TRANSITION TALK

Marcus Hagood

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Maximizing Business Growth Through Benchmarking

Posted by Marcus Hagood on Sep 14, 2018 8:48:16 AM

Maximizing Business Growth Through Benchmarking

The average advisor faces a difficult and increasingly competitive industry. With industry consolidation, technological advances, increased competition, more regulatory oversight, and the need to recruit and retain talent, it has never been more critical that financial advisors use benchmarking as part of their ongoing strategic planning process. With benchmarking, a business owner can improve their relative revenue and expense performance, organizational structure, and marketing results to support growth and achieve short-term and long-term goals. Used in conjunction with your business planning process, benchmarking is a powerful tool to track and build additional enterprise value.

What is Benchmarking and Why it is Critical?

Benchmarking is defined as a measurement of the quality of an organization's policies, products, programs, and strategies as compared against standard measurements of their peers and “best-in-class” providers. An effective benchmarking program provides insight into the connection between your business decisions and the resulting outcomes.

Benchmarking improves performance by identifying and applying demonstrated best practices to sales, operations, and procedures. Comparing the relative performance of their products, services, and sales both externally (against competitors) and internally (with ongoing operations and business decisions) ensures that performance meets or exceeds the competition. The objective of benchmarking is to find examples of superior performance and understand the business practices driving it. Effective business owners utilize benchmarking insights to improve by incorporating these best practices, not through imitation, but through innovation.

The Four “M's” for Incorporating Benchmarking into Business Planning

Every firm has unique needs for benchmarking. For example, the goals of a mature firm versus that of a start-up practice may differ greatly. More established business and solo advisors might be more likely to utilize benchmarks to implement changes that result in increased efficiency and profitability. By contrast, a young developing practice may be more focused on driving and managing growth in clients and revenue.

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Topics: Business Growth, Business Value, Enterprise, Sustainability, Benchmarking

Six Steps to Creating An Effective Continuity Plan

Posted by Marcus Hagood on May 2, 2018 12:00:00 AM

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The single, biggest threat to an independent advisory practice is not the lack of a succession or exit plan, it is the lack of a plan to protect client interests and business value in the event of an owner’s sudden death or disability. And still, relatively few practice owners have implemented a reliable continuity plan.

As you put together your own unique plan, here are six best practices to consider as you create an effective and practical continuity plan:

  1. Put your plan in writing. Create a concise, clearly-written continuity plan so that it works under adverse circumstances, without your ongoing involvement.

  2. Use an industry-specific valuation for market value in a transition to a third-party buyer or external continuity partner, or an equity-based valuation for equity ownership interests as is common with internal continuity partners. For situations like death or disability, it is important to quickly, and accurately determine value. Be sure the determined value comes from a credible, third-party opinion with the database and accreditation to support the result.

  3. Update your buy-sell agreement and valuation on an annual basis. As your business grows, you’ll want to capture current value and deal terms that support an agreed upon purchase amount. A routine review of the agreement can help practice owners ensure that their document addresses changes in circumstances and provides for evolution of the plan.

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Topics: Continuity Planning

SEC Proposed Rule 206(4)-4 & Proposed Amendments to Rule 204-2 Business Continuity & Transition Plans

Posted by Marcus Hagood on Oct 18, 2016 3:37:25 PM
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In past years, the slow and steady migration of independent financial service providers to the independent Registered Investment Advisory (RIA) channel has been well documented. As the number of state and SEC registered advisors continues to swell, the regulatory framework under which they have operated will undoubtedly become increasingly complicated.

For years, it has been the practice of regulators to primarily focus their attention on the largest players in our industry. Broker Dealers, Custodians, and product producers have, by and large, borne the responsibility of complying with our industry rules, if not in actual operation, then through procedural and compliance oversight of the independent producer. Call it the cost of success, but the regulatory bulls-eye is–without question–moving more and more toward the independent financial service provider. A perfect example of this is the SEC proposed Rule 206(4)-4 and amendments to Rule 204-2 for “Business Continuity and Transition Plans.”

DISASTER PREPARATION

After finding that many RIA firms were not well prepared in the aftermath of Hurricanes Katrina and Sandy, the SEC released alerts that practice owners should more closely review their disaster preparedness and continuity plans. Many of the new requirements under the proposed rules were to address shortfalls that were identified by these events in actual practice. Unfortunately, that guidance appears to be ignored by many whether through frustration, inability, or otherwise. Add to this, as FP Transitions has often pointed out, the substantial lack of Continuity Planning (death or disability planning) in our aging industry, and you have a perfect storm for regulatory intervention.

The Proposed SEC Rule 206(4)-4 and the amendments to Rule 204-2 are stepping in to address these apparent short falls in preparedness. Although many of these new regulations are considered within requirements that have long been in place for Business Continuity and Disaster Recovery under SEC Rule 38-1a and FINRA rule 4370, there are significant new requirements that are part of the language in the proposed rules and rule changes. Some of the highlights include:

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Topics: Continuity Planning, Transition Plan, SEC, Securities & Exchange Commission

Department of Labor “Fiduciary” Rule, Headwind or Hurricane?

Posted by Marcus Hagood on Mar 31, 2016 9:54:32 AM

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“Change is the law of life. And those who look only to the past or present are certain to miss the future.” - John F. Kennedy

If there is one fact that I have come to appreciate in my 20 years in the financial services industry, it’s that our business is always changing. Flexibility, a strong desire to learn, and the ability to adapt are absolute necessities for survival in this ever changing environment. According to recent industry publications, an announcement on another proposed change for our industry is set to be released on April 4th. The Department of Labor fiduciary rule would represent the single, largest industry change during my career since the Gramm-Leach-Bliley Act of 1999.

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Topics: Fiduciary, Department of Labor, DOL, Sustainability

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