3 proven ways to boost the profitability of your practice

Elixir Consulting, in partnership with CFS, recently conducted a nationwide study on back-office operations and their impact on the success of financial advice firms. The research of over 171 financial advice firms, including 561 advisers across Australia, identified a range of strategies that advisers are currently implementing to achieve sustainable growth and profitability.

1. Culture is king

Elixir Consulting founder and managing director Sue Viskovic explained that culture is a powerful profit driver when it comes to running a successful financial advice operations team.

Specifically, she noted that by fostering a culture of shared ownership and appreciation, advisers can unlock significant growth potential.

The research found a compelling correlation between a strong team culture and profitability.

Businesses with a culture score of five on a five-point scale achieved an average EBIT of 24.2 per cent, compared to 19.6 per cent for those with a score of three or less. These findings highlight the importance of investing in your team and fostering a sense of shared purpose and commitment to the firm’s success.

Here are some practical ways to cultivate a strong team culture:

• Implement bonus structures: Link bonuses to overall firm performance to incentivise and motivate your team members. This creates a sense of shared responsibility and reward, encouraging everyone to contribute to the firm’s success. Advice firms that offered performance-based remuneration had an average EBIT of more than 4 per cent higher than the firms who didn’t.
• Involve your team in strategic planning: By including team members in strategic discussions and decision-making processes, you foster a sense of ownership and engagement. This allows them to feel valued and invested in the firm’s future, contributing valuable insights and perspectives. Elixir found that practices that involved their team in strategy and improvement planning experienced a 25 per cent EBIT compared to 20 per cent who didn’t.

2. Streamlining operations

The research also emphasises the importance of streamlining operations. Businesses with documented processes achieved an average EBIT of 24.8 per cent, compared to 19.5 per cent for those without. This underscores the significant efficiency gains that can be achieved by implementing well-defined and documented procedures.

Key steps to consider for streamlining your operations:

• Identify and document key processes: Analyse your existing workflows and create clear, step-by-step documentation for all critical processes. This ensures consistency, reduces errors, and facilitates knowledge transfer within the team.
• Utilising managed accounts: The research also concluded that the use of managed accounts saves time. Using managed accounts freed up to 15 hours per week for advisers and support staff. This allowed advisers to spend more time focusing on their business, bringing in more clients and spending additional time with their existing clientele.

3. Embrace continuous learning

The study further revealed the positive impact of coaching, continuous learning, and investing in expert support. As the study will show, by fostering a culture of continuous learning, advice firms empower their staff to become valuable assets, leading to a more successful and sustainable future.

Consider these methods to invest in the growth and skill development of your team:

• Separate the role of practice manager: Hiring a dedicated practice manager can significantly benefit your firm. Research shows firms with dedicated managers have a 4 per cent higher profit margin (EBIT) and higher staff satisfaction compared to those where the adviser manages the practice. This suggests that not only will this allow you to focus on working with clients, additionally a dedicated manager will be able to support your team, fostering a positive work environment.
• Invest in expert coaching: The research also indicated that many advice firms (60 per cent) don’t use a coach or consultant. For those that do, the results are promising. Firms that currently have a coach or have had one in the past report a higher average profit margin of 26.3 per cent compared to 22 per cent for those without. This suggests that coaching can be a powerful tool for not only enhancing employee satisfaction but also boosting the bottom line.

Jackie Clark is the national education manager at Colonial First State.