Managing Your Practice — 2024 Wrapped: Practice Management Trends That Shaped the Year

Podcast by Dimensional Fund Advisors | Aired: December 19, 2024

Episode Overview

This episode of "Managing Your Practice" gathers Dimensional Fund Advisors’ global practice management team to reflect on the top five trends of 2024 shaping financial advisory practices — plus a bonus “sixth” trend. The discussion dives into tactical insights for driving growth, improving operational efficiency, and optimizing the client and employee experience, all drawn from Dimensional’s extensive advisor benchmark research and hands-on consulting.

Panel & Host

• Host: Catherine Williams – Head of Practice Management, Dimensional Fund Advisors
• Panelists:
  • Stephen Duman — Regional Director (Austin, U.S.), “team historian”
  • Dale Scaly — Regional Director (Melbourne, Australia), former advisor/owner
  • Cameron Logar — Practice Management Consultant (Charlotte, U.S.), yoga instructor
  • Mark Colosso — Regional Director (Charlotte, U.S.), former advisor and marathon runner

Main Themes & Structure

The team unpacks six practice management trends for 2024:

1. Strategic Planning
2. Business Operations & Efficiency
3. Capacity (Workforce Scalability)
4. Talent & Compensation
5. Client Experience
6. Bonus: Growth (Organic & Inorganic)

Each trend is contextualized with benchmark study data, client anecdotes, and real-world implementation challenges and best practices.

In-Depth Breakdown

1. Strategic Planning: Breathing Life into Mission, Vision, and Values

Key Points:

• Purposeful strategic planning drives results; it's more than lip service.
• The firm’s Mission, Vision, and Values offer the “map and guideposts.”
• Values are often most challenging because they require team-wide input.

Dale Scaly (08:18):

"There’s a concept by Dr. Kerry Evans... step back, step up and step in: step back from the business, step up to that altitude of strategic planning... and then step in and address [goals] rather than just making decisions on the fly."

• Strategic plans are “living documents” — not something you draft over drinks and shelve.
• All businesses, regardless of history, revisit and evolve these elements, especially during M&A, leadership changes, or milestone anniversaries.

KPIs & Metrics:

• Essential to connect strategic planning to key performance indicators:
  • Growth in assets under management (AUM)
  • Number of clients
  • Headcount (and its challenges)
  • Operating profit per senior advisor
  • Net Promoter Score (NPS)

Mark Colosso (10:42):

“You know, based on revenue growth, what would my AUM look like? How many clients? How many employees? ... My favorite: operating profit per senior advisor... and NPS is a great way to understand client sentiment.”

Execution Characteristics:

• High-performing firms follow frameworks (EOS, Covey, Lencioni) ensuring accountability, breaking goals into actionable “rocks,” and tracking progress with leading (proactive) and lagging (reactive) indicators.
• Open communication and socializing plans across teams is critical.

Cameron Logar (15:40):

“I see firms connecting their overall firm goals ... with specifically what are the individuals responsible for? ... That might come in the form of a scorecard or at least definition around, ‘Hey, these are firm goals. Here’s how you ... can help drive the client experience.’”

Notable Moment:
Advisor quote via Catherine Williams (16:46):

“We want 1/4 strategy, 3/4 action.”

2. Business Operations & Efficiency: Operationalizing Scale

Top Discussion Points:

• Scaling is about maximizing output per employee and clearly defining responsibility for relationship segments and profitability.
• Understand cost-to-serve at both client and segment level.
• Perennial wisdom: Expenses and profit margins are surprisingly stable.

Mark Colosso (19:30):

“About the data in our study... the old adage: 35% direct expenses, 40% overhead, 25% profitability. Five years of data, average profitability: 26%.”

• Raising/adjusting fees is rarely as risky as advisors fear when managed purposefully.
• Transparency in pricing and value alignment is essential; most client resistance is overestimated.

Catherine Williams (20:48):

“The primary question [clients] asked when fees were raised: ‘What was I paying before?’”

Efficiency Metrics:

• Revenue per FTE: Sweet spot around $350K; breaching $400K signals time to hire.
• FTE per Senior Advisor: Ideal ratio is four employees per senior advisor.

Cameron Logar (21:44):

“Revenue per FTE has proven to be a more effective metric... High performing firms have a ratio of four employees per every one senior advisor.”

Dale Scaly (24:36):
Three levers for addressing capacity & scale:

1. Workflow optimization and nimble process improvements
2. Smart team structuring (leveraging team-based models and embedding culture)
3. Technology adoption: “What do we humanize, and what do we robotize?”

3. Capacity: The Most Pressing Challenge

• All regions report capacity concerns: “Are we at capacity, or just hampered by poor process/resource allocation?”
• Australian example: Revenue per FTE for high performers crossing $300K (AUD), driven by process rigor, team structure, and selective tech use.
• AI sparks interest but remains a cautionary area: action is more about optimizing targeted pain points (e.g., note-taking, CRM) than wholesale transformation.

Stephen Duman (28:19):

“In terms of a quick-fix silver bullet [for AI] — no panacea yet. Do an effort/impact analysis to identify the area where an AI tool could net the most value.”

Emphasis that true capacity issues create tension and visible bottlenecks, not just “busy-ness.”

4. Talent & Compensation: Getting People & Pay Right

Major Topics:

• Team Structure: Enables efficiency, succession, and career continuity.
• Compensation: Key for both attracting and retaining talent. Incentive comp is on the rise, but the “right” structure is deeply tied to firm goals and culture.

Cameron Logar (32:20):

“Compensation structure must fit with your firm’s values and written philosophy. Governance committees help keep it aligned and responsive as the firm evolves.”

Best Practices:

• Strategic clarity comes first: What behavior or result does the pay plan incentivize?
• Successful comp plans balance the “three Cs”: compensation, culture, and career pathing.
• Simplicity and fairness are vital — “If the comp plan ended up on the copier, would staff say ‘That’s about right?’” (Stephen Duman, paraphrasing Philip Palaveev at 40:06)
• “Fairness” ≠ “Sameness.”

Cameron Logar (37:22):

“There’s so much variance in how incentive comp is structured... Each firm blends different types: individual bonus, profitability bonus, business development bonus... There’s no one right way.”

• Australia spotlight: With the introduction of a mandated “professional year,” career path clarity is more critical than ever—essential for retaining and advancing recruits.

5. Client Experience: Differentiation in a Crowded Marketplace

Frameworks & Data:

• Start with a well-defined target client profile (beyond assets—think values, lifestyle, needs).
• Use frameworks like the “Four Cs”: Competence, Convenience, Coaching, Continuity.
• Tailor the client experience to your ideal client (including personal touches, e.g. 45-minute in-office meetings for time-starved execs in Perth).
• Make your value clear: Tell clients who you serve and why you’re best for them — this also encourages referrals and self-selection.

Stephen Duman (49:03):

“[With] your target client profile ... if you try to be everything to everyone, you end up being meaningful to no one... Take it to the next level — some firms create an avatar, literally name the persona, and walk through her day.”

Data Highlights:

• Net Promoter Scores (NPS): Off the charts; indicates strong trust and referability.
• Clients value: Sense of security, progress towards goals, and personalized understanding — more than returns.

Mark Colosso (56:23):

“One of my favorite questions: Is it your expectation that your assets remain under your advisor’s care upon passing to your heirs? ... Greater than 40% of promoters say yes.”

Client Feedback:

• Regular, structured client feedback (e.g., Dimensional’s Global Investor Study, client advisory boards) is essential.
• Boards are underused but highly effective.

6. Bonus Trend: Growth Strategies (Organic & Inorganic)

Organic Growth

• Most firms grow mainly via client and COI referrals. Digital marketing matters but is often a secondary step for referred prospects.
• The “who we serve” section on firm websites is now more visited than even bios – clients want to see experience with people like them.

Dale Scaly (63:30):

“Referrals are still the main road. The key is making it process-driven, not left to chance.”

• Develop your “hunters” (those who bring in new business), not just “farmers” (relationship builders). Business development training and clarity in comp plans is vital.
• “Twelve Channels of Growth” — Pick channels (events, digital, COIs, client referrals, etc.) and commit resources and measurement to each.

Inorganic Growth (M&A)

• M&A is robust but complex: talent acquisition and pursuit of new service offerings are current drivers.
• Vigilance: Many deals don’t close or fail to produce the expected scale/efficiency. Firms must be as strategic with acquisition as organic growth.

Notable Quotes & Moments

• On Values Creation (07:18):
  • Cameron: “What’s hardest to nail down are the values... Values should be representative of the collective voice.”
• On Winning Execution (14:05):
  • Dale: “High performing firms place a lot of importance on communication... culture just becomes embedded when everyone is on the same page.”
• On AI Implementation (28:19):
  • Stephen: “Do an effort/impact analysis... where’s the greatest need, what are people spending the most time on?”
• On Compensation Equity (40:06):
  • Stephen: “If the comp plan for the whole org were left on the copy machine, could people look at it and say, ‘Yup, that’s about right?’”
• On Growth Mindset (66:10):
  • Stephen: “My hot take: Firms have overindexed on hiring farmers instead of hunters.”
• Favorite Advisor Quote (16:46):
  • Catherine: “We want 1/4 strategy, 3/4 action.”
• On Future Focus (74:53):
  • Cameron: “Really, stop thinking about 2025 and start thinking about 2026... everything in 2025 should be in motion.”

Timestamps for Key Segments

• [06:39] Why Start With Mission, Vision, Values? – Stephen Duman on narrowing focus
• [10:42] Key Strategic KPIs – Mark Colosso breaks down top operational metrics
• [14:05] Communicating Vision for Culture – Dale Scaly on high-performers’ internal comms
• [19:30] Establishing Profitability Benchmarks – Mark Colosso demystifies advisor P&L
• [21:44] Metrics for Capacity and Scale – Cameron Logar introduces revenue per FTE & support ratios
• [28:19] AI’s Real Impact So Far – Stephen Duman’s skepticism/approach to AI tools
• [32:20] What’s Driving Talent Conversations? – Cameron Logar on structure & comp
• [40:06] The Fairness Litmus Test for Comp Plans – Stephen Duman on transparency
• [49:03] Why Target Client Profile is Step One – Stephen Duman connects ideal client and service design
• [54:56] What Clients Really Value – Data from the Global Investor Study
• [59:11] Organic Growth: Where Are Firms Succeeding? – Mark Colosso on key drivers
• [66:10] Farmers vs. Hunters in Business Development – Stephen Duman on the need for sales training
• [74:32] One Key Priority for 2025 – Panelists’ top recommendations

Panel’s One Key Recommendation for 2025

• Dale: “Make a habit of strategic planning. Step back, step up, and step in regularly.”
• Cameron: “Think ahead — have your 2026 vision in place so you’re not reactive.”
• Mark: “What gets measured gets managed. Define and socialize key metrics and indicators.”
• Stephen: “Get real client feedback — use the Global Investor Study or similar tools.”

Bottom Line

This episode distills a year’s worth of research and real-world advisory firm consulting into actionable priorities: Purposeful planning, metric-driven management, disciplined operations, client-centric experience, and smart, sustained investment in people. Firms must operationalize leadership vision, stay agile via benchmarking and feedback, and commit to both culture and growth — with their eyes always one year ahead.

For additional resources, benchmarking data, or to connect with the DIMENSIONAL team, visit dimensional.com.