Business Insights Solving for Growth & Capacity Constraints

Sparking that next phase of growth might be harder than expected. For firms moving from sole proprietor to a practice, growth may come easy – but only to a certain point. When a plateau hits, where should advisors look to dig in and overcome? Benchmarking, alongside a deep understanding of business growth and value drivers, is where firms can stand apart from the pack.

If you are ready to grow your financial advisory business and wondering, “Why haven’t I grown faster?” this may be the blog post for you.

Read on for our best tips on diagnosing and overcoming growth inhibitors.  

What Causes Stagnation? 

Most business owners seek continuous growth because they know that growth is a key value driver in most businesses. Whether you are a sole practitioner seeking additional clients and revenue growth, or a multi-owner enterprise seeking improvement in bottom line profits and a stronger 5-year CAGR, there are notable pivot points that require attention.

The most common financial advisory firm growth challenges are:
•    Not gaining new clients
•    Capacity
•    Compliance & Tech
•    Confusing fees
•    Time managing operations
•    Not outsourcing
•    Missing vision
•    Managing staff/retaining
•    Not providing right comp & benefits packages
•    No career paths
•    Not communicating long-term plan for the firm

Growth Truth #1: It could be a capacity issue.

For many firms these challenges all really boil down to one thing: capacity. This single issue is holding back their ability to grow, and they are never going to overcome it until they understand and resolve it. Think of it in this way: they are operating at maximum capacity and so regardless of how many new prospects come their way, they are unable to service them. 
So how can financial advisory firms solve for capacity? 

Well, we'll get into this a little more. But first, what does capacity really mean?

Capacity is the maximum output level a company can sustain to provide its products or services. 

Capacity can mean you don’t have enough bodies, expertise, or people in the right chairs. You may be lacking an organizational chart, no clear roles or responsibilities, or no one to identify, implement and execute on aspects of your business strategy. We often find firms have inadvertently created bottlenecks that throttle their speed.

“Growth is almost never going to be solved by a marketing or sales trick.” – Scott Leak, CFP® and Senior Consultant at FP Transitions. 

A lot of advisors believe they need to focus on marketing solutions to their lagging growth metrics. However, this is often not the right place to look or the right question to ask. Instead, advisors should be asking a few other questions.

Growth Truth #2: Ask the right questions.

What should advisors consider when struggling to achieve continuous growth? You might note that your benchmarking metrics are lagging behind peers, or you are missing a 3-year growth goal. There are often underlying reasons for this that a seasoned consultant can instantly address. But for advisors, this isn’t an everyday focus. This is why working with a consultant can help you move faster to overcome growth challenges. 

Questions that industry growth consultants will ask:

•    Why do you want to grow? Some owners may be seeking more clients, or a different type of client. Most advisors today are trying to shift their client demographics, aiming to gain younger clients that are just entering the accumulation stage, or targeting the children of mature clients and hoping to gain some multigenerational wealth clients.

•    What are your current growth rates? If you are seeing a decline in growth, we’ll want to assess why that may be the case. If you have steady growth rates and are seeking an accelerant, then we’ll talk about your prior growth accomplishments. 

•    What strategies have been fruitful in the past? We need to understand why has worked in the past, and if they will continue to fuel target growth goals for the future.


Growth Truth #3: Properly diagnose the root problem.

Many firms jump right into problem solving mode. But instead of doing so with clear data on the root cause of their growth constraints, they are lacking the foundation to solve their issue. Just as financial planners spend time understanding their clients’ needs and personal situation, an owner needs to reflect on their situation before slapping a plan in place. 

Let’s consider how this applies to capacity challenges. Capacity constraints can be addressed in a few ways, namely, either gaining efficiencies or just flat out, adding more bodies. Some examples of efficiencies can be improving technology, adjusting operations and processes, or outsourcing. Remember, the challenge usually isn't in the solution. It's in the diagnosis. So regardless of the answer, we need to ensure we properly address the underlying issue.


Growth Truth #4: Examine your client experience for key insights.

If you are seeing a decline in growth, or stagnation essentially due to net zero churn (gaining clients as fast as you are losing them) then you may need to assess other underlying factors aside from capacity. Client experience can be hard to measure if you are a solo practitioner, but some places to examine may include:

•    Client-facing technology – is it easy to use, functional, secure, informative?
•    Appointment setting – is it intuitive, does it remind everyone, is it easy to reschedule?
•    Accessibility – how do clients reach you, what is your response speed, how can they escalate an urgent question?
•    Satisfaction – are you asking them for referrals, are you checking Net Promoter Score, are you assessing their happiness with their plan and performance year-over-year?
•    Nurture – Do you reach out throughout the year, even in between meetings? Do you recognize key life milestones, invite them to special events or webinars? 

Often times, if the root issue is related to client experience, capacity still may be the underlying driver. You may not have enough time to properly service your existing base of clients AND focus on running and growing your advisory firm. As sole practitioners evolve their business, this measure can help them realize it’s time to hire another professional. There are many peer-level benchmarks that owners can leverage to assess whether they have too many households per professional, something that varies with household AUM, type of services offered, and fees charged. Because it’s highly contingent on those variables, following an industry standard ratio may not be very applicable to your business.

Growth Truth #5: Hiring the right professional can save you time, energy, and frustration.

Leveraging decades of insights at FP Transitions has allowed us a remarkable vantage point into where and how advisors can properly diagnose and treat their growth problems. Our experts understand your financial advisory business needs and circumstances, and work with you to identify and select your business goals. Then we come together to analyze your immediate potential courses of action, and begin developing recommendations. Finally, we present these to you, implement them with you, monitor progress and update them throughout our time together.