Systems for Success

By John Bowen

To take your firm to the elite level and to optimize its value, the business itself must become your product. You must create a turnkey operation that almost anyone could run, even if you are no longer a part of the firm.

Reprinted from:

A business like this is founded on systems. Sound, well thought-out systems are the only way to ensure consistently outstanding experiences for both your clients and staff, whether you're there or not. And they are also the only way to assure potential strategic buyers, either now or in the future, that your firm's successful operation is not solely dependent on your presence.

A successful system consists of integrated components that work together in a predictable fashion. There are three steps for creating these kinds of world-class systems:

1. Collect best practices. Work closely with every individual or group that has responsibility in each functional area of all systems to collect various examples of best practices.

2. Establish standards. Carefully proceed step by step through every system and procedure, noting and recording all the relevant details about how each step is performed and how it fits into the bigger picture. If it's helpful, create a flowchart for clarity.

3. Document and file. File all systems documentation into a bound notebook or an electronic file that's accessible to everyone. This documentation will set the benchmark for your entire company.

To help organize your thinking, it's helpful to categorize all of your systems into one of the following two groups:

• Client experience systems, which your company utilizes to turn prospects into clients and to deliver an extraordinary client experience at all times
• Internal business systems, which support those efforts and keep your firm performing at a world-class level

Client Experience Systems

Three major subsystems are responsible for the total client experience, from the time clients first become prospects onward. They are your client acquisition, service and communication systems.

Client acquisition systems. Three major processes are necessary to turn any new prospects into clients:

• Getting referrals
• Forming a series of strategic alliances with other groups of professionals, including CPAs and attorneys
• Offering presentations to groups

For you to be as effective as possible in bringing new clients to your firm, you should define and document how you carry out each of these processes. Make sure to do this in a step-by-step manner.

Client service systems. Once you have acquired a new client, you must define how you will service him or her and create benchmarks for doing so successfully. Look at your wealth management consulting process, your range of product and service offerings and how you deliver them. Create a series of practice benchmarks to measure client satisfaction, such as an annual client survey and follow-up interviews. Document details of each of these processes, using flowcharts as necessary for clarity.

Client communication systems. The elite advisors intentionally manage all communications with their clients from the moment a prospect walks in the door. Examine how often you contact clients, how you contact them (personal meeting, by phone, email or letter, for example), and the content of your communications. Again, you should document in detail each step that's involved in these client communications.

Internal Business Systems

In addition to client experience systems, you have a range of internal systems that are collectively responsible for efficient management, profit generation and equity creation for your advisory business. You, your partners and your staff use these systems every day. Each system must also be precisely defined, perfected and carefully documented. A discussion of these internal system follows:

Practice planning systems. The ability to run a successful business is based on whether you can establish strategic and financial goals, create high-level strategies to meet those goals, and then develop specific actions to execute each strategy. Your practice planning system is the tool that you use to transform your vision of the future into reality.

Consider holding a semi-annual, full-day planning retreat to set the goals and strategies for your firm. This retreat will give everyone in your practice an opportunity to provide valuable input for the business planning process, making them that much more likely to be motivated to help your firm succeed. Throughout the one-day planning session, look at your company as a whole by asking the following questions:

• What is the vision of the company?
• What are our goals?
• What strategies and tactics are necessary to achieve these goals?
• How will we be held accountable for our mutual success?

After the planning session, ask each member of your firm to prepare an individual goal sheet consistent with the overall objectives defined. Use this sheet to track each individual's progress.

Practice measurement systems. Your planning system starts you off by determining your goals and an analysis of what it will actually take to reach them. Your measurement system will help you to make comparisons to actual results. You need to know where you should be at each interval to get to the end point, yet also be prepared to make adjustments in response to actual events.

Hold a "state-of-the-business" meeting every month. Make sure all contributors are accountable for their written goals by evaluating their progress toward reaching each goal. The purpose of this meeting is to help individuals maximize their performance by improving judgment, thus helping them to carry out responsibilities more effectively.

Staff communication systems. To build a strong team that's capable of creating a highly successful firm, you not only have to develop the team, you have to keep the team members focused, committed and working together with passion. Systematic communication is the key to all of this. Communication should be centered on two components—weekly status reports and weekly staff meetings.

Weekly status reports should identify missions, responsible players and six-month goals. List specific action items that are in process, report on the status of each, record any major new accomplishments and report any new issues.

Also set up a formal, two-hour manager and supervisor/team leader meeting each week. The goal of these meetings is to arm your management team with information necessary to achieve your business goals and to agree on required action items.

Information systems. It's important to recognize that information technology is not your core competency. Because this area should not be your focus, you must design responsiveness in your internal team and outsourcing partners so they can manage your technology effectively and without any large interventions on your part. In addition, maximize firm efficiency by standardizing the hardware and software now used across the business.

Compliance systems. A planner often thinks regulatory agencies and the firm's compliance department set up roadblocks without really understanding the business. On the contrary, your firm's compliance department can provide a competitive advantage, especially when the time comes to sell your practice. By doing business by the book and incorporating the key processes and disclosures to appease the regulators, you will create an attractive package.

Records systems. The SEC lists all of the record-keeping responsibilities that advisors should have in order to survive an SEC audit, and sooner or later the SEC (or a similar state agency) will audit the operations of your advisory firm. One of the easiest ways to successfully survive your examination is to set up separate files corresponding to each of the major recordkeeping responsibilities that are imposed by the Investment Advisors Act of 1940.

Set up all files, even if a few of them are empty or contain only a single sheet of paper that indicates the rule is "not applicable." This approach will remind the SEC examiner that you are familiar with all of your recordkeeping responsibilities and that even though a particular rule may not apply to your operation, you are cognizant of the rule.

Internal controls systems. Even within smaller firms, maintaining documented internal controls can add a level of comfort and security for anyone reviewing your firm's operations. One way to add protection and value is to segregate all of the relevant duties within the firm. For example, make sure that the person opening the mail and receiving checks for payment isn't the same person making the deposits. That can be tough in a small shop, but it's worth thinking out the separation of duties. Establishing an internal control structure will impress a potential buyer, and it looks good if you get audited.

Audit systems. The industry examiners don't call before they ring your doorbell. Therefore, you must be prepared to welcome them in at any time. "Being prepared" implies establishing agreement on who is responsible for representing your firm throughout the audit process, having your systems in order, and knowing what kinds of documentation the examiners are likely to request. Many firms have hired compliance specialists to run mock audits to ensure that they are properly prepared.

Learning systems. To become—and to remain—an elite advisory firm, all members must make a continuing effort to increase their knowledge and skills and to develop the competencies required for world-class performance. Develop and document a 12-month plan setting out how you will invest in your most important assets—your human capital. This plan should include both your own personal plan and a plan for each of your firm members.

By getting your systems in place—taking the time to be introspective, documenting each step of your operation and being consistent with your business plan—you can create an advisory firm that will consistently perform at a world-class level. Just as important, it will be a turnkey business that someone else can run efficiently when it comes time for you to move on, making it much more valuable than it would otherwise be.