In this episode of the Trusted Advisor podcast, Rob speaks with Dean Lombardo to discuss the concept of the profit gap, which refers to the disparity between reported profitability and the potential profitability of financial advice firms. He explores the systemic issues that lead to profit leakage, including misalignment within organizations, ineffective remuneration models, and the complexities introduced by advisor variance. Lombardo emphasizes the importance of leadership alignment, capacity planning, and the role of client services in driving efficiency. The conversation highlights actionable insights for business owners looking to close the profit gap and enhance their firm’s performance.
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SHOW NOTES
Topics Discussed
- What the “profit gap” actually measures in advice firms
- Why revenue growth masks structural inefficiency
- Organisational misalignment as a root cause of profit leakage
- Judgment based decisions versus disciplined execution
- The importance of leadership alignment and sequencing priorities
- Why half finished initiatives destroy commercial outcomes
- How leadership operating rhythm affects execution quality
- Performance linked remuneration versus effort based pay
- Why effort based incentives feel like deferred salary
- Workflow complexity as a silent profit killer
- Advisor variance and its impact on scale
- The cost of excessive handoffs in advice delivery
- The role of advice philosophy in workflow efficiency
- Why advisors spend too much time on back office work
- Capacity myths inside growing advice firms
- When forward resourcing becomes profit leakage
- What good capacity planning actually looks like
- Why removing waste can be better than hiring
Episode Highlights
(Timestamps are approximate)
- [00:00] – Episode introduction and guest context.
- [01:10] – Dean’s background and exposure to advice firm profitability.
- [02:45] – Defining the profit gap in financial advice businesses.
- [04:10] – Why strong revenue often hides weak margins.
- [05:55] – The illusion of growth without structural efficiency.
- [07:20] – Leadership misalignment as a root cause of profit leakage.
- [09:05] – Why firms agree on goals but not priorities.
- [11:10] – The cost of running too many initiatives at once.
- [13:00] – Half finished projects as a commercial risk.
- [14:50] – Execution discipline versus judgment based decisions.
- [16:40] – Leadership operating rhythm and cadence.
- [18:35] – Why accountability fails without clarity.
- [20:10] – Performance linked remuneration challenges.
- [22:15] – Why effort based pay feels safe but performs poorly.
- [24:30] – Transparency as the foundation of incentive models.
- [26:40] – Workflow complexity as a hidden profit killer.
- [28:55] – Advisor variance and its impact on scale.
- [31:10] – Why bespoke advice delivery destroys efficiency.
- [33:20] – The cost of excessive handoffs in advice workflows.
- [35:40] – Advisors spending time in the wrong parts of the business.
- [38:05] – Meeting data as a capacity signal.
- [40:10] – Why perceived capacity shortages are often false.
- [42:00] – Forward hiring as a form of profit leakage.
- [44:15] – What effective capacity planning looks like.
- [46:25] – Removing waste instead of adding headcount.
- [48:10] – Structural fixes versus tactical fixes.
- [50:05] – What firms should diagnose before scaling.
- [52:10] – Common warning signs leadership should not ignore.
- [54:00] – Final advice for principals focused on profitability.
- [56:00] – Episode wrap up and closing remarks.
Quotes
“Profit leakage is rarely obvious. It hides in plain sight.”
“Effort-based remuneration creates expectations, not outcomes.”
“You cannot scale a business built on variation.”
“Judgment-based decisions replace discipline when alignment is missing.”
“Excess capacity feels safe until it becomes embedded inefficiency.”
“Predictability is what builds trust with clients.”
Key Takeaways
- The profit gap is a systemic issue affecting many firms.
- Misalignment within organizations leads to significant profit leakage.
- Leadership alignment is crucial for effective execution and strategy.
- Remuneration models often fail to incentivize desired outcomes.
- Advisor variance creates unnecessary complexity in workflows.
- Effective capacity planning is essential for scaling businesses.
- Client services play a vital role in maintaining consistency and efficiency.
- A clear business way helps reduce operational complexity.
- Closing the profit gap can revitalize a firm’s performance.
- Regular leadership meetings enhance alignment and accountability.
Resources & Links
- The Trusted Adviser: https://thetrustedadviser.com.au/
- Effortless Engagement: https://www.effortlessengagement.com.au/
- Connect with Rob Pyne on LinkedIn
- Connect with Dean Lombardo on LinkedIn
- Follow The Trusted Adviser Podcast
Show notes and transcript
For the full show notes and transcript from this episode, head to the episode page on The Trusted Adviser Website here.