Doing the right
things the right way is how you get the biggest return
Jul 5, 2018 @ 11:52 am
By Joni Youngwirth
Peter Drucker may
be gone, but his contributions to the field of management live on, particularly
his espousal of the need to focus on both effectiveness and efficiency. That
means doing the right things (effectiveness) in the right way (efficiency).
Designing and
implementing a business that runs like a well-oiled machine is something to be
proud of. It takes a lot of work to get there. Once you do get there, though,
you can't exactly "set it and forget it"—no matter how tempting that
may be. Businesses need to be managed on a daily basis. Sure, workflows,
documented procedures, integrated technology, scale and capacity tools, and
good time management skills can get you to a certain point, but they won't help
your business if you're doing the wrong things.
In industries
undergoing change, such as ours, it's all too easy for a business to unravel.
So how can you ensure that you're doing the right things?
What the Right Things
Are
Think of four
quadrants, as follows:
1. Right things
done the right way (strategic efficiency)
2. Right things
done the wrong way (strategic inefficiency)
3. Wrong things
done the right way (wasteful efficiency)
4. Wrong things done the wrong way (wasteful inefficiency)
Clearly, you want
to be putting your energy into doing the right things the right way. That's
where you get the biggest return.
Where things get
off-track
Some advisers today
tend to stick with the status quo. Maybe they have a lifestyle practice and
aren't necessarily interested in change, or they just aren't sure what to focus
on next. The problem with this approach is that what once might have been the
right thing to do has now devolved into the wrong thing to do.
Let's look at an
example: You've worked with a couple for a decade. They have more than $7.5
million in investible assets, plus $4.5 million in non-investible assets.
You've taken a yellow-pad approach to their planning, with annual meetings
focused primarily on how the couple will retire. Suddenly, things have changed
— the wife has died; there's a new girlfriend; a grandchild has been born with
Down syndrome; the surviving spouse has moved from a state without state estate
tax to a state with estate tax. How is that yellow-pad approach going to work
for you now? Not well, I'd argue.
Embracing a
different, more sophisticated approach to financial planning could be the right
thing. Yes, you have to choose the best software, learn how to use it and
evaluate with your client the analysis it provides, so you can decide on what
to do next. It will take work. But the results can be life-changing.
Now your client may
not be asking for any new information or financial planning services from you.
After all, you've been his trusted adviser for a decade, and you've never
delivered a software-inspired plan before. But that doesn't mean the client
doesn't need it.
Are you prepared
for your firm to make a strategic shift to more sophisticated financial
planning? If not, perhaps it's time to suggest your client take his business
elsewhere, to a firm that does offer comprehensive investment management, tax
planning and estate planning, as opposed to your current approach of responding
to one-off questions as they come up. What's best for the client? Be honest.
Will You Be an Early
Adopter or a Late One?
We've watched
trends such as this emerge and grow. Others include going fee-only, ensuring
fee transparency and embracing cutting-edge technology. Still, we can't predict
the future. Did we see the DOL rule going away as it has done? Every adoption
of a strategic change carries potential risk. Ask yourself: What's your risk
tolerance as a business owner?
Trends require you
to respond to them. When you choose to confront them and adapt your practice is
a matter of timing. But if you are never willing to change? No matter how
efficient you are, you won't be as effective as you could — or should — be.
Joni Youngwirth is managing principal
of practice management at Commonwealth Financial Network.
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