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Managing Your Practice
2024 Wrapped: Practice Management Trends That Shaped the Year
01:19:43
Join Dimensional’s Practice Management team as they recap the top trends that shaped advisory firms in 2024 and share insights to help you succeed in the year ahead. From strategic planning and business scaling to managing talent and enhancing the...
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- [00:00]
A
Foreign thank you for joining us today. My name is Catherine Williams and I am head of Practice management here at Dimensional Fund Advisors. And in the work we do with advisors, both through our studies as well as consulting, we have an opportunity over the course of the year to engage in a lot of different conversations, a lot of different topics. There are many levers to be polling in an advisory business these days. So I am really looking forward to our conversation today because it's all about bringing some of those highlights to life in our discussion today. And to say that I have an all star panel I feel like would be an understatement. With me today are members of the practice management team from around the globe, quite literally, as you'll hear in just a moment. And this team, along with the remaining larger group of 15 members of the practice management team, have been working tirelessly over this year to help advisors think about their business, whether it's tech growth, human capital. M and A, of course, is always a big subject with so many organizations. And so we are going to spend the next 60 minutes or so, maybe a little longer than that, sharing with you what we've identified as being the top trends for 2024 from a practice management perspective. We're going to talk a little bit of data, but we're also going to really talk about some of the things we see advisors doing to be creative and thoughtful about their businesses. And by the way, I said top five trends, but there's a bonus one at the very end, so you get six. You're going to get as much bang for your buck as you possibly can with this podcast. So let me introduce our panels today and we will get going. I'm really pleased to first introduce Stephen Duman, who's regional director on the practice management team based in Austin. We're for those of you that have not had an opportunity to engage with Stephen. Stephen is our resident historian. We absolutely love when he can bring historical references and stories to life with our engagements. And so probably not surprisingly, to share with you that he started his career as a civics teacher in rural Texas and we are so thankful for his spirit around teaching and learning. And how do you translate that in the conversations we're having with advisors has had a really powerful impact. He's also the dad of two little ones, which are super cute as well. So Stephen, it's great to have you with us today.
- [02:23]
B
Great to be here. Thanks for having me. I'm excited. Longtime listener, first time caller or participant.
- [02:28]
A
I guess you don't have to say that it's okay, we can do that. So next, I want to introduce Dale Scaly. So Dale is based in our Meldon Australia. So at this recording, most of us on this recording are on halfway to the pub and Dale is halfway through his breakfast. But that's the nature of practice management. We are on at all times. Dale is a former advisor, former business owner, owner as of a boutique advisory business. Tons of experience and background working with advisors, has sat on that side of the table and was originally based in Perth, now based in Melbourne. Father of two daughters, two amazing kids as well. So super busy when he's not working. Dale, good morning. It's great to have you with us.
- [03:11]
C
Thank you, Katherine. Fantastic to be with you all today. Really looking forward to the chat. First time caller, long time. Oh, hang on, somebody's already used that one, but you know what I mean. Great to be here. Sorry Dale, sorry, I should have got in first.
- [03:23]
A
Damn, it's great to have you with us. Next, I want to introduce you to Cameron Logar. So Cameron is one of our, the newest members of our team. Although absolutely a veteran in working with advisors, she's had prior senior roles around sales enablement, advisor training, practice management as well. Joined us a little over a year ago. And Cameron, it's wonderful to have you with us today.
- [03:47]
D
Thank you so much. Excited to be here. I can't leave my children out too. So proud, proud mom to three.
- [03:53]
A
Proud mom of three under the age of seven, I want to say. Does that sound about right?
- [03:58]
D
Close, close. 8.
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A
We've had a birthday here recently.
- [04:01]
D
I love that.
- [04:02]
A
And also for those of you that don't know, Cameron is a certified yoga teacher. We love that and I think really shows in terms of the way that you care and show up for our clients as well too. There's, I think there's some. We could have a whole nother podcast on what the interchange is between those two. And last but absolutely not least, it's my pleasure to introduce Mark Colosso, regional director as well on the team, based in Charlotte, here with Cameron and I. Mark is a former advisor, was an Advisor for over 16 years, so has a ton of experience and understanding about what it means to sit on that side of the table to be thinking about your clients, building a business, working with, with, with clients really in all different levels, if you will. And so just a little bit about Mark, he is an avid. If you can't find him, he's probably running. That's what I always say. He's out there. How many marathons have big marathons. Have you done.
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E
Done five so far? I got six coming up in April.
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A
Okay. And then how many after the sixth one?
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E
I. I need one more to complete the now the six majors.
- [05:01]
A
So I love that. Well, now you've put it out here on the podcast, so it's gotta have.
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E
So it has to get done.
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A
Yeah, it has to get done. Mark, it's great to have you with us as well.
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E
Yeah, super excited about this. Thank you.
- [05:11]
A
Well, let's go ahead and dive on in. As I mentioned, we're going to highlight five trends that we've observed that we've been engaging with advisors with around the globe this year in the year of 2024, really kind of thinking about what's been coming up with firms, but also what are some of the ways that even as you begin to make that turn into a new year, you're thinking about your own business, you're thinking about the ways that you want to improve your business, grow your business or engage with your. Your people more. I think we'll. Hopefully you'll come away with some good ideas from our time today. And so number one, we're going to start kind of at a bigger, slightly bigger bucket, which is strategic planning. So that absolutely can sound like a big, wily concept, if you will. But we do see over and over again that organizations who are purposeful about their strategic planning put pen to paper around that, create accountability, socialize it within their businesses. Like all these things absolutely lend itself to a successful strategic plan that can really move the organization forward. One of the components of that that we often start with in our engagement when we're asked to come in, work with a leadership team, you maybe even work with an entire organization, is this idea of what are your mission, vision and values? Why do you exist? What are the guideposts for making the decisions in the business? Stephen, I'd love to start with you. Why do. As consultants, we start. We often start there or at least raise that question with firms when we're engaging with them around strategic plan.
- [06:39]
B
Yeah, I think simply it helps narrow your focus. It helps guide you when you need to make decisions as an organization. And it's. It sometimes seems obvious, but when you can fall back on those core principles, those core values, where you're headed, why are you heading there? Just think of climbing a mountain, right? It's like, gives you a map of how to get there. It's the guideposts along the way. And those values are, you know, how you're going to approach, approach that climb so it's critically important and something not to be overlooked.
- [07:12]
A
So I'm curious, maybe Cameron or Dale, I will ask, is there a harder component of those three?
- [07:19]
D
Cam I think what I would say is hardest to nail down are the values. And the reason being everybody's got to be engaged with the creation of those values. So, you know, mission. That's why, why does the firm exist, right? Why was it initially founded? Vision, often leadership led thinking about what do they see three, five, ten years out. But values really should be representative of the collective voice. And nailing that down takes some time, it takes some care, it takes some craft. So a lot of times I've seen firms successfully go about that by having team discussions where they're really throwing every noodle at the wall and then ultimately seeing what sticks and what resonates across the group.
- [08:09]
A
Dale, as organizations evolve, what components of this do you see stay the same, if any, or perhaps evolve over time as an organization grows?
- [08:19]
C
I find that what sort of stays the same and is, is always really important from the outset is actually really carving out the time to address this where if someone's in a small business, there's, there's a lot that needs to be done, larger businesses, a lot that needs to be done. And we have a tendency to sort of stay in the now and just address the, as they're arising and make decisions on the fly. There's a concept by Dr. Kerry Evans, he wrote a book called Perform Under Pressure. This concept of step back, step up and step in is the way that he puts it. And it's ensuring that as often as you possibly can, to step back from the business, to step up to that altitude of strategic planning of the mission, vision and values and then step in and address them rather than trying to again, just address things on the fly in the day to day. Because, you know, I don't think we've, in any profession, we've never been as busy as we are now. So just that importance to take the time to address this, I think is important at any level of business.
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A
I think you make an interesting point, you know, really treating it as a sort of a living, breathing organism as opposed to something that we, you know, maybe go offside and we have some cocktails maybe and figure it out and then it kind of goes on a shelf somewhere. I'm thinking about some of the firms that we've engaged with here in 2024, maybe a little bit in 2023, around mission vision, values. And this isn't a new company thing, this isn't a small company thing. This is, you know, a lot of the organizations we work with have been around for 15, 20, 25 years. And to your point, they're coming back to this. They're, they're revisiting now. Maybe that's because there's been maybe some M and A activity, maybe a succession has happened. And so you've got G2 as opposed to G1. But whatever those triggers are, it's certainly not something that is unique to a firm that just hung their shingle out today. Right. But it's absol. We see some of our more well established organizations focusing on. So Mark, when we think about strategic planning, mission vision, values, for sure, but we also want to be thinking about what are some of the, some of the KPIs, some of the ways that we want to think about measuring what we're doing in the business either today or we need to start measuring if we really want to know, is this plan that needs to become an action plan at some point, not just pontificating, actually taking shape. And we see real movement in the business. So with that in mind, what are some of the top metrics that you've seen organizations focusing in around when it comes to thinking about their strategic plan, where the business is headed?
- [10:42]
E
You know, Katherine reminds me of that Lewis Carroll quote, if you don't know where you want to go, it doesn't matter which path you take. And that's what we see from a lot of firms. Right. They struggle with what do I want to be right and how do I carry my mission through what we do? Yeah, first and foremost I would think about, based on expected revenue growth, what would my AUM look like? What would my number of clients look like? And I think importantly, how many employees will I have? A lot of the firms struggle with that last point. Do I want to manage 50, 100, 200 people in an effort to carry out my mission? Then we see some of the firms that really focus on some of the more unique KPIs, I'll call them, right. There are a lot of KPIs that we provide in the global advisory study, but things like effective fee, am I, am I charging on a consistent basis, what does that look like? One of my favorites, operating profit per senior advisor. Really an understanding of firm health there as well. And I think importantly, from a client facing standpoint, Net promoter score, it's an easy question to ask. We offer that in our global investor study, a great way to understand client sentiment.
- [11:41]
A
And certainly as we look at the high Performing firms in our Global Advisor study, which is a very specific criteria. So for those of you that are not familiar with our global benchmark study, and that criteria consists of client retention, employee retention, profit margin, revenue per advisor, and then of course revenue growth as well. So the five criteria, we dump them all together. Ultimately we look at the top quartile and those are our high performing firms. And I think all of us have observed with those organizations this idea of having a strategic plan, being purposeful about it, mapping it out, having those metrics as you just mentioned, Mark, really critical, but you've gotta be able to execute. So a question for each of you as you've looked at organizations that seem to be and Mark, I'll start with you. As you see, as you look at organizations that do seem to be executing on their plan, what are some of the behaviors or characteristics that you see in those organizations?
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E
Yeah, it's really interesting. One of the kind of seminal pieces on this, the four disciplines of execution, one of those key components is leading indicators versus lagging indicators. So as an example, if I want to bring in a certain number of client referrals, the number of client referrals that a firm brings in would be a lagging indicator while something like number of prospects met would be more of a leading indicator. And that subtle difference along with, as you mentioned, Katherine, accountability scoreboarding can really drive some of the initiatives for the firm.
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A
Steven, what have you observed in organizations that seem to be kind of hitting on these cylinders, so to speak?
- [13:11]
B
Yeah, I think firms that have a program or have some kind of framework like you know, one that's really popular is the EOS Entrepreneurial Operating System by Gina Wickman. But something that keeps you, holds you accountable. It's a framework for setting your core values and setting your targets for 10 year, 5 year, 3 year, 1 year. And you break it down into rocks. And it applies some of the aspects from Stephen Covey and Patrick Lencioni, some tried and true folks in the world of organizational management. But I think those disciplines around a framework or a structure is a good best practice.
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A
Dale, as you've worked with primarily organizations in Australia, New Zealand, and certainly recognizing that there's been a lot of change around on the industry in your part of the world as you do look at organizations that seem to be executing what are some of the things that you've observed?
- [14:06]
C
Some of the main observations for me is really the effect that it has on human capital and culture. So if there is a clearly defined vision, it's everybody has the ability to be on the same page, because there is a page, there is something to go on. You know, there was something that the firm can get behind. And second of all, you know, I found that the high performing firms, those who are gaining real traction, have a real tendency and they place a lot of importance on communication. So it's one thing to have a vision and to work towards a vision, but it's then the ability to articulate and communicate that, particularly internally with the staff, to ensure that that culture just becomes embedded in the firm and everybody is on the same page heading towards ultimately the owner's vision for the fir.
- [14:47]
A
Yeah, I think we've all seen examples of stepping into an organization and seeing examples of firms where the leader or leadership team has spent a great deal of time thinking about their strategic plan, mapping it out that they've not necessarily shared or socialized or really brought to the table the rest of the organization. That's a critical component. And it's not from a, even necessarily from a buy in perspective. It's from a, we can't get this done without you. This is the kind of culture and mindset we want to have in this organization, whether it's growth, whether it's the client experience, whatever it might be. And so we really, we have expectations that everyone in the organization is going to contribute. So I think you make a really good point around that. Cameron, any additional observations around what we see with organizations that seem to be fully executing or moving that strategic plan forward?
- [15:40]
D
I see firms connecting their overall firm goals, their objectives and key results with specifically what are the individuals responsible for? So that might come in the form of a scorecard or at least definition around, hey, these are firm goals. And here's how you as a senior advisor can help drive the client experience, which is going to be different from how do you as operations manager drive and impact the client experience. So bucketing out those core objectives for the firm and then identifying what are the specific actions, responsiveness possibilities for each role that align with those and setting a metric around them. So Mark talked earlier about the leading and lagging indicators. What does that look like? So for the senior advisor prospecting meeting example that he shared earlier is that two prospecting meetings a quarter, and then how are you looking back at it at the end of the year to say how far on or off were we and do we need to change the bar? Do we need to set the bar higher? How can we push ourselves further?
- [16:46]
A
I had an advisor say to me the other day, we want 1/4 strategy, 3/4 action when they look at the balance of the individual plans. And I thought, oh goodness, okay, well a glad I don't have to develop that for him. But it is that balance and that is where quite literally the rubber hits the road, so to speak. And you also create a mindset or a buy in when people can see how their individual contribution moves the needle on that strategic plan. I think it's a really important component for sure.
- [17:15]
D
And there's a benefit to talking about it as a team. I was speaking to a firm a couple of weeks ago. They have a business development power hour every two weeks where they sit down together, all of the senior advisors, they spend about the first hour together kind of talking through how are things going, what opportunities am I working through? Then they spend the next hour back at their desk using that time to work on those specific things that they were just talking about. So it's those types of things where to your point, putting in place some, some forums, some modalities. Modalities to be able to support that action as well and inspire one another that creates true results.
- [17:58]
A
All right, we could absolutely spend an hour talking about strategic planning. You can tell we're for those listening that we are incredibly passionate about. This is where you start, this is where you come back to not just at the end of the year or the beginning of a new year, but throughout the course of the year for sure. But you've thought about where you want to go strategically. The larger plan we now for trend number two, we absolutely have to think about what are the business operations, what are the efficiencies, some might even use the word scale that we ultimately are looking to achieve and what are some of the challenges around that. And so Mark, in our work with advisors this year, I know you've done, you know, you've been on an airplane almost as much as me, if not the same that in our work with advisors, when we do think about the business operations and really moving the organization forward. From that perspective, what are a couple variants that advisors seem to be bringing up with us, raising with us in our time?
- [18:50]
E
Big ones is scale. Like how do I create more scale out of the individual employees that I have? And that goes so far as to say who's responsible within my firm for working with certain types of relationships. And we talk about profitability per client and do advisors have a clear understanding of what their breakeven point is on a per client basis? And for those more advanced firms, do they have a break even point first segment of their clients as well?
- [19:15]
A
So how do you do that? How do you start? That's a big question. We're not going to unpack the whole thing, but just, you know, kind of off the top of your head. And others can chime in as well, like how do you really start moving that needle on how you scale the business over time?
- [19:31]
E
Yeah. My initial thought is to understand what your profitability is in the first place. Right. So one of the things we find consistently about the data in our study, we actually had the five year look back. Remarkably consistent. The old adage in our industry, 35% direct expenses, 40% in overhead, and 25% in profitability.
- [19:48]
A
We keep waiting for it to change. It's not happening.
- [19:51]
E
Yeah, exactly. Yeah. Literally over the last five years of the study, the average profitability has been 26%. So very consistent on that front. And then from there, like I mentioned before, understanding what the cost is to serve those relationships.
- [20:04]
A
Yeah. Okay. So how are fees and pricing factoring into that? It's another area we get asked about a lot.
- [20:10]
E
It's a very, very popular topic. Yeah, fees and pricing comes up more and more often. I think one of the things that we're able to do through the data that we have is we now have a dedicated data team within practice management and they took a look at the impact of adjusting fees on client retention. And not to bury the lead too much here, but what's most interesting, for the firms that raised fees over the last six years and the firms that did not raise fees, the difference in their client retention was less than half a percent.
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A
Yeah.
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E
As we like to position it, raising or adjusting fees tends to be more of an advisor issue than a client issue.
- [20:48]
A
I know we worked with a verm in the Midwest this year. Lots of planning, lots of conversations, lots of mapping and planning around what the communication with clients was going to look like. And I understand that one of the primary or most common questions they got from clients when they started calling them was what was I paying before? And that's not to say you can be casual about changing your fee structure. You should be incredibly purposeful about it. And we've got some resources. We're happy to, happy to share around that. But first and foremost, even going back to your profitability comment, get candid about it. Know exactly, really where the organization sits, understand what those numbers truly are, especially when you, you know, if you strip out market, you strip out some of these other things that can allow maybe some, some other numbers to kind of hide. Cameron, anything else? When we do think about business, efficiencies and some of the things that we've observed with organizations that might allow them to really start pursuing that scale in particular.
- [21:45]
D
This has probably been one of the two biggest conversations that I've had this year around capacity. Because firms largely feel like they're at capacity and they want to know do we need to hire or is there something broken within our system. We have a workflow problem, we have a technology problem. So some of the metrics that we look at to help sort of suss that out. One, we look at revenue per fte. We found that to be a more effective metric around capacity because as we all know, there's more that goes into supporting that client relationship than just the senior advisor. It's really that whole team, whether they're client facing or back office. So we look at revenue per FTE and the sweet spot we have found is around 350k per FTE. Once firms breach 400, it's time to hire. It's probably time to hire. The other metric that we found to be effective in looking at capacity is FTE per senior advisor. Senior advisors are often more expensive, but we also need to protect some of their capacity so that they can focus on growing the business, bringing in new business. So the more of a support and service ecosystem we have to help them, the more that they can do that. So we found our high performing firms have a ratio of four employees per every one senior advisor. So those are two of the metrics that we usually start with to say is this a talent issue, is this a headcount issue? Or do we need to dig into your processes around onboarding clients, around technologies, etc.
- [23:25]
A
Yeah, it's an interesting point. And Dale, I would love to get your perspective. Any other metrics that you think about this capacity in? Certainly even within our study, it's one of the top three challenges that organizations are citing even in the high performing firms for their ability to grow their business. But I think Cameron, you make a really good point around really getting purposeful to think about is this a capacity challenge or a resource challenge? Right. And those are two different things. Are we capacity constrained or resource constrained? Resource constrained usually is a temporary existence, something that can be solved. Thinking about, as you just described, technology workflows, maybe we, you know, we get another other body for a period of time versus capacity is really like we are stuck. And we see this in our data as well. Real capacity walls show up in organizations that are there. There's just a lot of tension there. So that's one way that we'll, we'll absolutely talk with firms about that. I love that. Dale, what's, what's been your perspective on this capacity which by the way is trend number three in our podcast here. If you're keeping up, if you're taking notes, we gave it its own trend number because it is something that we have been talking about with advisors all year long. Yeah.
- [24:36]
C
Following on from Cameron's point, it's certainly been the topic that majority of firms have been most concerned with at this point in time. And that revenue per FTE metric that Cameron mentioned as well is certainly one over here that there appears to have been a systemic shift in the firms in Australia. So just looking at the Australian numbers, the average was around 240,000 revenue per FTE for many years. We've seen in the last two years the high performing firms have pushed that beyond the 300,000. So this is in Australian dollars. So it sort of calibrates a little bit lower than the US numbers. And we've really dug into, you know, the reasons how, how are firms doing that? Because on the face of it, you'd think the firm is running too hot and it's not sustainable moving forward. They're going to have to employ some more people and there's been issues with employing people. One of the key concerns we get from firms is finding human capital has, has been an issue. So it's how are firms actually operating at these high levels of capacity? We certainly have seen those who are at that level of revenue per FTE that are running too hot and where it isn't sustainable and they will admit we do need to make some changes here. But we've also seen other firms who seem to be able to consistently maintain that higher level of capacity and drilling down on it. We found there were really three areas where they were actually really moving the needle. The first and probably most effective was the addressing of workflow processes. So that's, that's probably the one that's been, you know, that has moved the needle the most. We find year in, year out in, in the Global Advisor study, one of the key operational challenges continues to come up. Implementation of workflow processes. Maintaining workflow processes. Maintaining workflow. It came out so often that, you know, we started to think is this an issue? Why can't we just tick this box and move on to it, you know, and have a different challenge next year. But sometimes you sort of think, well the fact that it is coming up every year is showing that there are firms who are consistently addressing and readdressing and making sure that is always top of mind so that they can look for new and more efficient ways to do things. And the firms that are doing that, you know, we find are addressing at least this capacity issue. The second way that they've moved the needle has been the smart arrangement of human capital, arranging the client facing teams into team structures. That's something that I know it's been in existence in the US for some time. It's catching on more and more here. We found in last year's Global Advisor study across Australia, New Zealand, two thirds of firms actually have a defined team structure in place. So there's the ability to get that leverage out of the team structuring, but there's also the leverage that comes from culture. You know, it's a little bit harder to quantify, but it has been quantified that those who are really serving the values of the firm and reflecting the values of the firm are operating at those higher levels as well, which is giving you more productivity and more efficiencies inside the business. And the third area where capacity has been addressed has been technology itself as an overlay. So there's a lot of firms in fact, who are still on the search, on the lookout for that piece of technology that's going to revolutionize their business. And there are others as well, I guess, who are perhaps putting it in, in more of a rightful context and saying, you know, we've got our workflow processes task by task, process by process. What do we humanize and what do we robotize? You know, what can we actually get leverage from tech? And what, what are some tasks where we just have to leave the human element to it? If the technology can provide some enhancements and in a lot of cases it can. And I think it's got the ability, particularly moving forward with AI and others, to have more and more of an impact at this point in time. It's one of those three factors that we're seeing is really making a difference to firms when it comes to capacity.
- [28:05]
A
Yeah, Stephen, that AI piece, I know an area that you've had a number of conversations with firms about the impact of technology to not only solve for capacity, but for some other stressors in the business. What's that look like in your conversations with advisors this year?
- [28:20]
B
Yeah, I mean, just a cautionary tale on the artificial intelligence. There's been so much, you know, in the zeitgeist from the conversation around artificial intelligence, in particular generative artificial intelligence, like your ChatGPTs and your Geminis out there and the idea is that it will revolutionize or radically change. Just we're not seeing that quite yet in the advisory space. I think there's a lot of applications out there when it comes to note taking and helping with coordinating with the CRM and also around prospecting. But in terms of a quick fix silver bullet solution like Dale mentioned, no panacea yet. But I think, you know, one tip in that space when you're evaluating AI tools is do a quick effort impact analysis and analyze where's the greatest need, what are people spending the most time on, what's having the biggest impact, what's having a less of an impact for a lot of time. And it's a, it's a simple two by two matrix that you can do. You know, it's not gonna be perfect, but it'll help you narrow that field. Of what, of where an AI or other technological tool can, can fit in to help you scale.
- [29:33]
A
It's such great perspective and you're absolutely right. Even from a regulatory risk management standpoint, it is a cautionary area, if you will. A lot of organizations are in wait and see mode a little bit, but some organizations are absolutely moving forward and thinking about to your point. They've done an analysis, they see an opportunity. We know one firm in the Northwest that is implementing some technology that they believe will quite literally give advisors hours back in their week, which could translate to you can now take care of more clients. We know our high performing firms in particular, their senior advisor per household number sits right around 140. Most organizations, we feel like it's a pretty hefty number. It's actually a tick lower than the other firms. In our study, it flipped this year, but even at 140, 145, you know, that can still, that feels, you know, like a big number for a lot of organizations. So they're interested in how AI for example, could help solve for some of those, but proceeding with caution for sure. Cam and Dale, as you talked about that revenue per full time equivalent, our Global Advisor study turns 15 years old in 2025. That's a long standing metric in the study. We have seen it kind of hanging out for so long up until just really the last couple of years. Dale, you talked about the movement of that number in Australia, New Zealand as a percentage of movement. We're seeing something similar as well in emea. So it's across the board really beginning to move for a lot of the regions that we work with. We're going to keep an eye on that. But I think as both of you pointed out, you know, as you're thinking about how do I solve for capacity, how do I think about the metrics that can help me be informed on that? Mark, you mentioned a few as well at the top of our call. You know, that's the data, right. I think it's also really important to look at some things like, you know, is work getting done in a timely manner? Is it getting done in an air free manner? You know, I often sort of joke, not joke, you know, do people dive under their desk when you say we got a new client? You know, I think those are also things to look at as well too. What's the health and vitality of your culture and your people right now and those kinds of things? For sure we would ask about as we talk with firms about, you know, do you have a capacity problem in certain areas of the business or across the business? So you know, ways to think about that beyond, beyond the data as well too. We can't do our job and advisors can't do their job without people. Very important component. There might be days where we wish we might be able to do it. Speaking of AI. No, I'm just teasing for trend number four, Cameron, I'm going to start with you talent, your people and this is a big bucket. So we're going to boil it down into a couple of key areas. Again, we could talk a whole nother hour on this particular area. But what have you observed in our work with firms this year when it comes to people, what are those one or two things that are really coming up frequently or standing out for the firms we're working with?
- [32:20]
D
One is team structure. Firms are trying to think through as they grow. How do we structure for efficiency purposes to best support our rising talent, to best prepare for succession planning. So structure is a big one and then compensation is the other firms want to make sure that they're competitive with how they're compensating people both to attract talent and to retain talent. Incentive compensation structure in particular has been a big one in question. I think also as we see just demographics of advisors change over time, we have new generations of advisors coming in and their expectations around compensation are different. Not just in a dollar amount standpoint, but in that guaranteed anticipated compensation to what maybe the needs to work for or the firm needs to earn with, with certain metrics reach such as aum, firm profitability, et cetera.
- [33:26]
A
So let's talk a little bit more about that compensation and I do want to come back to team structure as well too. We've been talking about team structure for a while a minute, but it is still an area that we see organizations kind of wrestling with, but talking a little bit about compensation for just a few minutes. You know, when you talk with an organization, maybe even one that feels pretty good about their comp plan, what are some of the components that you see for an effective compensation plan overall within these organizations?
- [33:56]
D
We spent a lot of time on that this year because of all the questions that have been coming up. We do have a process that we're happy to walk firms who participate in the compensation section of the Global Advisor study through. But it starts with the strategy. You've got to have a very clear picture of what you're trying to accomplish with your compensation plan. The compensation plan should support your firm goals. So your firm might prioritize team harmony above all else, or your firm might prioritize business development or client experience. None of those are the wrong things to prioritize. It's just in conjunction with the culture and the values of your firm. So based on those values that you're prioritizing and how you're reflecting them in your written compensation philosophy, you're then building the structure off of that. I love when firms have some sort of a set governance committee in place to help support these compensation decisions because it's not a one and done thing. You know, you've continually got to be looking at your compensation plan. There may be unintended risks that just play out over time based on who you hire, based on how people move through your career pathways. And being able to look at that collectively as a team, sometimes pulling in external parties to help with that compensation governance committee can be helpful. So starting with that strategic side, the compensation philosophy, and then moving into the structure, the benchmarking and the review pieces.
- [35:31]
A
We often talk about the three Cs around compensation as well. And the other two Cs in addition to comp are the culture and the career journey or career pathing. And that you kind of not kind of. You need to pull on all three of those over time anyway as an organization evolves. Mark, what's been your observation when it comes to compensation? What are advisors maybe asking questions around or feeling the most challenged by some of the observations, some of the things you've seen.
- [35:58]
B
Yeah.
- [35:58]
E
To echo Cameron's point, I think one of the biggest struggles is that advisors come to us and they ask, what should I pay somebody? And to go back to the Simon Sinek, you know, start with why I need to know why you pay somebody. Through compensation philosophy, how you pay somebody structurally, and then we can talk about what the numbers should be. And so, Katherine, as it relates to firm culture, I should be able to look at your compensation plan and understand the firm culture. Right? And I think importantly, beyond career pathing itself, is also to understand based on the role, like what do job descriptions look like, how much time should a senior advisor spend servicing existing clients versus business development, for example? And being very clear about that can be helpful as you set up your compensation plan.
- [36:42]
A
We do still step into organizations. It's kind of hard to believe, but I suppose that's a little bit of why we have a job too, that they are looking to drive growth. They're looking to, as Cam said, they've got this very specific vision for the business, and their comp plan doesn't do anything to reward, recognize, or quite, you know, honestly incentivize what they're ultimately trying. So how do you get those, those in alignment? Cam, you, you touched on this. You know, we think about it in terms of a compensation philosophy statement. Just like you would have your values around the business, your, your client engagement philosophy, having a comp philosophy is, is absolutely part of that as well.
- [37:22]
D
We see about 3,4 of firms in our study offering some sort of incentive compensation structure. But there's so much variance in how they do that because you've got a handful of different types of incentive compensation. You know, you have an individual performance bonus, you have a firm profitability bonus, you have a business development bonus, you have a servicing bonus, you can have ad hoc bonuses. Right? So each firm has their own blend of one or more of one of those different incentive compensation. So there's no one right way to do it. Again, as Mark said, it's got to fit with the culture.
- [38:01]
A
And Steven and Dale, I know you've seen this as well. So it's, you know, you come up with a comp plan and this is also sometimes where we get a phone call of, okay, I've got to implement this. I've got to, you know, I've actually got to start making those changes within the business. What are some of the ways that you've seen organizations maybe in, you know, the right way, begin to implement changes to comp plans within organizations? Have you observed any of that?
- [38:28]
C
Certainly observed that in Australia over the last five years or thereabouts. We've had an issue in this country where There was about 27 and a half thousand financial advisors seven years ago, and that number dropped to about 15 and a half thousand over that time period. So there's been a lot of systemic change throughout the industry or throughout the profession. And four years ago there was the implementation of the professional year. So it's the ability for a firm to take on. It's usually a graduate or it might be someone from another industry or someone who isn't yet registered or authorized to be a financial advisor and train them up for a year and then embed them within the business and then they will go on, on their journey. So the second C that you mentioned, Catherine, of Career Journey is becoming, you know, really the most important. It's the ability to embed that career journey and that advancement plan inside the comp strategy. So it's not only what you're paying now, but what you are able to deliver moving forward. Because one of the biggest fears that firms have, obviously in this environment is that you can bring on someone and do their professional year. Because we're in desperate need of financial advisors, they can do that professionally. You need to get trained up, get authorized, and then move on somewhere else, you know, so take all that training and leave. So that career progression is, is all important. Embedding that not only the, the compensation plan but the business itself, that this is, you know, how you can advance from it. It's got implications then for the roles and role clarity. So, you know, this is the role of an associate advisor. When you move into perhaps a service advisor. This is, you know, what that role entails and what that role will entitle you to in terms of compensation, in terms of roles and responsibilities and accountability. And then there's perhaps an ascension plan up the senior advisor and wherever as well. So it's just becoming all important here that we've got that clarity in place moving forward.
- [40:07]
B
Yeah, I'll just add to what Dale's saying. I think that's why growth is so important. Right. If you're having stagnant growth, that's going to limit the career paths and potential development of your people. So, you know, when you're, if you're a younger employee listening to this out there, like look at the growth rate of your firms and you know, really press on that because that's, that's an important aspect of, of your future right there. The other thing I'll just say about comp is simplicity is key. You know, we've, I've seen in some study groups that we've, we've done a dimensional where principals will go around and try to explain their comp to each other. And it's like quantum mechanics. I Mean, it gets really complicated. And so if the principals are having trouble describing it, imagine how different individuals at different levels of the organization have trouble. So the simpler you can make it, the better. The other thing I'll say about comp that I think is really important is equity. And by equity, I don't mean ownership. I mean fairness. And if you have any doubts about the importance of this, watch YouTube Capuchin Monkeys and fairness and equity around when people feel like there's not fairness or not equity within an organization, that can really sow discontent. So the adage of. I think I'm borrowing from one of Philip Palvive's isms, but if, you know, if the. If the comp for the whole organization were left on the copy machine, could people look at it and be like, yep, that's about right. Or would there be outrage? And that's sometimes be a gut check for a lot of firms out there.
- [41:42]
A
Yeah, yeah, such a good point. Fairness and sameness are not the same. Right. I mean, I probably could have said that a lot better, but you're absolutely right. And it in being purposeful about it, and it has to be fair. It has to make sense and has to be clear. Right. Just as roles have to be clear, expectations have to be clear. Dale, you mentioned the accountability piece, which I think is really important, and we've all worked with advisors this year to really help strengthen that across their teams. You know, I was thinking most recently, you know, Dave Devoe talking at our practice management symposium about, he calls essentially business development for a lot of organizations, he would call a business development payout discretionary, which you could see half the room at least, if not 3/4, was like, what? Wait a minute, that's not discretionary. They bring in new business, I pay them. The reason why it's discretionary, and we see this in the firms we work with as well too, is that you position that incentive compensation as if you bring a new business, we will pay you. And so there's an accountability factor, There's a role clarity factor. If you're calling somebody a senior advisor or a lead wealth advisor or whatever title, you get points for creativity in this industry in a few ways, and titles are one of them. But if you're doing that, be clear on expectations that they must be bringing new business into the organization or not. Right? Call them a service advisor, whatever you want to do, but just be clear on that. We've got a bit of a challenge now in a lot of the firms we're working with where they've sort of lumped all the advisors together and for all intents purposes, if they bring in new business, it's kind of discretionary in that they can sort of choose to do that or not versus it's part of their job. So that accountability piece is really important as well too. We've talked about strategic planning, we've talked about business operations. How do you position the organization to scale over time? How do you overcome capacity challenges within the business? And how do you think about your people, particularly in this area of the compensation which we've talked quite a bit about. Cameron, you mentioned team structure. It's been brought up a few times over the course of our conversation already. Why is that so important and what are some of the trends or some of the behaviors you're observing with teams and organizations?
- [43:53]
D
Firms stress about what shape they should structure their organization. And we all know the shapes, right? We've all heard the shapes. Pick your shape. I think it's less about the shape and more about three things. How does your org structure reflect decision making and allow for good decision making with clarity over who is responsible for what? The second thing is, how can it reflect career paths both on the client facing side as well as the operational side. So that should be very clear when you're looking at your organization chart as well. And the third is scale. If you have multiple people in the same role, how can you cross train? How can you share resources so they can tap in and support one another when there is someone out, when there is unexpected work that's coming into the pipeline? So I would focus less on again the shape and think through the decision making, career pathing and scale components.
- [44:54]
A
I love that and I know many of us have worked with firms to think about not just that client facing team, but the overall, we'll call it organizational structure. What does that look like today? But what's the futuristic org chart that you might need to start mapping out roles that you don't even need or have today? But certainly as you said, could inform some a little bit around career pathing, but also could talk to how we're going to stay in front of capacity challenges as the business continues to evolve. And it's never a life sentence. But that futuristic org chart is something that we see some organizations really leaning in around.
- [45:28]
D
That's right. And sometimes lately with firms, we'll even design two future state org charts. They're growing at such pace that we're having to think about what does your organization look like in 2026 and what does your organization look like in 2028, you'll identify roles that you need to perhaps hire for in the future that don't even exist today. And there's going to have to be some priorit. Which roles do we hire and when and at what point do we need to say hey, we have to stop wearing four hats a person and start to build out some of these specialized roles either at the C suite level or the individual contributor level.
- [46:07]
A
We often talk with high performing firms about that team structure and how that's very much in play for those organizations. But the other two components that we frequently see with high performing firms, and this isn't a mid or big firm sort of solution necessarily or exclusively, but centralized operations as much as you possibly can. We were talking about scale earlier. You know, get purposeful about that. What are those responsibilities, those duties which by the way could be one of 12 things that are sitting on one person's plate right now. But is there opportunity over time to really centralize some of those pieces so that they're done if you know the same the same way each time, they're leveraging technology wherever possible. And then the other piece that we are seeing in play with a lot of the high performing firms is this idea of more specialized roles. So maybe it's an onboarding specialist to help with that bubble that happens or that lift that happens when you're onboarding new clients. But it could also be specialized roles that are kind of taking some of the weight off of the advisor's shoulders and having to know everything for their clients. So it could be an insurance specialist, it could be estate planning specialist, family office even. But really thinking about some of the, we see some of those more specialized roles which of course could be sort of an outsourced opportunity. But we also see some of the, some organizations bringing those resources in house for purposes of alleviating some of the bottlenecks and some of the capacity constraints, the stressors that can show up around that client facing team as well too. So we've talked about strategic planning, we've talked about how we're going to scale the business over time. Right? Really, really big on that. Thinking about the operational efficiencies and solving for capacity. That is absolutely an area that we've been spending a lot of time with organizations this year. We've been talking about our talent. How do we think about role clarity, compensation, what really drives the business forward when it comes to the people. So trend number five, for those of you that are following along, we're down to just a Couple of big buckets, if you will. And trend number five is the client experience. This is absolutely critical. I would offer it's getting harder and harder to differentiate yourself with regard to that client experience, but it is critical. It's why we see super high retention rate with our high performing firms. We know if you're growing through client referrals that the first thing you need to do is deliver a referable experience. Right. That's first and foremost. So really important area that we spend a lot of time with clients helping them think about. And a little bit like, you know, as Cam said, pick any team structure as long you know, you can be creative around that. Your client experience should, in my opinion, feel unique at the end of the day, it should feel unique internally and hopefully you're finding a way to help that feel unique for your clients. So I want to talk about that a little bit more. And Stephen, I'm going to start with you. What's the thing that we tend to start with whether you're a five minute old firm or a 500 minute old firm, to really think about the client experience? There's three magical words I know we often start with in our time.
- [49:04]
B
Yeah, I think you're talking about that target client profile that we, you know, harp on a lot. I, I just love the client experience. It's, it's core to dimensional who we are as a firm. You, you hear Dave Butler and Gerard talk about, you know, a great investment experience for clients. And part of giving clients a great investment experience is that peace of mind. And as an advisor, you've got their back. You've, when they put their head on their pillow at night, you're looking out for them. And that target client profile is so important in that equation because if you end up trying to be everything to everyone, you end up being meaningful to no one is, I'm trying to, to get at it. But it's so important because again, if you sit down with the marketing professional, you, if you hired a marketing consultant, the first thing they would do they is they'd say, okay, let's narrow your, your universe. Tell me who it is that you want to target. And I don't want to know just assets or revenue. I want to know everything about the way they tick, what do they think about, what are their values, what's important to them. Psychographics, demographics, you know, go way beyond just how a typical advisor may think about segmenting their clients. And the last thing I'll say, we do a great job with the women and wealth forum, and I was sharing the target client profile information, and an advisor kind of stopped me dead in my tracks. And she said, you know, what we do is we take this to the next level. We take our target client profile and we create an avatar. We name that Persona, and then we wake up in the morning and we think about what does that person do when she wakes up in the morning? What does she have for breakfast? What does she listen to? What news does she consume? What's on her mind? I mean, they walk through the psychology of literally step by step. And I think that's just such a good. That's like, definitely next level. But it's. It's a good reminder of where. Where you can go with that.
- [51:05]
A
So if we think about the target client profile, which certainly you can have more than one, just be incredibly disciplined and purposeful about the ones that you have. But if you've captured demographics, you've thought about the psychographics, you've thought about the behaviors, the value systems of the clients that you most want to work with, how does that then show up in the client experience? What can you do with that information to really help deliver an exceptional experience? We know client retention rates are high. In general, I feel like you kind of have to work hard. I say that very carefully, to lose a client. Clients are moving around, though, so don't get us wrong. But what do you do with that information? Have you seen that be used in some of the firms we work with? Anyone can chime in on that one, I guess.
- [51:49]
C
Catherine. This one that I found particularly valuable to look at when I was starting my business in Perth, we had a look at the clients who we took on board initially and literally built our target client Persona around a handful of existing clients that we had that we realized that we could serve them really well. So it was a little bit of reverse engineering to some extent. And then we listened to them. You know, we really, you know, question them on what. What do you see as being the most importance from an advisory relationship? What are the things that you're really looking for? What can we provide you with? And I'm giving an example. We talk about the four Cs when it comes to the client experience. One being competence, showing that you are competent to deliver on what you can deliver. Another one is convenience. So being able to provide convenience in the services that you offer. There's coaching and then there's continuity involving the whole family. It was the convenience piece that stuck out to us. So we were dealing with corporate executives across Perth Western Australia, these people we were dealing with were particularly busy. And we actually wrote a white paper on what the implications of the busyness that they were having in their professional lives was. You know, what effect was that having on their personal financial lives. At the end of the day, what we determined was, is that these people were extremely time constrained. So to offer convenience and make sure that all meetings were kept to a maximum of 45 minutes that we met in the client's premises to do as much work as possible if there was anything that could be done administratively, sending emails wasn't the most efficient way to go about things. So we try and get a staff member to actually go to the office to get documents signed and to explain documents and whatnot as well. So offering that convenience, so that became a part of the client experience. And it came about from us just really observing what the needs of our target clients were.
- [53:35]
D
I also say, tell your clients, you know, let them know what your target client profile is and why you're best designed to serve them. So we use a framework around the value proposition called the four Cs, and part of that is competence, but continuity, coaching and convenience are the other Cs and that should sound unique based on what you offer for your target client profile. So one that's going to help them feel confident that they're working with the right team, but it's also going to help you with bringing in future referrals to your business.
- [54:18]
A
I think it's so true. I love that both you and Dale mentioned that the 4C's framework, because that quite literally is a framework that we use to understand this with the advisors. So Stephen, we have a global investor study that just here in 2024, as a milestone marker cleared 100,000 end clients. So it warms our data hearts here at Dimensional. We got lots of data to look at on that. You've been one of the early and chief architects of that study over time. So Stephen, when you think about all of the millions of pieces of data that we've gathered in the Global Investor study, with those a hundred thousand end clients, what stands out to you?
- [54:56]
B
Yeah, a couple points in particular. First is when we look at that net promoter score, how likely someone is to recommend, it is lights out. So advisors are doing a tremendous job in terms of their ability to build trust to a level where clients are willing to put their own reputation on the line to recommend their advisor to a friend or colleague. So that is awesome and it's a great metric for firms to use. Second is when we look at what clients really value and what matters to them and what attributes they're looking for. You know, especially for those promoters, those people who are your champions that are in your corner. When we look at what they value most, the metrics around sense of security, peace of mind, progress towards my goals, knowledge of my personal financial situation are consistently in the top three over things like investment returns. And that's just a powerful reminder because oftentimes advisors like to tout the returns or like to tout what they can do from a perspective around the competency is to go back to the 4C framework. But these other areas are super important. And then the other one I'll share. I'm going to kick this over to Mark because he's so good at describing this is the Ayers question. I always refer to this as Mark's favorite question, but it's such a, it stands out in the data year after year. And so Mark, to put you on the spot, you shine when you talk about this one. So I'm kicking it to you.
- [56:24]
E
It's only because I forced that question into the Global Investor study. Cameron had mentioned continuity. One of the questions we have in the Global Investor study is is it your expectation that your assets remain under your advisor's care upon passing to your heirs that that one question alone could engage with the next gen of of your clients just for that on that basis alone. So, and what's interesting that promoters, yeah, not the majority, but greater than 40% do want their assets to be maintained by their advisor when those assets pass between generations, meaning you have a great opportunity for those that are willing to refer also to engage with the next gen of clients.
- [57:01]
A
And I think Mark, one of the, you know, and Dale, you touched on this in terms of the cliented client Advisory Board. If you're an organization that is either unsure or does want to be incredibly purposeful about the beneficiaries, it can be an opportunity to get some of those folks into a room and just understand what is important to them. What do they look for in an advisory relationship? How can that advisor meet their needs? And we have some best practices. We're always happy to share. But we know from our study a few years ago that while it is the least used form of client feedback and you know, I think I echo all of you when I say wow, I think our Global investor study is absolutely the way to get feedback from your clients. Just be getting feedback. There's other ways to do that. Be purposeful about it. Client Advisory board is one of them. It was the least used, but it was the most highly ranked mechanism relative to effectiveness and satisfaction. And so. So all that to say if there's clients, whether they're next gen, as Mark was just describing the beneficiaries. Maybe it's a different kind of client that you really want to know are first and foremost, are we delivering an exceptional client experience to them? And if we want to get more of them, what might we learn from them? Get in front of those folks and really kind of pick your brain. Steven, your points are very valuable. When clients actually do they want to help you, they want to tell you they absolutely want to be asked. So that client experience is really critical. That was our trend number five. But it absolutely leads us to the bonus trend that we're going to talk about here for just a few minutes. Because so many advisors rely on client referrals, COI referrals to grow their business. So the bonus trend that we're going to talk about, that we talk about all year long, sometimes on weekends and definitely around the globe, is growth. We're going to break that into a couple pieces here. We're going to talk a little bit about organic growth. We're going to talk a little bit about inorganic growth in our remaining time before we close out our session here today. So when we think about organic growth, Mark, I'll start with you. Let's start with the numbers. Are firms actually growing? It's probably not too revolutionary to answer that question. I probably wouldn't be asking it if the answer was what we think it is. But how do we think about organic growth? What are we seeing in most organizations these days?
- [59:12]
E
Yeah, so firms are growing, to be fair, but I think it's where they're growing through. For those of you who may have read the McKinsey white paper tailwinds to Cross Currents, they did a study between 2012 and 2021 that indicated that 70% of faster growth was market related, meaning only 30% over the last of that 10 year period was either organic or inorganic. Now luckily in our Global Advisor study, the firm's doing a little bit better collectively. So over the last six years, if we strip out market performance, the average organic and inorganic growth combined 6% for those firms in our study. So firms are growing and yes, client referrals is somewhere between 48 to 53% of the most common sources of new clients for the average firm.
- [59:56]
A
And you're right, we do see a slightly higher organic growth rate in our study. I know, you know, I had, I did a Had an opportunity to sit down with Lisa Salvi, who runs the Schwab study on a prior podcast. They're looking at those growth rates as well too. Generally speaking, we know for our high performing firms in our 2024 Global Advisor Study that their year over year, so this would have been for the calendar year 2023, their year over year revenue growth rate median was 14.4%. But you strip out M and A, you strip out the market and you can see where we get down into that, you know, 5, 6, 7% range pretty quickly for a lot of those organizations. So, okay, so we know organic growth, they are growing. Maybe they'd like to grow faster, maybe they'd like to grow at a greater clip, if you will. Where are they setting client referrals and COIs aside? Dale, I'd love to start with you. Any other channels or opportunities that you're seeing? Advisors drive growth? We talk a lot about the client referral growth and COI growth, but, but any that stand out to you as some, maybe some untapped opportunities for organic growth with firms?
- [61:04]
C
It's a good question because it's oftentimes the question that we get when we publish the Global Advisor study results. So Global Advisor study results come out, we show high performing firms growing by 12%, non high performing firms 4%, which was the case across Australia, New Zealand next year. And so the first question we generally ask is, how are high performing firms doing this? What's their secret? And businesses will come to us and say, you know, what's the magic bullet when it comes to growth at this point in time? In all honesty, year in, year out, referrals from existing clients, referrals from COIs tend to be the two mainstays. So there's not often this untapped areas certainly that I'm finding we've seen a little bit of an increase in digital marketing. Some of that's actually coming through from other channels. So businesses are ensuring they have a really convenient website, a website that really describes their target client well and has the ability, ability for someone who engages with that website, who gets a sense of okay, the this firm deals with clients like me. You can get them engaging with the actual firm. However, that prospect often times came to that website through a referral from an existing client or a referral from a coi and they're checking out the firm. It's sort of like a secondary means of coming through. So we've seen it's still persistently the referrals from existing clients. It's the referrals from the cois that are working. And oftentimes, you know, they're working better for some firms than others because of things like with areas that we've already spoken about, you know, they, they do have capacity to take on clients at this point in time as well. They have worked on the client experience and their target client profile to ensure that that is really clear. The firms who they add the most value to, you know, often say that if, if you're on the website of an advice firm, the probably the most clicked on button was the about us. You know, at a point in time where you've got the bios and you get to, to know the people, you can establish reform. The most clicked on nowadays is the who we serve. It's that clear articulation of the target client. If that's clear, then the prospect is going to want to deal with you because they get that sense of this firm has experience with clients like me. So I don't mean to evade your question, but you know, in terms of other, other than digital marketing, which may be bleeding through from those other areas, the mainstays just remain and it's, it's possibly in some ways just so simple. It's been made difficult that firms are now putting processes around eliciting referrals from existing clients and not just leaving it to chance, you know, these sorts of things.
- [63:30]
A
Yeah, and I'll definitely let Mark, Steven and Cameron weigh in as well too. But I think you make an interesting point. You know, I often encourage advisors because so many prospective clients do come by way of a referral. Right. You know, the client, you know, Patty or Bob sent that person over or that particular coi. So the question that I encourage advisors to consider asking either as a prospect or when they decide to join you and come on board, is what are all the ways you check this out? Because to your point, they may get a really warm, you know, referral, warm connection. We can talk all day long about the differences between global investor and global advisor studies in terms of clients who say they've referred versus what advisors are actually seeing. That's a whole nother podcast. But the reality is really understanding what are all the ways that client may have checked you out. And if they don't see you out there, they don't see a strong digital storefront or they see you in the community, whatever it might be, it could have an impact on their willingness to work with you over time. So I do think that digital piece is in play. Mark, Stephen and Cam, anything that you've observed in the US is maybe some untapped or some opportunities.
- [64:37]
B
I've got a hot take on this one. So my hot take is that firms today have over indexed or over hired farmers instead of hunters. And what do I mean by that? That as the evolution of our business has moved from investments to holistic wealth planning to the client experience, we've put a lot of emphasis on really servicing and doing a great job servicing existing clients. And that's the farmers like doing a great job cultivating, growing the relationship. And that is so important. But I think in doing that, we've neglected that business development arm or in its atrophy. And we need to put more effort around training and developing people to go out and get new business advisors, to go get business senior advisors and all the different levels of folks that work with clients. There should be some training and development around. What does a conversation look like when you're at a birthday party and someone asks, what do you do? I think about this through my lens. You know, I go to a birthday party and you know, someone asked that and it's like, okay, here I go, I can practice this now. And a lot of advisors who have been in the industry for a long time, they cut their teeth cold calling, you know, and they have the battle scars to test it. And it's proven and new younger employees don't have that. And they're, and they do a great job. I don't want to discredit the job they're doing, but there's, there could be more development and training around going out and getting new business that way.
- [66:10]
A
So from a data perspective, Stephen, to your point, the number you're looking back a few years, it's from a channel of growth, 10%, 11%, 13% this year. So it's maybe glacial in its movement, if you will, but that channel of growth of advisors. So this is straight up the advisor's ability to go build their own network, identify their own opportunities separate from the client referral. And you know, there's, there's overlap a little bit, but we're slowly seeing that particular channel of growth increase over the last few years. We'll of course be looking at it again in our 2025 study.
- [66:48]
E
Yeah, so Stephen's point, we kind of joke that the best way to get out of a conversation in a social setting is to tell somebody you're a financial advisor.
- [66:55]
A
Right.
- [66:56]
E
We need to be prepared to have those conversations in a different manner. But Catherine, to your previous point, we've had some advisors and Some advisory firms have success using our 12 channels of growth and then deciding, making a conscious decision through which channel do they want to grow. Is that client referrals, is that COIs, is it events, et cetera. And being more mindful, one of the frameworks we've created, what is the strategy that goes into each channel? What's the education that's required? What are the activities we're going to track and what are the resources that we need to execute our strategy?
- [67:26]
A
And you've got to have the skills, right? Cameron, as I was saying earlier, if you're a lead advisor or senior advisor, as we define in our study, versus a service advisor, you've got to have skills, you got to have time, you got a capacity, and they should be compensated for that. I know that's an area you've worked with a lot of firms on. We talked about the comp piece a little bit, a little bit earlier.
- [67:44]
D
Yeah. And, you know, connecting some of these points. A lot of times I'll hear advisors say it's tough for our G2 advisors or our younger advisors to do business development because they're not running in circles with people that meet the firm's target client profile. And so can they bring in clients that are below the firm minimum? And my answer is usually no, because your firm is firm target client profile. Is your firm target client profile. If you've strategically built out a separate segment of growing individuals who are still very much in wealth accumulation, who show high earnings promise, then build that into your strategy and have a specific segment around that. I've seen some firms do a really interesting incentive compensation structure for clients that hit different revenue break points. So, for example, if you're bringing in a client that's bringing in, let's just say, less than $5,000 in revenue, you could bring that client in. We're actually only going to pay you 10 basis points on that as your business development. And then imagine different break points that go up from there, where let's say you're, you're bringing in a client that's bringing in 30,000 of revenue each year, you might make 40% in, in business development. So I would say just be about not saying, all right, just because we want these younger folks to get their business development reps, we're going to all of a sudden start taking these smaller accounts. Because that can get really tricky from a capacity standpoint.
- [69:19]
A
Absolutely. I think to absolutely reinforce the point you're making, be purposeful, be strategic, have a very specific structure in place. If you are going to treat it like its own business line, not a, hey, we're going to think about it on 3 o' clock on a Friday afternoon and we'll just sort of slot them in. And by the way, we have one service model. You know, all clients get the same services. So that segmentation the service models and to your point, absolutely have structure around that and give adequate resources to it. Don't treat it like as sort of an afterthought. Sometimes even just the way we communicate that as leaders, as G1 to G2 is like, oh yeah, you, you know, go, you can kind of go play around with that.
- [69:58]
D
And there, there are absolutely great training programs and resources out there that exist. One that we're huge fans of here is Philip Pahlaviv. He came up earlier, his G2 Leadership Institute, but also just mentoring. That's actually a big trend that we've seen over the last year or two is there's an increase, particularly among high performing firms, moving away from these structured onboarding training programs more towards a social learning element where they're having specific opportunities in a more formal way to learn from the more seasoned advisors through an established mentorship program, conferences, participating in study groups. Those are some other increases that we've seen to, to help these advisors get up to speed on business development specifically.
- [70:48]
A
Well, to round out our conversation around growth. And then we're going to close out our time today because again, first of all, if you're, if you haven't picked up on this, we love talking to each other about all the work we get to do with clients, but lots of GR around to cover. It's certainly. I'm going to ask everyone on the podcast today to share, you know, if there's one thing that a firm could really, really do well or focus in around for 2025, what might that be? Because as we all know from strategic planning sessions, we end up with hundreds, well, maybe not hundreds, but dozens of post its on the wall, lots of whiteboarding. You cannot do everything. You cannot boil the ocean, as I often say. And so if you could only do One thing in 2025, I'm going to ask each of my panelists to answer that question. But I'll finish by talking just a little bit about the M and A landscape. It absolutely continues to be a driver in this industry. And we're on tap to see about. According to some of the third party data, we look at between 250 to 285 transactions here in the US alone. We know M and A is kicking up Even, even just for succession purposes in EMEA and Australia as well too. But it's still a very much, to borrow Stephen's phrase earlier, it's a cautionary tale. You know, it's not for everyone. You have to be incredibly just. We've been talking about having a very focused strategy for organic growth. You've got to have the same for the inorganic piece as well. Drivers for inorganic activity. These days I'm hearing from the firms that I talk with and I think my panel would agree with me. How do we acquire talent? How do we acquire services and skills that allow us to in fact pursue organic growth? Right. Like how do we overcome capacity challenges? We know from our high performing firms that they tend to deliver a broader set of services to their clients. So how do you get access to that? And that all leads to scale over time. But if you're not careful, all you've done is two firms have hitched their wagon together and scale and efficiencies don't ever really get there. That's sometimes where we get a phone call after a deal's been done. Very important to consider that we're certainly having lots of conversations with organizations. It's why we do our deals in succession conference every year. Inorganic opportunities are very real and they can be an incredibly powerful strategic mode of growth in your organization. You know, certainly proceed with caution and know that despite the media of which this podcast is part of that, I suppose that more deals don't happen than do happen. Take that phone call from someone that's maybe calling you for the third or fourth or 10th time, maybe just to understand a little bit about what your own deal breakers are going to look like, what the pressure points are going to be. If you're thinking about some sort of M and A activity, get out there and start, you know, start flexing that muscle a little bit. But absolutely know that it's still harder to get a deal done than it is to, you know, than not these days. I, I, my, my team sort of laughing and nodding their heads on that. So five top trends plus bonus. We always want to give bonus wherever we can. Going around the horn. Dale, I'm going to start with you. If a firm can do one thing really, really well in 2025, what would that be?
- [73:49]
C
Have I only got one?
- [73:50]
A
Just one.
- [73:51]
C
Okay. All right.
- [73:52]
A
Your colleagues will come hunt you down if you take them all, so.
- [73:54]
C
Sure thing. I, you know, we started this podcast talking about mission, vision and values, talking about the core, why the business, and, and I believe that was really For a reason. Looking at the firms who have gained traction, who've moved forward, who've been able to navigate their way through this relationship, the common thing that I see is that they've made a habit out of their strategic plan planning. It's not a one and done. It's not something that you can just tend to now and, and then put on the shelf and say okay, we'll revisit it in years time. So I would say make a habit, carve out the time of your strategic planning, continue to step back from the business, step up and step in at that mission, vision and values at that core Y level. I think that's what's what's going to move the needle the most.
- [74:33]
D
Cameron, Mine's similar to Dale's and it's really stop thinking about 2025 and start thinking about 2026. Because once you're in 2025 everything should be emotion, you should be in action and we should be anticipating how, how are we setting our sights on the future? So continue to be proactive and anticipate.
- [74:54]
A
Yeah, so true Mark.
- [74:56]
E
Otherwise Stephen was going to take mine. Oh yeah, definitely. In this, in this industry, what gets measured gets managed. Let's put some numbers up there again as we talked at the beginning of our conversation about some leading indicators, what are the activities that we can control that will focus or allow us to execute our strategic plan going forward?
- [75:13]
A
Yeah. And socialize them across your organization. They shouldn't just sit in a particular team or with one person. Yeah. Steven, what's one thing if an organization does one thing in 2025, what's one thing you'd love to see firms focus in around?
- [75:28]
B
It's a no brainer. You can hit all the bells that were just mentioned. You get good metrics, good data around your client experience, you hit on your core. Why to your clients you can reinforce that value to help you grow. It's available to you from Dimensional and to quote one of my favorite advisors that we get to work with, that investor study is the easiest thing since sliced bread. So go ahead and take advantage of it. We put time in that it's based on your input and feedback from the advisor community. So it's there for you.
- [76:02]
A
It's such a powerful mechanism. And if you're listening today and you don't currently work with Dimensional, we would say find a mechanism to measure feedback from your client. To Steven's point of your clients, it's so critical. And Steve, one of the things I love is that you often say to firms that have done the study. If you're ever having a bad day, just go open up the verbatim responses. You know, it's important to also make sure you get reinforcement around the great things that you're doing in the business and you need to be sure to continue to do those things as well. Great, great advice. And you know, for me, I think what I would offer is pay attention to your people and make sure that there's clarity on what you need from them and their contribution to the organization. If you're growing rapidly, if you've had M and A activity or succession activity, all those things, you know, can and or even just a firm that is sort of of evolved and everybody's wearing a few different hats that can get squishy, it can get cloudy and that can have an impact on productivity. Profitability certainly can have an impact on the culture of your business. So be purposeful about where your folks sit in your business. What does the organization need to thrive and then as you add bodies into that process, how can you help each individual thrive and contribute to your business? It's something we want to continue to pay pay very close attention to. So with that I'm going to go ahead and close out our time. This has been really, really fun. Great conversation and thank you Mark, Dale, Cameron and Steven for the work that you do. We have other RDs on the team as well. I just, I couldn't have you all on the podcast. It would be a lot of voices. Thanks for representing the 15 member practice management team and the Dimensional organization at large. On behalf of each of you, I will extend a happy holidays and the very best for 2025 to our audience. For those of you that are listening today, you can certainly find all of us on LinkedIn. And if you want to know more about how Dimensional engages with advisors and investment professionals, check us out@dimensional.com and with that we will catch you next time.
- [78:12]
C
Thank you for joining us for Dimensional Fund Advisors Advisors Managing youg Practice Podcast. For more information please visit www.dimensional.com. dimensional Fund Advisors LP is an investment advisor registered with the securities and Exchange Commission. The views, information or opinions expressed during this podcast are solely those of the individuals involved and do not necessarily represent those of Dimensional or its affiliates. Dimensional is not responsible for and does not verify for accuracy any of the information contained in the podcast. All expressions, information and opinions are subject to change. This podcast is distributed for informational purposes and it is not to be construed as an offer, solicitation, recommendation or endorsement of any particular security products or services, please consult with qualified legal or tax professionals professionals regarding your individual circumstances. Investing involves risks. Risks include loss of principal and fluctuating value. This podcast is available for private, non commercial use only. You may not edit, modify or redistribute this podcast without the express written consent of Dimensional. Dimensional assumes no liability for any activities in connection with this podcast or for use in connection with any other website, website, computer or playing device.