It is no secret that the world is changing fast, or that companies that stand still are currently getting run over. The retail industry is filled with the corpses of chains that failed to evolve and change with shopper attitudes, and even pioneering firms like Sears are now struggling to survive.
The same problems that plague retail and manufacturing can also befall the financial planning industry, and staying the same are just as dangerous for financial advisors and wealth managers. If you are not constantly looking for ways to improve your operations and increase efficiency, you could find yourself losing ground to your more savvy competitors.
Learning the Lessons
We have already seen enormous changes in the financial planning industry, starting with the move from full-service brokerage firms to their lower cost online competitors. That shift caused massive changes in the sector and a new demand for leaner and more efficient operations.
The transition from traditional wealth management to more passive forms of investment is another example, and another reason independent financial advisors and the owners of wealth management firms need to focus on efficiency and the elimination of waste. Clients love the low costs of passive investments, but those small fees put the squeeze on advisory firms and force them to operate even more efficiently.
Finding Waste and Inefficiency
There is an old saying that you cannot solve a problem until you know it exists, and that is certainly true of the financial planning industry. Even if you think your practice is doing everything right and operating as efficiently as possible, waste and inefficiency could be hiding in plain sight.
Identifying waste and inefficiency is a vital first step for everyone from the individual financial advisor to the owners of large wealth management firms. Waste and inefficiency come in many forms, and identifying it can sometimes be a struggle.
Waste in Daily Operations
One of the most common types of waste comes from defects in daily work. In the financial world, this kind of waste and inefficiency may take the form of client statements that raise additional questions through overly technical terms and indecipherable acronyms. By reviewing their client communications and making improvements, practice owners can improve customer satisfaction and increase the efficiency of their day-to-day operations.
Other defects in daily work may include errors in invoices, issues with data entry and lost client records. Improving back-office operations can reduce these risks, as can cross-training employees and tightening hiring practices.
The Dangers of Overproduction
Overproduction is another killer of efficiency, and another area of waste financial professionals need to focus on. In the manufacturing world, overproduction can lead to warehouses full of unsold merchandise and associated high carrying costs. In the financial industry, overproduction takes different forms, but it is still just as dangerous.
As a practice owner, you may see overproduction of client reports, redundant paperwork and training materials. Determining the proper volume of these documents and cutting down on waste can reduce costs and help the firm operate more efficiently.
Overproduction can also hamper back-office operations and reduce efficiency in that way. When employees make dozens of extra copies - just in case - they are engaging in overproduction. The same goes for sending memos and emails to everyone in the office instead of a select group or entering the same information into multiple databases. Consolidating those disparate databases and creating distribution groups for emails can improve efficiency and reduce waste.
Waiting, and Waiting, and Waiting
Time spent waiting for something to happen may be a more subtle form of waste, but it is just as serious a problem. If you doubt the efficiency drain waiting can create, just take a look around. Think about the time your brokers spend waiting for documents to be prepared or the amount of time your clients waste while their orders are made.
There are countless other examples of how waiting can reduce efficiency and increase costs. Something as simple as slow response time for the computer network could waste many hours over the course of a week, and even more by the end of the month. Putting the office computers on a three-year upgrade cycle could improve their efficiency and save the company money.
Meetings are notorious time wasters as well, but in many cases they are necessary. Introducing changes that increase efficiency can aid operations, so make sure everyone is on time, avoid sidebar discussions and always email a detailed itinerary in advance of each meeting.
Once you identify areas of waste and inefficiency, you can work on rectifying the situation and improving the operation of your business. Efficient business operations is not an option for the owners of financial planning and wealth management firms - it is a necessity. If you are not continuously improving your operations and looking for better ways to do business, you will quickly find yourself left behind.
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