Measuring your firm’s ROR

As accountants, we love to measure things. But we tend to spend our time measuring what’s easy to measure—net income, revenue per employee, for example—and not enough time measuring the intangibles that make our relationships with clients so valuable.

That’s why I trademarked the term Advis-ROR™ (Return on Relationship). It’s all about quantifying the intangible value you bring to your clients—the peace of mind you give them when they know they’re on track to meet their financial goals and live a more fulfilling life. It’s hard to put a price tag on that, but as Warren Buffett likes to say: “Price is what you pay. Value is what you get.”

As the trusted advisor to your clients, you know everything about their financial lives, and an awful lot about their personal lives. Think about how much money you are saving them in taxes every year. That’s a start. Now think about how much money you’ve saved them by preventing them from making bad financial decisions. Even better. But don’t stop there. Think about the tangible impact you could have by helping clients with so many areas of their life beyond taxes. The trust is there. The technology is there. The door is open for you to provide wealth management, financial planning, estate planning, life insurance, exit planning, charitable planning, and more. It’s never been easier to incorporate these services into your practice thanks to the Virtual Family Office (VFO) model.

By taking a “holistic” view of your client’s entire financial picture—both personal and business—you can provide the aforementioned services without having to bring all of those capabilities in house. Wealth managers have long recognized the value of the holistic approach. However, wealth managers generally don’t start working with people until they have substantial assets to manage. By contrast, accounting professionals start working with clients much earlier in their wealth building years and have an outsized impact on their lives for decades. They know their client’s family situation, values, goals, and concerns intimately. I’ve found this approach is much more rewarding for you the advisor—and for your clients.

Return on relationship (ROR)

ROR is an important metric for financial professionals who intentionally prioritize the relationship component of the services they provide for clients—the human side of advice beyond the numbers. ROR is at the foundation of my forthcoming book “Holistic Guide to Wealth Management: The Science Behind Integrating Services with the Human Side of Behavioral Financial Advice.”

Accounting industry strategist, consultant, and editor Seth Fineberg told me on my podcast recently that the future of advice begins with having conversations with clients—when it’s not busy season—to discuss their total financial picture. In other words: “How are you doing? What’s keeping you up at night?” vs. “Here’s how much you owe (and here’s my bill).” So why not take it a step further?

Emily Koochel, head of financial wellness at eMoney, told me on my podcast that her organization identified nearly two dozen advisor actions that were found to be most impactful for clients. The top three actions had nothing to do with generating higher investment returns for saving money on taxes. They had to do with the human side of working with clients:

1. “My advisor helps me identify meaningful personal and financial goals and objectives.”
2. “My advisor always considers what I value most in life.”
3. “My advisor considers what I value most in life before they deliver financial advice.”

Asking clients very basic questions about what they value most and where they want to go in life is the foundation for the “human-first” approach to financial advice. It’s at the core of the Advis-ROR™ philosophy which aligns nicely with the VFO model.

Again, a VFO can provide your clients with access to a wide range of specialists in estate planning, insurance, legal, philanthropic, investment and administrative matters from anywhere in the country. They don’t need to be on your payroll and they can work closely with you while still allowing you to quarterback the client relationship and maintain your trusted advisor role as the central point of contact.

How to start the VFO conversation

A good way to get started on the road to building a VFO is to reach out to a Registered Investment Advisor (RIA) that you trust. Ask them if they’d be interested in working together to provide your clients with valuable advanced planning and concierge-level services described above. I’ve found there are four different ways that you can work with an RIA model:

1. Refer business with no monetary compensation from the RIA.

2. Become a solicitor/promoter. Here, you refer clients to the RIA for a fee. You’re not doing the actual work, but you’re consistently referring clients to the trusted advisory firm for predefined monetary compensation.

3. Become an investment advisor representative at an affiliate registered investment advisor. Here your affiliate RIA firm can handle all the heavy lifting except for either the direct client relationship, or the actual planning levels. It depends on how your firm’s structure and service model is set up.

4. Set up your own RIA practice. Here you have control of your entity, but you can outsource certain functions such as administration, compliance, technology, and client wire transfers, among others.

Wrapping it up

As Simon Sinek likes to say: “People don’t buy what you do; they buy Why you do it.”  If you’re intrigued about expanding your practice to include higher margin services and higher net worth, but aren’t sure how to get started, reach out to me any time. I’m happy to help.

AFO Disclaimer – Arrowroot Family Office