Cannon Financial Institute

Preparing your business: How to evolve alongside your financial practice

As an advisor, you are always on the lookout for that "next big thing" or a new way to grow your practice. This industry is fluid, and the economy, regulations, consumer confidence and a wide range of other trends can have quite an impact on a daily basis.

As a result, the steps you've taken to secure your practice for the future could be out-of-date. The last thing you want is to have a business that is unsustainable, especially as your clients rely on you for sound financial guidance. While a financial practice may be susceptible to a wide variety of risks, there are three that should require your attention today:

  • New technology
  • A different firm
  • An unexpected death

These three can either be hard to predict or difficult to plan for. In many cases, a practice doesn't have the proper risk management steps in place to ensure minimal client disruption should new technology, a move or an unexpected death take hold of the business.

"Predicting risk is difficult, but you can still prepare."

Here is how you can prepare your business to evolve alongside these three common practice scenarios:

New technology in the industry
New technology may not feel like a major disrupter in your practice, but it can be. Take the example of the "robo-advisor." Thanks to technology, clients have the ability to receive financial advice right online. The implications are, of course, that the entire financial advisor profession could become obsolete.

This is highly unlikely at the moment, but it illustrates the importance of technology risk management at your practice. Other common threats include cyber attacks and online security. Your clients' personal information is sacred, and a data breach could be a disaster for your business. New technology won't just benefit your business, it can also be a boost to hackers and criminals.

In order to improve your technology and security, follow these tips:

  • Consult with professionals - You may be an expert in wealth management, but you may not have the same level of expertise when it comes to cyber security and technology. If so, the first step you take should be to get outside help. Professionals can ensure your practice is up-to-date, secure and properly integrated with new technology.
  • Improve your password protection - Next on your list should be password protection. As you know, keep your passwords random and varied. But, you may also want to add multi-leveled authentication. You can have a username, a password and a custom verification code to log in.
  • Talk to your clients - Your clients' online savvy is also important. According to Financial Planning, it's crucial to make sure you talk to your clients about safe online behavior. You don't want them clicking on a bad link or accidently sharing sensitive information.

A different firm
Another common risk to any financial practice is the move. While your practice may be successful, you could see greener pastures if you partner up with a different firm or professional. Consider the transition from the eyes of your clients: Will they face higher costs? Will they have to move assets or loans? Will their service be improved?

Your reasons for moving a practice may not be in line with your clients. If you don't address this issue, a simple transition could be the biggest risk your business faces this year. For instance, Wealth Management recommended planning ahead to accommodate this concern. There are two scenarios that can highlight whether a move is right for you:

  • Your clients love your firm
  • Your clients love your services

This is an important distinction - do your clients love your practice or do they love your services? If they don't care who you work with or where you are located - they just want your advice - then a move may have minimal impact. On the other hand, if your practice's name and reputation is what got those clients, they could decide to stay behind or seek out another advisor. Consider this distinction before you uproot your practice.

"Get your practice ready for the unexpected."

An unexpected death
The last major risk that could impact your business is an unexpected death. This is never anything anyone wants to talk about, as evidenced by clients' hesitancy to discuss succession planning, but it's just as important to prepare your practice as it is to guide your clients.

Say your partner passes away with little notice. What do you do? What happens to his or her book? You may think that it would switch over to the other partners, but this isn't always the case. This may not be possible without a buy-sell agreement in place first. This "business will" can provide clear directions for how your practice should proceed following an untimely death.

If you are going to prepare a buy-sell agreement for yourself, keep these steps in mind:

  • Pick a partner with similar interests - You can enter a buy-sell agreement with a partner who either works for your practice or a similar practice, according to a separate Wealth Management article. This will help make the transition for your clients as smooth as possible.
  • Choose a partner who is close by - You'll also want to enter an agreement with a partner who operates close to your existing practice. This will maximize the likelihood that your current clients are willing to switch over. Many are against the idea of working with an advisor who is very far away.
  • Find a like-minded partner - Finally, you'll want to choose a partner or a practice that is similar to your own. This cultural match will help smooth out the transition, and that can make things a lot easier for the clients and the professionals involved.

Take no chances when it comes to your practice
Your financial practice will face many risks during your career. However, the three listed above can be both prominent and hard to spot. Due to this, you should have a plan in place to cope with these risks in order to ensure your practice is secure for the future.

This will not only help you establish a successful business, but it will also keep your clients happy for the long haul.

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