Finding Profit In Written Policies And Procedures

It may be no surprise that written policies and procedures would be linked in some way to profit. What is surprising is how few financial advisors actually take the time to write them. For some, it may seem redundant to create a set of manuals if they already have similar types of written materials provided by their broker-dealer. So, to be fair, let's differentiate between broker-dealer type policies and procedures and those that should be created separately by the financial advisor. And, while we are at it, perhaps we should also explore the reasons behind such an exercise.

Generally speaking, policies and procedures that are developed by broker-dealers facilitate the processing of paperwork and/or transactions, ensure appropriate compliance requirements and protect the broker-dealer. Following such procedures generally also protects the financial advisor. However, policies and procedures that relate specifically to the day-to-day operation of a financial practice are most always left to the financial advisor to develop or customize to his or her needs. So, to understand how to develop such things, it is critical to identify what it is about your practice that needs a written policy or procedure.

Starting with policies, some of the easiest to identify are those associated with employees. An employee manual (or guide) can set out the rules of behavior, actions, identify inappropriate actions and spell out remedies. It can also provide details on employee benefits, vacations, sick time and policies regarding such things as jury duty, family medical leave, sexual harassment, discrimination in the workplace, etc. In short, the employee manual can serve as a guide to the employee, new and old, on what they need to know to work in your office environment. Items such as client relationship policies and office atmosphere issues where it relates to the client experience should be in the employee manual, but often are neglected.

Additionally, it may be a good idea to include a legal agreement that covers such things as noncompete/non-solicitation of clients or nondisclosure of information rules. Even if an employee is a nonlicensed assistant, it is still a good idea to have such a document signed by that employee. Check with your broker-dealer and/or seek legal advice before preparing such a document.

Another document that can be associated with an employee manual is a job description. Not a one-page summary of duties, but a detailed, line-by-line description of every expectation, activity and responsibility for that specific employee position with accountability factors built in (such as how you intend to hold the employee accountable for those responsibilities.). Writing job descriptions can be tricky. While you would want to be as detailed as needed, you may also want to leave room for additional tasks falling outside the list that may, from time to time, be assigned. Otherwise, the employee could legitimately refuse to perform a particular task simply because it was "not on the list."

Closely related to the job description, but far more time consuming to write, are task-oriented procedures. Several advisors have mentioned that employees are reluctant to assist in the assembly of procedures manuals because they view the manual as a threat to their job security. One point to consider is the need to protect the vital functions of your practice versus one or more employees retaining control over tasks that cannot be replicated by others. The fact remains that if an employee is sick or quits, your practice could be in real trouble if that employee, for instance, was the only one that knew the procedures associated with trades or the operation of a software platform that manages portfolios. Yes, you can call the software company or your broker-dealer or whoever to help. But, how much time and money is lost while all this is going on?

The key to maintaining up-to-date procedures manuals is not to make employees obsolete, but to allow any employee to be able to perform the functions of another employee (or, for that matter, the financial advisor) in a pinch. Such publications also make training new employees a snap. Task by task, they need only refer to the associated manual to know the step-by-step instructions on how to complete that task. You might consider suggesting to an employee (who might otherwise be reluctant to assist you in preparing manuals) that merely having the manuals on hand makes that employee more valuable to you, as they can step in to anyone's role when needed.

So, what sort of procedures might be best suited to having a manual? Tasks associated with software such as client relationship management, asset (portfolio) management, trading platforms, illustration software, financial planning, asset allocation and portfolio analysis software to name a few. It may be that the financial advisor performs certain higher level tasks in these software packages, but uses an employee to perform initial data entry. Whatever the case, having written procedures in place makes your practice much more efficient and less prone to "down time."

You may also wish to fully document the "paper trail." That is, record all the procedures required to submit documents, information, suitability requirements, applications, etc., which comprise the flow of business through your office. Some advisors prefer to draw out a flow-chart that depicts each and every step in the workflow process. This is a good idea, but should be accompanied by detailed written procedures on each step in the process.

Other procedures, such as phone etiquette, file preparation and handling, mail handling or compliance recordkeeping, may be able to be grouped into a single "office procedures" handbook. Some advisors prefer to include these procedures in the employee manual. Be aware though that your broker-dealer may impose certain requirements with respect to separate recordkeeping for compliance purposes.

If you look long and hard enough, you can find thousands of products and written guides to help you write policies and procedures. But, sooner or later, you are going to have to sit down and actually write them. So before beginning this, you may want to ask yourself how this relates to efficiency and profit. The answer lies in understanding how systems can make the flow of business and accomplishment of tasks easier, faster and more effective. By writing procedures, you get a first-hand look at how efficient (or inefficient) those existing procedures are. The exercise of writing the procedures can reveal ways to trim the process, refine your workflow systems and make things work better in your practice. Freeing up your time and that of your employee(s) can save you money. It can allow your practice to handle more clients, process more business, improve client relations and increase employee satisfaction merely by going through the development of written policies and procedures.

David Lawrence has more than 20 years of experience in the financial services profession. He is the current president of the Financial Planning Association of Tampa Bay. He owns David Lawrence and Associates based in Lutz, Fla., a financial practice consulting firm.