#22: Standardizing Processes, Not Randomizing Outcomes

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How Strong and Efficient Processes Will Save Your Business

The outcome of any action is dictated by its context. What do we mean when we say that? Take watering flowers in your garden as an example. 

While diligently watering throughout the hot summer protects your plants from drought, dumping cold water on your roses in the middle of winter will likely lead to a frosty death. Watering your plants is good, but it needs to be done at the right time in the right way to keep them blooming year to year. 

What does this have to do with your business?

Your business relies on the appropriate processes, systems, and talent to carry them out. Without a standard process, the client experience suffers. This idea stems from the “special exception paradox” we have discussed in the past. 

All advisors think their clients are special (which they are) and want to provide top-notch customer service. But providing excellent service often translates into altering systems and processes to create a custom solution for that client. While positive on the surface, it can lead to mistakes and miscommunication, making the overall experience suffer. 

How can you keep the same thing from happening in your business? The answer is simple:

Standardize processes across your organization. Today, we are going to look at three unique ways our team found success with standardization.

  1. Standardized processes create a consistent client experience

In general, wealth management firms produce three deliverables:

  • Investments
  • Advice
  • Service

At CX Institutional, the CX stands for client experience and the client experience dictates the investments, advice, and service we provide. It’s the complete package. Think about it like this. If your advisors are operating under 12 different models, you are likely to produce 12 different experiences. While fine on an individual level, in a leveraged ensemble, chaos would ensue. Each client would receive a different type of service and result to follow. 

If there is one thing we know for sure it’s that randomized outcomes do not lead to happy clients. Imagine going to a restaurant and hamburger and fries. Without a single process, you might get a great meal one day, but a cold sandwich and fries made of beets the next visit. On the third day, your burger might be burned and the fourth, you get a veggie patty instead of beef. 

Delivering a hot meal cooked right with fries that are crispy on the outside and soft on the inside requires a single, consistent process. If you aren’t sure what the food will be like, you’re going to stop frequenting that restaurant. And from a client perspective, if they disengage with their financial advisor, they are less likely to reach their goal.

If advisors can’t build a consistent process, it’s not only annoying but it hinders progress toward the client’s goals, which is, in essence, the whole point of our business. 

Creating a consistent experience is better than a custom experience. Yes, you read that right. Consistency is more important than custom because it is something that clients, staff, and owners can rely on. You know the results and the client has the same incredible experience no matter who they work with. 

  1. Standardized processes reduce chaos and boots value

A lack of standardization can take over a business, especially as you grow. Left unchecked, you no longer have a business. Instead, you have a bunch of people running around and bumping into each other. The client experience suffers, employee dissatisfaction and engagement declines, and all of that leads to decreased financial performance for the owners.

Avoiding chaos inherently means a rigorous adherence to standard processes and procedures. We hear questions from prospective advisors all the time asking if they can retain their secret sauce and special way of conducting business if they join our firm.

We don’t claim to hold a monopoly on the most effective and innovative financial planning ideas. Should a new advisor come in with a system that consistently outperforms our current one, great. But if not, adopting our processes will actually give them and their clients better results. 

We never ask advisors to use inferior methods, but we do need everyone to use the same ones to deliver that amazing customer experience. This helps our business scale as we grow and use systems that will serve clients for the long-haul. 

Another benefit of a single repeatable process is efficiently managing personnel. That might mean backfilling open positions and managing surges in work volume, for example. 

In a service business, we deeply rely on our people. But people have families, and they take vacations, they have babies, they have appointments during a workday. They might have medical issues, so sometimes they aren’t available to serve clients. If let’s say, Suzie is the only person who knows how to do the goal review process for 30 clients, but she’s on her honeymoon, without a standard process, the google review would simply fall through without her. 

But a standard process means her work can easily shift to another person without any service drops.

  1. What’s the difference between aggregating versus integrating revenue?

In the financial planning space, large registered advisor firms (RIAs) can be identified in two ways:

  • Aggregators
  • Integrators

What does this mean and why does it matter? Let’s take a look. 

Aggregators are a collection of separate businesses. While there is an overarching platform, affiliated firms may choose to use whichever pieces of the larger RIA’s value proposition they like. This system doesn’t represent the same process across all partners. Each firm will have different fee structures, investment management approaches, financial planning processes, tech stack, personnel policies, etc. In an aggregated model, individual firms operate in their own little world. 

Integrators, on the other hand, develop a standard brand, planning process, career path, ownership track, fee schedule, investment management, compliance, the list goes on and on. This single operating system spreads revenue among multiple wealth partners and brings further scalability and refined institutional recognition to the company. 

It’s important to understand how these processes work and where your time and skills will be most valued. If you are looking for a partnership track and opportunities, be sure to read the fine print in the aggregated firms. Most partner deals operate more like a customer as opposed to a partner, where the “partner” pays a handsome sum to the large RIA in exchange for platform services.

Again, I want to drive that point home. As an advisor in your life’s work, where do you want the value to go? If you’re going to make a big change, do you want to maintain that value appreciation in a partner-owned, partner-managed situation? Or do you want to shift the value to the platform that you’re aggregating onto?

In most cases, institutionalized businesses are more valuable than just collections of several firms with multiple businesses. It’s often hard for an individual producer to understand how his or her business will be worth more by joining us. But of course, it doesn’t become more valuable by simply joining. Instead, it gets more valuable because it is part of a scalable institutional entity with a single process, and all these benefits that come along with that.

What’s the next step?

If you’d like to learn more about the value of an integrator firm, check out our free downloadable resource A Guide To RIA Integrators and Aggregators below. You may be surprised to learn how top firms in the field operate and can determine which structure makes sense for you and your goals.

CX Institutional is registered investment advisor.

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