticated or demanding clients. This is a realistic concern that can be dealt with by leveraging the expertise of others, including a strategic partner and other financial institutions. You can look to a partner to provide the expert support you need for your affluent client base in the areas of custodian functions, performance reporting, asset allocation, fixed income vehicles and hedge funds.

Lack of knowledge to go upscale. To get the needed skills in place to serve the affluent, an advisor can begin to access both the tools and skill sets offered by their custodian, broker dealer, money manager and/or strategic alliance partner.

Lack of effective support staff. Given the superior level of service required by sophisticated clients, it's critical to develop a staff that can effectively support your investor focus. Commit to having a great support staff and institute appropriate hiring and training methods for building it.

Non-revenue distractions. One of the most significant challenges is managing your time effectively. Often professionals are pulled back and forth between back-office problems and client opportunities, with a significant impact on profitability. By outsourcing as many of these administrative distractions as possible, you will be able to fully devote your energy to your core competency of client relationship management.

Staying compliant with regulations. Knowing that inattention to compliance can result in substantial difficulties, many financial advisors have taken preventive action by working with their broker/dealer, hiring a consultant or leveraging a financial institution for guidance.

Reprinted from: FINANCIAL PLANNING