Transcript No Slide Title

Your Present, Your Future
Making the Most of Your Practice
Advisors Only
Introduction
Building a succession-friendly
practice is part of taking care
of investors and being a
“client-centred” advisor
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What Do You Think Your
Practice Will Be Worth?
Expected Value at Retirement
Percentage of
Respondents
<$100,000
4%
$100,000 to $499,000
39%
$500,000 to $999,000
22%
$1,000,000 +
31%
Don’t Know
6%
Source: Advisor Impact’s Practice Update 2004
Advisors Only
What is Your Practice Actually
Worth?
$600,000
$497,000
$500,000
$400,000
$300,000
$200,000
$186,000
$100,000
$0
2004 Average Sold Price
Source: www.businesstransitions.com. Business Transitions Report 2005
Advisors Only
Fee-Based
Commission
How to Value Your Practice
Yardstick
Multiplier
Assets Under Administration (AUM)
50 – 200 bps
Historical Commission and Fee Income
1.0 – 1.5 times
Historical Annual Recurring Revenues
2.0 – 2.5 times
Revenues Actually Received
2.5 – 3.0 times
Free Cash Flow
2.0 – 4.0 times
Source: Sandra Foster, Buying and Selling a Book of Business (Headspring Publishing, 2001)
Advisors Only
Managing Your Business as
an Asset
 Look objectively at your business model
 Examine the quality of your client base
 Emphasize efficiency and profitability of
your practice
 Focus on the future
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What Decreases the Value of
Your Business
 Unprofitable clients
 Too many liabilities or expenses
 Placing too many conditions on the sale
 Reluctance to sell
 Over-dependency on the owner
 Compliance concerns
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Ten Strategies to
Maximize Value
1. Develop and follow a business plan
2. Keep meticulous financial records
3. Maintain up-to-date client files
4. Nurture a brand in the marketplace
5. Invest in systems and processes that
enhance efficiency
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Ten Strategies to
Maximize Value
6. Become a “client-centred” advisor
7. Emphasize a team approach
8. Make it difficult for your clients to leave
9. Streamline your practice
10. Protect your business with a succession plan
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1. Develop and Follow a
Business Plan
 Where are you now?
 Where do you want to go?
 How are you going to get there?
A business plan helps provide focus and
direction. If you don’t have one, you’re
reacting and not being proactive.
- Pat Horning in The Advisor’s Guide to Business Building, Volume 2
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1. Develop and Follow a
Business Plan
Elements of a Business Plan
 Executive Summary
 Business Overview
 Industry Overview
“A man who does not plan long ahead
will find trouble at his door.”
- Confucius, (551-479 BC).
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1. Develop and Follow a
Business Plan
Elements of a Business Plan
 Marketing Strategy
 Implementation Plan
 Financial Plan
“By failing to prepare, you are preparing to fail.”
- Benjamin Franklin
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2. Keep Meticulous Financial
Records
 Income Statement
 Monthly Cash Flow Statement
 Annual Cash Flow Statement
 Balance Sheet
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3. Maintain Up-to-Date
Client Files
 Keep copies of all client correspondence
 Responses from client surveys can help
you identify priorities and service
expectations
Maintaining complete client files will
help you identify clients who are not
contributing to your bottom line.
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4. Nurture a Brand in the
Marketplace
 Differentiate your practice
 Create a position
 Advertise your team
Defining what separates you from everyone
else increases the value of your practice.
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5. Invest in Systems and Processes
That Enhance Efficiency
Profitability Benchmark
100%
90%
80%
Gross Profit Margin =
Gross Profit
Total Revenue
70%
60%
Brokers
Planners
50%
40%
30%
20%
10%
0%
Source: Advisor Impact’s Practice Update 2004 Survey
Advisors Only
Profit Margin
5. Invest in Systems and Processes
That Enhance Efficiency
Clients per full-time equivalent staff:
118
Clients per professional:
214
Assets per full-time equivalent staff:
$25,270,500
Assets per professional:
$25,683,621
Gross revenue per full-time equivalent staff:
$247,767
Gross revenue per professional:
$239,920
Figures shown are averages from the Practice Update 2004.
Analyze trends in these metrics and work to
enhance the productivity of your business.
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6. Become a “Client-Centred”
Advisor
Research Results Uncovered Two Distinct Groups
1. Investment-Centred Advisors
Investment-Centred

86.2%

technically oriented
focused on investment strategies,
portfolio structuring, and analysis
2. Client-Centred Advisors

Client-Centred
13.8%

Advisors Surveyed
Source: The Best of Times, CEG Worldwide, John J. Bowen, JR. and Robert Clark
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strong focus on relationships
interest in investment process did
not overshadow client activities
6. Become a “Client-Centred”
Advisor
InvestmentCentred
Advisors
ClientCentred
Advisors
1.3
6.8
$51,000
$269,000
Existing clients providing new assets
0.8
7.3
Average new assets per existing client
$13,000
$64,000
Total new assets
$76,700
$2,296,400
Results over six month period*
New clients
Average assets per new client
All values in US dollars. *Six month period
preceding survey dates (April 9th and 10th, 2001).
Source: The Best of Times, CEG Worldwide,
John J. Bowen, JR. and Robert Clark
5 times more new clients,
30 times more new assets!
Which type of advisor would you rather be?
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7. Emphasize a Team
Approach
Factors to Consider When Hiring
New Team Members
 Client needs
 Education
 Personality
 Manners
 Flexibility
Your team is an extension of you and your business.
Source: www.advisor.ca
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8. Make it Difficult for Your
Clients to Leave
Differentiate yourself as a trustworthy advisor
through superior service and advice.
 Products and services sold become the
by-product of meeting your clients’ needs
 Create a “one-stop shop” by cross-selling
multiple products and services
Source: The Best of Times, CEG Worldwide, John J. Bowen, JR. and Robert Clark
Advisors Only
8. Make it Difficult for Your
Clients to Leave
The Benefits of Cross-Selling:
Client Satisfaction and Referrals
% of Clients Providing
2 or more Referrals
60%
50%
40%
49%
34%
Clients offered 3 or more
services indicated a
96.6 percent satisfaction
rate and generated more
referrals.
30%
20%
17%
10%
0%
1 Service
Source: Price & Associates
Advisors Only
2 Services
3+ Services
Interviewed: 778 super affluent
clients with $5M+ assets
8. Make it Difficult for Your
Clients to Leave
Develop Your Service Offerings
 Evaluate your service from your clients’ perspectives
 Offer clients the appropriate number of choices
 Go above and beyond the normal call of duty
Ensure your clients receive a high
quality level of service and experience
each and every time.
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Source: The Best of Times, CEG Worldwide, John J. Bowen, JR. and Robert Clark
9. Streamline Your Practice
 Remember the 80-20 rule
 Educate your clients
 Transition to a fee-based model
 Hire an associate
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9. Streamline Your Practice
Moving to a Fee-Based Model
 Converting to a fee-based model can
demonstrate your real economic interest in
your clients’ finances
 Fee-based practices may be easier to sell
in the future
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10. Protect Your Business
with a Succession Plan
 In extreme cases the value of your
practice could disappear
 Junior Advisors could walk away with
your clients
“The less time you have on your succession clock, the fewer
your options. The challenge for many today is to make sure
that they are giving themselves enough room to maneuver.”
- Mark Tibergien, Practice Made Perfect:
The Discipline of Business Management for Financial Advisors.
Advisors Only
10. Protect Your Business
with a Succession Plan
What would happen if you fell seriously ill
during RSP season?
“Every financial advisor has a moral obligation to make
sure their clients are taken care of, especially in the event of
something bad happening to them.”
- Mark Tibergien, Practice Made Perfect:
The Discipline of Business Management for Financial Advisors.
Advisors Only
10. Protect Your Business
with a Succession Plan
Most Advisors Plan to Sell Their Practices at Retirement
Sell or transfer to a
child 9%
Have no established
plans 23%
Sell to an
existing junior
advisor 11%
Sell to an unknown
third party 27%
Sell to an existing
partner 16%
Source: Advisor Impact’s Practice Update 2004
Advisors Only
Other 7%
Sell to an identified
third party 7%
Buying or Selling a Practice
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Partnering with Other
Professionals
 Accountants can provide tax advice
 Lawyers can draft the purchase and sale agreement
 Third-party negotiators can help with mediation
 Business coaches can help with human
resource issues
The professionals you choose can make the
difference between a transaction that goes smoothly
and one that ends in frustration.
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Finding the Right Match
 Look for a buyer that will treat clients the
way you do
 Deals usually breakdown because of
disagreements of how the business will
be run
A good seller feels the presence of his or her
clients saying, “Please find us someone in whom
you trust and someone we can work with.”
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Keeping Clients Happy
 Present the buyer as a “successor”
 Explain the need for “ongoing professional
and personal contact”
Keeping clients happy is clearly a matter of
reaching out and presenting a united front.
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Introducing the New Advisor
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Negotiating Payment Terms
70%
60%
50%
40%
30%
20%
10%
0%
Fee-Based Practices
Deals paid with earn-outs
Deals paid with a promissory note
Deals that used earn-outs
Deals that used promissory notes
Source: Business Transitions, 2004
Advisors Only
Commission-Based
Practices
Maximizing the Value of
Your Practice
 Look objectively at your business model
 Examine the quality of your client base
 Emphasize efficiency and profitability of
your practice
 Focus on the future
Advisors Only
Start Today!
A good plan today is better than a
perfect plan tomorrow.
- George S. Patton
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Resources and Support
Advisors Only
Resources
Mark C. Tibergien and Rebecca Pomering
Practice Made Perfect: The Discipline of Business Management
for Financial Advisors. Princeton: Bloomberg Press, 2005.
Mary Rowland,
In Search of the Perfect Model:
The Distinctive Business Strategies of Leading Financial Planners.
Princeton: Bloomberg Press, 2003.
Sandra E. Foster, Buying and Selling a Book of Business.
Toronto: Headspring Publishing, 2001.
Advisors Only
Additional Resources
www.businesstransitions.com
www.headspringconsulting.com
www.advisorimpact.com
advisor.morningstar.com
www.advisor.ca
www.valuationresources.com
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Advisor Dedicated Web Site
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www.tdadvisor.com
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Thank You
Questions?
The information contained in this presentation has been provided by TD Asset Management Inc. (“TDAM”).
The information has been drawn from sources believed to be reliable, but the accuracy or completeness of
the information is not guaranteed, nor in providing it does The Toronto-Dominion Bank, its affiliates,
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