TECHNOLOGY Smooth
TECHNOLOGY Smooth transition Technology and succession planning Whether you are passing on an existing business to new blood in the practice or selling the business to another financial advisor who can take it over easily and keep the existing client base from jumping ship, technology plays a crucial role in getting your business in a position where you can pass it on to your successor confidently. Two reasons for this are: • You need to get the intellectual property and history of financial advisor/ client relationships out of an advisor’s or the owner’s head and into a form that is enduring and can ensure ease-of-transition during succession handovers. • You need to have reliable and accurate business intelligence data that enables the successor to understand your clients and your business and to ultimately measure the value of your business. Centurion Market Makers, an Australian-based specialist in succession planning, asked the following question: “What do you find to be the hardest thing about buying a business?” It elicited the following response: “Inadequate preparation of the right information by sellers is one of the most common mistakes we see when transactions are taking place. It is also the number one reason why practice owners fail to maximise value, minimise transaction risk and transact in less than six months.” So the crux of preparing a smooth success plan is “How do I access the correct information about my business, in my business?” Let’s look at some of the common hurdles: • How do you demonstrate that you have a technologically enabled business if you are using multiple tools, but each tool is poorly implemented, and manual processes still abound? • Multiple tools themselves create the following challenges: 1. Difficulties in understanding your client base and how to communicate and transition them 2. Lack of structured, clean client, investment and revenue data to help you understand your business 3. Absence of intelligent insights provided by this data in order to form the basis for a valuation 4. Lack of a documented, systemised client service model that will provide continuity in your absence. • How do you formulate strategic decisions in the business without informing those decisions with facts, i.e. quantifiable data from your practice? 34 www.bluechipjournal.co.za
TECHNOLOGY • Is it enough to simply know what is going through your bank account? • How do you show who your clients are and how they rank in terms of AUM and income? • How do you prove the value of your business if you can’t access accurate information about your clients and revenue? • How do you understand the real cost of lack of operational efficiencies in your business and how this impacts your bottom line? As an illustration of what is currently happening in many advisory practices, one of the selected highlights from our 2018 independent advisor survey contained a question about whether practices use proper revenue reconciliation tools. The survey answers revealed that very few FSPs properly track revenue and fewer still can connect revenue with income for management information purposes: The same survey highlighted some of the typical causes of frustration for financial services providers relating to data management: • Poorly maintained client data integrity and centralisation • Inability to obtain complete and reliable management information. Data issues are one of the common underlying, unidentified denominators for advisors changing their technology, rather than issues with the system itself. The bottom line is you need to understand your data in order to understand your business and in order to trust what your data is telling you, you need to know where it’s coming from, where it’s stored and what it looks like. In most practices multiple software tools result in unconsolidated, messy data. Over 90% of businesses use multiple software tools in combination; the vast majority without any integration. Almost none have a “one-stop-shop” model. Why does the data get messy? Most practices have multiple sources of external and internal data being fed or manually captured into multiple systems: • External – Astute, Investment feeds, platform information, sometimes by clients via client portals • Internal – client data manually captured into internal systems or onto excel spreadsheets leads to errors in capturing. The result is that you have multiple versions of one client lying in different systems and the information and data attached to each version is incomplete and/or incorrect. Now, multiply that one client by 500 or 1000 and you start to understand the problem. Nina Lowes, Linktank director This highlights how important it is get your data house in order before thinking about succession. Steps the advisor can take to truly understand all the metrics of the business and solidify the practice-management process are assessing the efficiency of the technology and determining whether the data is consolidated, integrated and accurate. Achieving accurate business intelligence using technology and accessible data has become a cornerstone in measuring the success of a business strategy and illustrating demonstrable business value. The practices that get this right will experience a far smoother and successful succession, be it to planner within in the practice or a new owner. • www.bluechipjournal.co.za 35
