Many advisors are succeeding in increasing revenues, but failing to make the operational changes needed to keep up with the growth, according to a new study.
   The end result, according to the study by management consulting firm Moss-Adams of Seattle, is that many advisors are losing money due to inefficiency and lower productivity.
   "We are noting among most advisors that while revenue is growing, the processes are not keeping pace," says Mark Tibergein, a principal of Moss-Adams. "In other words, they're pretty good at building the revenue and assets side, but the infrastructure is suffering."
   The study found that advisor firms are losing an average of 8.3% of their total revenue to operational inefficiency-a figure that doesn't include losses from lower advisor productivity, Tibergian says.
   "In many respects the operations side is really the next crisis for advisor firms," he says.
   Moss-Adams conducted the study for Pershing Advisor Solutions, which like other custodians is rolling out services to help advisors on the operational level.
   Tibergein says the steps advisor firms need to take to shore up operations depend on the size and nature of the firm. The options range from effective technological solutions to hiring a chief operating officer.
   "If a firm finds its overhead is increasing at the same rate as its revenues, that usually signals it's time to make a change," Tibergian says.
   "They need to know when they make a change in their operations it means that they are going to give operations a strategic priority," Tibergein says.
   One example of how a firm can make operations a higher priority is to offer employees incentives that make jobs on the operational side of the business as a meaningful career track, he says.
   Operational jobs are more often viewed as stepping stones to the financial advisory side of the business, which is why the average advisor firm sees a 70% to 80% annual turnover rate in their operations staff, Tibergein says.
   The lack of attention to operations often means advisors are forced to pick up the slack. The study found that the average advisor spends about 20% to 50% of his time on operational issues.
   "The pressure is not coming from rising costs as much as it is from advisors spending time on operations," Tibergein says.
   The study surveyed 1,200 advisor firms.