Burns Simpson & Associates TEAM WORKBOOK Decisions and Notes for Modules 1 – 5 BSMART Business Simulation Management and Relationship Training

Burns Simpson & AssociatesTEAM WORKBOOK

Decisions and Notes for Modules 1 – 5

BSMART Business Simulation Management and Relationship Training

Vision, Mission & StrategyThe Foundation of a Business

MODULE ONE

Your Vision

Burns Simpson & Associates’ vision for the future is to establish itself as a growth oriented firm by achieving $850m in AUM and $7m in top line revenue, while maintaining an operating profit of at least 35%, by the year 2020.Our firm will accomplish this vision by implementing strategies in 2014 that will position us to increase the share of wallet of our existing clients, to develop new clients through a re-engagement of our Centers of Influence and client referral initiatives, and by implementing a segmented client service model in order to drive extreme client loyalty, while also ensuring an efficient allocation of firm resources for long term success.

A vision statement describes what you want your firm to look like in the future, typically three to five years out, or longer, and is both an internal and an external message. If you keep it front and center, it can help you stay focused on your goals. It can also help inspire and motivate your staff, and instill confidence in clients that you know where you want to be in the future.As you craft a vision statement for your firm, ask:• What do we aspire to become in three to five years?• What does success look like for our firm over this period?• What does our end-state look like?

A vision statement describes the future state you are looking to create – your desired end-game for the firm in 2020.

Your Mission

We at Burns Simpson & Associates place tremendous value on meeting the needs and exceeding the expectations of our clients’ long term financial and personal goals. We strive to accomplish this through a collaborative, team based environment, that is guided by placing our clients’ needs at the core of everything we do. Our belief in the importance of personalized, financial planning for our clients drives deep relationships and a roadmap for our clients’ success. Our firm strives for strategic and sustainable growth, in order to build enterprise value for our shareholders and employees, as well as to ensure we will always be here for our clients

A mission statement describes why you are in business, and is primarily used internally. It plays an important role in helping you assess your activities and determining if they are in line with your core purpose. It can be used to “sanity check” what you may be considering doing – if activities stray from your core purpose, you may decide not to do them or to reevaluate your mission.As you craft a mission statement for your firm, ask:• What is our purpose for being here? Why do we do what we do?• What needs do clients have when they come to us?• What are the most significant strengths of our business?• Why do clients choose our firm over other firms? What are our differentiators?

A mission statement describes why the organization exists – its core purpose.

SWOT Analysis

4

Strengths Weaknesses• We have great depth and diversity of

experience.• We depend too heavily on our legacy

brand.

• We have a strong local market presence and deep roots in the community.

• We have concentration and distribution risk in our book of clients.

• Due to our succession efforts, we have a fully baked business continuity plan.

• We lack role clarity internally.

• COI Network • No partnership consensus• We have a strong brand in the

marketplace.• The partners and staff lack firm vision

consensus.

• We are not optimizing our centers-of-influence (COI) network.

• We do not have a thoughtful growth strategy.

SWOT Analysis

4

Opportunities Threats

• We need to review our pricing against the marketplace

• Our lack of culture / collaboration can be detrimental to our success.

• We need discipline/clarity around our investment process.

• We have an aging client base and no plan to back-fill those assets.

• There is opportunity to better leverage the back office.

• We may have challenges moving upstream as the central Oregon workforce is mostly mass affluent and small business owners.

• We need to better engage our centers-of-influence. network.

• Wages in Oregon are typically 20% below those of Washington or California. Central Oregon can typically run 10-20% below that. (Source: 2013 Economic Development for Central Oregon Business Research)

• We need to deepen client relationships and grow share-of-wallet

• Investment Firm Presence: Reflecting higher than average deposit wealth, Central Oregon also supports a significant number of financial planning and investment firms. Many of these firms also provide wealth management for clients nationwide (Source: 2013 Economic Development for Central Oregon Business Research)

• There is opportunity to potentially change our brand.

• We lack disciplined organizational structure and role clarity.

• We need to leverage our DFP partnership and their strengths.

• In order to improve enterprise value, we need to transition from silos to a true enterprise.

SWOT Analysis

*See Appendix B

Initiatives and Notes

Initiatives for Improvement

Write down and agree on Strategy initiatives in your firm and elect a “champion” for each initiative.

Notes

Improvement Opportunity Who Will Complete

1a. We will re-engage centers-of-influence that have/had established relationship with the original BSA founders

Ned Fland

1b. We will create and implement an on-going centers-of-influence strategy. Edna Krab

2a. We will identify share of wallet opportunities with existing clients. Ken Brock

2b. We need to implement a client segmentation strategy to achieve extreme client loyalty and resource efficiency.

Selma Bold

3. We will develop a next generation/small account strategy. Apu Nahasap

4. We will create a disciplined process for target client groups (onboarding, service, etc.).

Selma Bold

5. We will forecast our financials for 5 years. Ned Fland

GrowthBuilding the Firm

MODULE TWO

CHARACTERISTICS OF THE IDEAL CLIENT

CHARACTERISTICS OF THE NOT-SO-GREAT REFERRAL

Business YouWould LikeTo Win

• Minimum of $1m in investable assets

• <$500k investable assets

• Married with children, small-medium sized businesses, retiree transplants looking for local Advisor

• Not interested in engaged/partnership approach

• Values the planning process • Not focused on long term goals

• College educated, business professionals

• High maintenance, overly analytical

• Social and active in the community

• Start up businesses

CHARACTERISTICS OF THE IDEAL COI

CHARACTERISTICS OFTHE NOT-SO-GREAT COI

COI RelationshipsYou Would Like To Have

• Accountants, Attorneys, Charitable Organizations

• Lacking follow up and ability to articulate BSA’s firm story

• Already established relationship with the original BSA founders

• Doesn’t have clients that meet BSA’s ideal client financial profile

• Similar values • Different values/client relationship approach

• Well networked • Not growth oriented

• Compliments BSA’s overall offering

• Lacking opportunity for reverse referrals

Ideal Profile



Write down and agree on Growth initiatives in your firm and elect a “champion” for each initiative.

Notes


1. We need to re-engage our centers-of-influences & develop COI strategy. Ned & Edna

2. We need to identify and quantify the share-of-wallet (SOW) opportunity within our book.

Selma

3. We can find a way to monetize small accounts by creating disciplined investment management and service to drive profitability (or sell that part of the book or high a junior advisor to work it).

Apu

4. We need to develop a sales strategy for organic growth (address Advisor production: Implement sales goals).

Edna

5. We need to develop a referral program for existing clients and centers-of-influence.

Ken

Staffing and CompensationAttracting, Retaining and Organizing Talent

MODULE THREE

Organizational Chart

Draw your firm’s organizational chart. Label the positions.

Compensation Philosophy

We at BSA believe that compensation is not just about how much we should pay someone—it is part of our overall business strategy that has the ability to positively impact employee performance and ultimate results for the firm. In order to develop the most strategic compensation plan, we have consulted with our IWS Relationship Manager and have worked through the “Effective Compensation Planning Guide” provided to us by both IWS and ManPower Solutions. Compensation is one component of an interrelated system within BSA that includes our:(1) Overall business strategy(2) Financial related objectives (3) Nonfinancial objectives:

I. cultureII. organizational structure.

Our plan is to translate these high-level priorities into more specific goals that each employee understands and can respond to. The most appropriate compensation system for BSA will vary based on the business lifecycle we work through as the firm continues to grow. During the early stages, our compensation system tended to be more informal and focused primarily on attracting and retaining personnel. As we grow and mature, our compensation system has to become more structured. As with all human capital systems, consistent and effective administration is critical to obtaining desired results. We will therefore keep our firm’s administrative capabilities and tolerance for formality in mind as we design our compensation plans for the future. In summary, we will develop and will continually refine a compensation system that will support the goals of BSA that will change and grow with the success BSA has over the coming years.

What is your compensation philosophy?



Write down and agree on Human Capital initiatives in your firm and elect a “champion” for each initiative.

Notes


1. We will define roles & responsibilities (talent evaluation). Selma Bold/DFP

2. We will review & align compensation with these roles. Edna/Ken/DFP

3. We need to have career path development in order to retain top talent.

Selma Bold

4. We will develop a training plan to cross-train staff and support the career path development.

Ned Flan

5. We will develop a governance structure for collaboration until it is engrained in our culture.

Ned Flan

Handouts in the Appendix

• Advisor HR Solutions• Sample Compensation Profiles

Operations and Technology

MODULE FOUR

Role of Operations

Service and Deliverables

Component-level Role

• We deliver comprehensive and collaborative financial planning services.

• We implement BSA’s investment management approach.

• We execute exceptional service through on-going client service & account maintenance.

• We perform fee billing activities quarterly.

• We deliver quarterly performance reporting.

Financial Planning Investment Management

• Discovery/collect data • Research & analysis

• Input data & create plan • Asset allocation

• Review Plan with client • Ongoing trading

• Implement plan •

• Review & adjust plan •

List and Documents Services

Process1. Financial planning 4. Fee Billing2. Data recon 5. Trading & Rebalancing3. Reporting 6. Asset allocation 7. Marketing 8. Client communications

Purpose1. Service delivery/core offering 2. Data integrity 3. Service delivery 4. Collect revenue 5. Investment philosophy execution 6. Investment philosophy 7. Marketing 8. Client communication

Budget

1.$17,0002-5 $150,000 (760 clients x 3 accts @$65 per year)7-8 $90,000

Resources Evaluate how well resource components are satisfied.

Available Scalable

Attainable Sustainable

We need to implement ideal client profile strategy, define roles and responsibilities and evaluate existing workflows in order to determine if our existing services and processes are appropriate. We understand that we need to reinvest in our back office but want to be purposeful in that investment.



Write down and agree on Operations initiatives in your firm and elect a “champion” for each initiative.

Notes


1. We need to evaluate processes & create disciplined, automated workflows. Selma

2. We need to optimize the use of our client relationship management (CRM) system to drive consistency, scale, institutional knowledge and enterprise value.

Lisa

3. We need to evaluate our reporting output and processes to see if they are meaningful to our existing clients and aligned with our target client needs.

Edna

4. We need to evaluate our trading practices to ensure efficiency and minimize risk.

Ken


• Six Tell-Tale Signs That Your Business Processes May Need Attention

Financial ManagementMaking the Numbers Work

MODULE FIVE

Financial Management

Use the Financial Worksheet* to calculate the following metrics:

2012 2013

Gross Profit Margin $3,405,935 $3,320,269

Earnings before Owners' Compensation % 74% 72%

Operating Profit Margin $2,146,080 $1,950,887

Pre-Tax Income per Owner $567,656 $576,716

Active Clients per Professional 95 126

Active Clients per Staff (total headcount) 54 63

Revenue per Professional $601,380 $803,447

Revenue per Staff (total headcount) $343,646 $401,724

AUM per Professional $76,124,010 $101,702,200

AUM per Staff (total headcount) $43,499,470 $50,851,080

Revenue per Active Client $6,347 $6,343

AUM per Active Client $803,420 $802,912

Direct Expense per Client $1,854 $1,974

Overhead per Client $1,662 $1,790

Operating Profit per Active Client $2,831 $2,579

*The Financial Worksheet is a separate Excel file.



Write down and agree on Financial initiatives in your firm and elect a “champion” for each initiative.

Notes


1. We need to evaluate partner compensation to ensure role, firm risk and incentive is aligned.

Edna & Ken

2. We need to evaluate the best way to re-invest in back office to build the foundation for growth.

Selma

3. We need to evaluate ways to increase revenue per client (more efficient service, increase fees, eliminate unprofitable relationships, etc.).

Ned

4. We need to establish minimum client criteria and be disciplined in adoption. Selma

5. We need to re-evaluate outside funding to confirm current agreement is appropriate and evaluate future uses. Edna


• Key Drivers of Firm Valuation

Agenda and Minutes

Appendix A: Bi-weekly Partners Meeting

Demographic Research

Appendix B: Regional Analysis

Competitive Landscape – Financial Advisors in Central Oregon

Area Zip

Wirehouse # Non Wirehouse #Grand Total # of

RepsBD Dual WH Total BD Dual RIA Non WH Total

Bend 1 71 72 50 74 37 161 233

97701 2 2 25 47 12 84 86

97702 1 69 70 24 27 25 76 146

97707 1 1 1

Eugene 1 52 53 120 159 43 322 375

97401 1 51 52 85 141 30 256 308

97402 1 1 9 4 13 14

97403 1 1 2 2

97404 14 4 1 19 19

97405 7 7 7 21 21

97408 4 3 4 11 11

Portland 32 294 326 467 566 262 1295 1621

97201 6 72 78 65 88 12 165 243

97202 1 1 2 6 10 3 19 21

97203 1 3 4 4

97204 11 104 115 59 68 68 195 310

97205 9 85 94 31 59 18 108 202

97206 4 1 5 5

97209 1 1 32 35 20 87 88

97210 2 4 3 9 9

97211 1 1 1 1 3 5 6

97212 4 6 11 21 21

97213 1 1 5 5 5 15 16

97214 2 2 9 11 1 21 23

97215 1 3 4 4

97216 2 8 1 11 11

97219 2 2 16 11 11 38 40

97220 29 5 34 34

97221 17 1 18 18

97222 4 12 16 16

97223 3 16 19 102 134 45 281 300

97224 26 13 15 54 54

97225 5 5 20 43 31 94 99

97227 1 2 3 3

97229 5 6 9 20 20

97230 1 1 1 1 1 3 4

97232 1 1 10 32 2 44 45

97233 1 1 5 5 6

97236 2 2 2

97266 1 1 1 2 3 4

97267 1 1 2 7 4 11 13

Salem OR 1 33 34 67 108 17 192 226

97301 1 10 11 28 60 6 94 105

97302 23 23 13 31 6 50 73

97303 13 4 4 21 21

97304 7 7 14 14

97305 1 1 1

97306 3 4 7 7

97317 2 2 1 5 5

Grand Total 35 450 485 704 907 359 1970 2455