"That doesn't mean that the human touch will be removed, but the way the clients are touched might change," said Mark Tibergien, partner at Moss Adams in Seattle and a nationally recognized expert on valuing, selling, and merging financial advisory practices.

Tibergien, who spends his time helping financial planners, investment managers and broker/dealers with practice management, ownership transition, valuation and strategy issues, will offer planners advice on building their practices effectively at the FPA Success Forum here next week.

Tibergien, along with SEI Investments vice president Frank Mercurio, will lead a discussion Sunday afternoon, Sept. 10, called "Benchmarking Your Practice for Business Success." The talk will focus on the results of the comprehensive study of financial performance and compensation in the planning profession.

Tibergien predicts a shift in the typical financial planning practice model.

"I see an evolution away from the sole practitioner model towards ensemble practices," he said. "Planners are recognizing the power of numbers. Through alliances or mergers, they can offer more services more effectively to more people."

However, Tibergien added, that doesn't mean the sole practitioner is dead. "The sole practitioner will always be in existence, but many will be creating more of an enterprise."

Among the three practice models -- sole practitioners, ensemble practices, and large organizations -- Tibergien predicts the greatest growth will occur among ensemble practices, collections of professionals "who function together as a business, rather than as a group of sole practitioners."

"Ensembles practices will have regional or local strength. They'll be dominant in their market, either by geography or by client type," he said. "They'll leverage themselves more, they'll be able to handle more business (than a sole practitioner). They'll create an organization where there's a career path."

Most ensemble practices will consist of planning professionals, but some will expand to include other professionals, such as CPAs and attorneys with a specialization in support of the planners' strategy, said Tibergien.

One of the keys to building any successful planning practice is benchmarking, he noted.

"You have to begin with a main strategy," he said. "What makes you unique -- your market, your expertise, a technical advantage? You have to commit to a strategy and dedicate your resources to it."

"Firms need to set manageable benchmarks," Tibergien continued. "(Benchmarks) aren't always financial. They can be the number of clients served efficiently, productivity, or the financial returns."

"Success is a relative term, but it comes to firms that think and act more like businesses," Tibergien noted. "Acting like a business" means creating a more dynamic organization, delegating, and having leaders focus on their strengths, he added.

Benchmarks firms should keep an eye on include: profit, cash flow and income. "Firms should generate 20 to 25 percent profit after fair compensation of the owner and employees," according to Tibergien. "Income should grow at a commensurate rate."

According to Tibergien, some of the traits of a valuable practice are: good cash flow after fair compensation; transferable business; less dependence on the owner; minimization of risk of the uncertainties in business; and growth in earnings and cash flow.

"The value to the buyer is a function of the future -- how you've positioned your practice to perform," he noted. Tibergien said he often hears firms say they're so swamped, they have to turn away business, which he says is the result of owners "thinking 'I' am the business model, rather than 'we.'"

"If they're building their business right, they shouldn't have to turn business away," he said. "They either have to increase their prices to slow the volume, or add the capacity to support the clients. There's this philosophy (among planning firms) that you should fire your lowest group of clients, but then you can get a reputation of not taking on new business."

Tibergien noted several common mistakes planners make that puts stress on their practices: failure to understand and monitor their own financial statements; failure to anticipate the financial requirements of the business - they grow dramatically and run out of cash; compensation that is out of sync with their strategy; the way they identify, select and retain people is unprofessional; and growing without a strategy and without a clear idea of where they're going or how they're getting there.

"Planners must take the time to think strategically, and develop a vision of their business," he said. "They have to take more control over their business focus and operations, and not abdicate business performance to fate."

In other words, "they should be doing things in their business that they tell their clients to do in their personal lives," he said.

-- By Melissa Klein

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