Recession proof your practice

We all differ on the types of investments we recommend. When it comes to such things as the markets themselves, fee-based versus commission based; we all have our points of view based on our experience. There is one thing we can all agree on though: watching our incomes drop by events that are out of our control (like those in 2008/9) can be devastating to our practices.

During those dark days, advisors with 100% DSC models were most affected as net new money was as hard to find as a Lehman Brothers employee. Some advisors reported a drop in income of almost 80%. Fee-based or trailer-based businesses suffered as well, but more in line with the market drops, so income would be down approximately 30-40%. That’s better, but still an intolerable amount.

I know what you are thinking: Are there ways to protect against this? After some thought and research, I am happy to report that I believe there are and here’s how.

We always tell our clients to diversify their investments to best protect their nest egg. What are we doing to protect our nest egg, our practice? We have to treat our practice like a real business and diversify our product line and revenue sources. Here are 5 ways to recession proof your practice.

Introduce financial planning for a fee

The demand for financial planning rises during times of crisis, as clients are seeking advice on if they are very far off track or if they can still retire when they wish. If you charge $1,000-$2,000 for a comprehensive plan that can help a client retire, plan for unforeseen events, achieve goals and most importantly budget, it will be the best money they would have ever spent. It will change their lives and increase your revenue at the same time, a total win-win situation. Click here to view a sample of our financial plans

Get licensed, provide insurance advice

As we do comprehensive financial planning, we are licensed to implement the insurance requirements of the plan. This means being able to explain to clients in a simple yet effective way that they need certain types of insurance to ensure there plan isn’t blindsided by an unexpected event. In our plans, we have developed simplistic ways to illustrate what needs attention by using red and green colours so clients can easily identify the trouble spots. Insurance revenues can actually go up during a downturn as people may lose their benefits or change jobs. Here’s a sample from our practice.

Be a one stop shop

Start helping client set up high yield bank accounts and lines of credit like Manulife’s Advantage account or Manulife One product. These products offer your clients great interest rates, certainly higher than the banks, typically have lower fees and pay you a .25% trailer fee as well. We have approximately $5 million in these accounts, it isn’t enough to live on but it can certainly cover a good portion of the rent. You can use these accounts to help clients focus on goals such as travel, emergency funds, etc. And at reviews you can track controllable targets like goals. You can check out our review dashboard, here.

Consider offering mortgage broker services

Check with your compliance team and determine if you or someone on your team can be a licensed mortgage agent. At our office our branch administrator is a licensed mortgage agent so we are able to offer our clients a great mortgage rate, great service and no need to go to the bank for the loan. And we earn revenue from the lending institution for helping our clients.

Tell clients what they want to know

By introducing planning, you will be advising clients how much they need to save each month to reach their retirement/RESP/Travel/etc goal. Set them up on monthly PACS to achieve these goals. You are giving great advice, the client is on the way to meeting goals, they are saving regularly even when markets go down and you are increasing your assets under management.

I really believe financial planning is what clients want and need. Imagine, giving great advice, helping clients and diversifying your revenue stream, all at the same time? When the next downturn comes, and it will sooner or later, if you are still relying on one stream of income you will have the same drop as last time. The beautiful thing about our business is you alone can decide if you will have a repeat of the last downturn or if you step up now to ensure that never happens to you or your business ever again.

Best of luck in your practice.