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How effective is your decision making?

Effective decision-making is a skill that needs to be properly addressed by practice managers to maximise profitability, Garry Mcluckie, communications director at Nucleus, explains.

For any business, it’s a given that the management team know how to make effective and well-informed decisions based on the most robust information available.

Within an adviser firm, sound decisions need to be made every day to run the practice at its optimum level – from decisions around conducting the due diligence on a potential platform provider to choosing a discretionary fund manager or a new back office provider. There are key daily business decisions to be made also, from operations to hiring the right staff and from sales to more strategic decisions.

However, although it’s accepted that being a good decision maker is an essential skill in the workplace, it’s surprising how few managers receive any formal training – especially in the modern age with decision-making becoming ever more complex with faster flows of information and data.

Make or break

Being an effective decision maker matters because whether the decisions are good or not can make or break the profitability of a firm, particularly small firms. An IFA practice that makes competent decisions year in, year out, can consistently reach, and even exceed, targets.

The good news is that techniques can be adopted by practice managers to ensure better decision making, which can not only support the long-term success of the firm, but can lead to better outcomes for clients too.

Being proactive is a key strength in sound decision-making and putting a ‘decision process’ in place is the best starting point.  Although software tools are available on the market dedicated to effective decision-making, a simple framework can also be put in place with four simple steps, as outlined below:

1. Identify the decision to be made

2. Work through scenarios for the best possible solution

3. Calculate the solutions that will bring you closer to your firm’s goals

4. Make a rational, timely decision based on the evidence you have.

When identifying decisions, it’s vital that practice managers make sure the decision is being made at the right level and to give the decision the correct level of importance and context.

Working through scenarios to find solutions is an important part of the decision making process too as it focuses attention and helps ensure practice managers, and other individuals involved in the decision, are fully aware of their actions.

Target your business goals

Moreover, in today’s demanding, 24/7 business environment, calculating the solutions that will bring your firm closer to its key objectives is a crucial part of decision making, as the main element for any good decision making is to be clear on your ultimate objectives.

It’s also critical that decisions are based on solid facts. Decisions based on incomplete information  – and on too much emotion – can have long-lasting, damaging effects on a business. To help gather the data you need, ensure you conduct meetings with the right personnel in place and with a focused agenda and clear questions. Effective decision-making can be a straightforward process when approached in a logical manner and will ensure your practice remains successful.

In the case of making sound decisions around the due diligence required for a potential platform provider, adopting the above framework can help support the process. Although the decision is often made by the business principal or senior adviser within an IFA firm, input should be sought from the administration staff and paraplanners who will be using the platform on a day-to-day basis. As the platform you ultimately decide on needs to support delivery of your client proposition, it’s key to address how the platform would support those needs. For example, examine whether the platform would fit with your firm’s investment philosophy and whether it would align with the amount of proposed time spent face to face with clients.

The main objective around due diligence decisions here is that it’s the right platform for your firm, based on what your core requirements are in terms of client proposition, your own business objectives and the usability for those interacting with the platform day in, day out. Look closely at whether it’s a platform that staff can be trained up to use efficiently and what access they have to day-to-day support.

Decisions around due diligence should always be based on evidence and facts, therefore all necessary documentation, including business plans, development plans and accounting statements, should be requested from the platform provider for scrutiny before any final decisions are made.

Armed with this information, remember too that business is fundamentally about human relationships and particularly true when dealing with other people’s money. Take time out to consider your relationship with the personnel behind the platform and how responsive and open they are to your requests for information. Ask to speak with the CEO or management team and consider whether they genuinely have your business and your clients’ interests at heart.

Timing is critical

Finally, decisions are usually time critical and one of the hurdles to competent decision making is failure to act until too close to a decision point, when information and options may be limited to you.

Good decision making essentially lies with a number of factors from the decision maker including experience, instinct, good listening skills and knowing when to react and be decisive when necessary.

Ultimately of course, good decisions means good business and what will drive the profits of your practice is the quality and efficiency of the decisions you make.

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