The Art Of Vision Statements Do They Really Help Advisory Firms Grow

25 Jan    Investing News

For every business owner, a well-written vision statement can be a tremendously effective tool, helping to clarify the long-term direction in which they want to take their companies. Although advisory firm owners are no different, there’s a difference between a vision statement that helps drive growth, and a vision statement that does little more than serve as a platitude that looks good on brochures, or one that speaks to the financial goals of the owner but not necessarily the aspirations of the business itself. Which, in turn, begs the question: how, exactly, does a growth-minded financial advisory firm owner actually create an effective vision statement for their firm, and does it matter what kind of vision statement they craft?

In this guest post, Angie Herbers – Chief Executive and Senior Consultant at Herbers & Company, an independent management and growth consultancy for financial advisory firms – shares recent research conducted by her company, revealing interesting data about the relationship between vision statements and firm growth, and what that means for advisory firm owners trying to clarify the long-term vision they have for (and improve the long-term growth trajectory of) their practices.

Specifically, Herbers’ findings reveal that revenue for advisory firms operating without a vision statement declined by 4.3% over the past year. Other firms that were operating with performance-based vision statements expressed primarily in financial terms (e.g., achieving a particular revenue, profit, or assets under management benchmark), had an average growth rate of 5.8%. Whereas the third group of firms, which operated with client-centric vision statements focused on serving clients and improving the client experience, had a growth rate of 13.4% – more than twice the growth observed for the firms with performance-based vision statements!

The impact of advisory firm size on the magnitude of growth was also examined for firms with client-centric vision statements; the data revealed that firms with such vision statements had relatively similar growth rates (between 12% – 14.5%) across revenue ranging from less than $1M to more than $15M. Which is interesting, because small firms often have an easier time achieving high growth rates as compared to larger firms; larger firms, on the other hand, have the advantage of leveraging economies of scale (or simply having the ability to merge with other large firms) to facilitate growth. As it turns out, a strong client-centric vision statement appears to impact both.

A deeper look at the psychology of business growth offers potential explanations of why the growth of firms with client-centric vision statements outpaced those with performance-based vision statements. As while centering a firm’s vision on servicing clients will encourage the firm as a whole to focus first on providing high-quality service and continuously improving that service (and thus naturally leading to a better overall client experience, growing reputation, and stronger brand), a performance-based vision statement can easily decouple a firm’s association of client service efforts with revenue generation… which can then (understandably) lead to employees who are distracted by financial performance and individual compensation versus focusing on providing good client service and the actual client experience that powers growth in the long run.

The psychology of why client-centric vision statements appear to be more effective than performance-based ones is also reflected in the approach used by many financial advisors to advise their own clients, where clients are often discouraged from focusing too intently on the details of their portfolio returns, and instead to focus more on their long-term big-picture goals that they have determined will make them happiest (and then simply monitoring and making adjustments to ensure they’re staying on track towards those goals).

Ultimately, the key point is that a well-designed, client-centric vision statement can actually result in a more fruitful outcome than a performance-based vision statement, because maintaining a firm’s attention on making clients happy with great service is generally the more sustainable route to healthy, positive business growth, and will take care of the financial bottom-line in the process.

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