Behavioural profiling & business vision

Welcome to a new 6 edition Mini-Series of CPD available only on AdviserVoice which addresses issues that confront financial planning businesses large and small each and every day.

In the first in the series, former financial planning business owner Ray Griffin, who built and sold a successful advice  business, discusses some of the more fundamental issues which advisers who are either thinking of setting up their own business or who are in the early years of getting established in business, will face.

You and your business decision
A decision to go into any form of business is a major decision and if your business of choice is in the financial advice arena it has the added complexity of layers of compliance laden risk.  It’s not a decision to make lightly and the reality is that some people are just not suited to being in a business of their own.  Indeed, some people set up their own business only to discover that it’s not really their skill set.

So in this first edition in our mini-series on Financial Advice Business Management CPD we’re going to look at how to gain a deeper understanding of you and how you might function in business along with helping you refine why you want to go/stay into business.

Win or lose – it’s all down to people!
Businesses either succeed or fail due to people and the decisions (or lack thereof) they make.  While external forces are constantly at play in business outcomes, it is people who make decisions which either protect or expose the business to the effects – positive and negative – of the external forces.  And it is people who sometimes avoid making decisions which might otherwise make a business successful.

Understanding people is a vital skill in any business; the capacity to understand and relate to your clients, your employees, your business partners and other stakeholders is an essential component in the skill set of a successful business owner.  It really isn’t an optional extra.
However, understanding you – how you: think, process information, make decisions, act in certain situations along with a substantial range of other behavioural traits – is a good first step in deciding whether or not to go into business and indeed, in making subsequent business planning decisions if you do take the big step into your own business.

Myers Briggs Type Indicator® (MBTI) and DISC® behavioural profiling systems are but two services which could aid you in better understanding your behavioural preferences or tendencies.   Gaining a deeper insight into you might assist you in, for example, critiquing decisions you are about to make or implement.

Sometimes businesses fail due to, for example, overly ambitious income forecasts which are not achieved. In such a situation, it could be that the personal preferences or behavioural style of the business owner sees that person have a bias to always see things in a positive light – to not take proper account of data or information which might otherwise see them develop an alternate – perhaps more realistic – income expectation.  In contrast, it could be that an overly cautious or conservative behavioural profile might see a business owner fail to take advantage of opportunities that might arise during their business career.

Behavioural profiling can also aid existing business owners who might be considering going into partnership with another person(s). Understanding yourself and the person(s) you might be about to enter into business with could be one of the best investments you make.  It should equip you and the other person(s) with deeper insight into yourselves and each other and help you better understand or interpret particular behaviours in business partners which will at some stage inevitably be on show.  It might also be that such profiling might suggest that the people planning to join forces in business might be better off not doing so.

Personality or behavioural profiling is usually conducted by completing a questionnaire which is then analysed by the service provider.  The questionnaire can be completed in hard copy or on-line.

Please note that there is no suggestion that any particular behavioural or personality profile is superior to another in business.  Indeed, the world is full of successful business people who exhibit a range of behavioural profiles.  However, it is reasonable to suggest that a common factor in almost every business success – save perhaps for the one-off technological discoveries sold for vast sums – is that the business owners have really understood people and some of those would have had a deep insight into their own behavioural preferences. Such people knew what they were good at and knew what skills they lacked and as they grew their businesses ensured that they filled skills gaps with suitably skilled people.

If you wish to explore this issue further, an internet search will reveal several service providers who can provide professional assessment and guidance on understanding your profile.  There are even smartphone ‘apps’ which can be downloaded however if you do wish to find about your personal behavioural profile, it is strongly recommended that you subscribe to a service which provides you with personal service, even if this is only in the form of a follow-up consultation after completing an on-line questionnaire.  There are numerous ‘free’ profiling services available however it is unlikely that a personalised follow-up consultation will be provided through the free sites.

Business Vision – what does your business look like?
When you’re in business or planning to go into business, it’s quite easy to become immersed in business jargon and terminology and to think that the answer to success lies in knowing and applying academic rules and procedures.  For decades now, business schools and business leaders have developed terminologies which are attempts at identifying key aspects of business planning and operations which can give businesses a competitive advantage.  Among the plethora of terms are: Capital Expenditure, Cash Flow Forecasting, Marketing and Public Relations, Customer Service, Strategic Planning and on the list goes.  These terms are of course readily used each and every day in large, well established businesses but what about a brand new financial advice practice?

The reality of the early weeks, months and years of small businesses – which most financial planning businesses are – is that survival is the first objective.  Just making it through the first few years of operation is, for many people, the objective.  If they survive in business and can then take some time to think more deeply about what they are really trying to achieve – then the more academic aspects of business become quite important.

That said however, as you set out to build your financial planning business, you need to have a vision of what your end goal is; how you see the business at a certain time in the future.

Vision statement
Large organisations develop quite formal Vision Statements and they do provide some value; they are something which internal stakeholders can refer to from time to time to check how the business is going in pursuing its goal.  Such vision statements can appear in some business documents, form themes for staff meetings and the like as well as appearing in annual reports.  However, for small businesses where in the early years the principal(s) and perhaps one or two employees are the business, a formal vision statement might not be so necessary and might not be so beneficial.

That said every business owner or person planning to go into business should have a vision – a view in their so-called ‘mind’s eye’ – of what they are trying to achieve with the business. A vision statement (or ‘mind’s eye’ view) is not a panacea for bad business decisions however it can act to be regular reminder of what you are trying to achieve in business over the longer term and help maintain the required focus during difficult times.

What’s your vision?
There are varied views on what a vision statement should be based on.  Yours could be something quite simple and nebulous such as “Providing advice to 100 clients by 20XX” or something much more definitive.  If you choose the latter, much more precise, option you could chose to base it on three perspectives: personal – professional – financial.

In its simplest form the personal component of a vision statement is how you see – how you envision – yourself and your lifestyle to be in say five years time. How long might you want to work each week? Where might you want to live? How do you spend your leisure time and a range of other possible ‘visions’ of how you would like to be living out your life at that future point in time. One further suggestion to consider is: How much work pressure to do you want to be under in business?

The professional perspective could address:

• What type of clients would you like to be working with? So-called young ‘accumulators’ or the generation of their retiring parents/grandparents? Or combinations of both perhaps?
• Will you, personally, still be seeing clients in five years from now?
• What might typify a satisfied client in your business?

The financial perspective will deal with ‘bottom line’ matters:

• How many clients do you want to be caring for?
• What level of funds under management do you want to be charged with managing?
• What level of business income would you like to be generating – and what profit might you be seeking?
• What personal salary package might you be earning in five years?

Of course it will be difficult to encapsulate these three aspects into a succinct vision statement however it should help you form a view as to what your business will ‘look like’ at your chosen point in the future and how you fit into it.

It’s likely that some people reading this might want to go straight to the numbers – straight to the financial perspectives.  For some it will be a natural attraction.  However, I can only encourage you to start thinking about your visions from the personal perspective.  As former Eagles drummer Don Henley wrote in his 1990 song ‘Gimme what you got’ – a comment the greed culture that enveloped ‘Wall Street’ in the late 1980s and which remains relevant today in the post Global Financial Crisis era:
You spend your whole life
Just pilin’ it up there
You got stacks and stacks and stacks
Then, Gabriel comes and taps you on the shoulder
But you don’t see no hearses with luggage racks

That verse confronts the human instinct to get more and more of many of the ‘physical’ things that can be accumulated in life – given sufficient income.  In business, having more of everything – more clients – more funds under management – more staff – more technology – more money, will not be a panacea to a life only half lived.  As you go about your business career, perhaps occasionally take some time out to check that you’re in the business to live, not living to be in business.

Competencies
In business you need various core competencies some of which are unchanging over time while others, often more technical based skills, by necessity need to change and adapt to changing conditions.  A primary example of the latter in the financial advice profession is the constant changes to superannuation and taxation laws.

A prime example of a competency which, generally speaking, does not change over time is the need to manage the business cash flow – income and expenditure.  No matter what increase in client numbers and fees occurs in a financial advice business, managing cash flow – as in any business – is a constant function; a constant pressure.  It is vital that you become skilled in managing cash flow certain in the knowledge that there will be times in your business career when cash flow will be tight – that is to say there will be times when income reduces through myriad reasons; loss of clients, investment market downturns (this particularly affects asset fee based businesses), loss of investor/consumer confidence and so on.  Or it could be that your business expenses grow too rapidly and the prevailing income is either insufficient or, at best, a break-even position from which no profit arises in the business.

Note: The accreditation for this CPD article is no longer current. Please visit our CPD section for current CPD quizzes. 

We’ll have more on cash flow management later in this mini CPD series, in the meantime stay tuned for the second in our series which is about how to carry out a SWOT analysis on you and/or your business.