The sales environment among financial professionals is extremely competitive. Often the market adjusts compensation models to reflect what consumers are willing to pay for advice. One of the results, the only result worth caring about, is pricing fee income and product commissions. But can your practice survive on your present margins? Can you be profitable? Will sales contract in such a way as to implode on itself in these uncertain times?
Good business models are designed to support profitability. But if your business is unprofitable (losses for three out of the last five years) the IRS may disallow your business deductions. Many business plans are poorly designed or outright nonexistent. Even career insurance companies offer little to no advice on business planning for their captive agents. They just focus on selling their proprietary product lines. And how can you price your business plan on the basis of undercutting the competition’s fees when you know it may not be profitable? That’s not a plan. It’s reactive not proactive.
If you’re a boomer, you may very well come to the conclusion that it’s time to sell your practice. If you’re under age 40, you may seriously begin to consider merging with a firm or two that share your values and increase your margins. After the recent pandemic, many small financial servicing firms are struggling and just don’t have the cash reserves to survive. This may be an excellent time to reevaluate the profitability of your practice before you go forward with your business. Some have exited the financial services business altogether.