At a time when financial advisors need to scale their practices to be more profitable and productive, an advisory practice’s human capital resources are more critical than ever before. In the past, when an advisory firm reached capacity, the only option was to staff up. Today, there are far more options, including effective employment of new technology, outsourcing or hiring more skilled versus the administrative level staff.
Technology can complete part of the workload previously done by onsite staff, such as portfolio rebalancing, financial planning, portfolio management and dictation. By integrating technologies in a useful way and using automated CRM workflows – those that actually accomplish tasks previously completed by staff – technology improvements can add efficiency to a financial advisory practice.
Adding staff – either outsourced or in house – is the other complimentary solution, provided that you make the right hire to fill the right position. Frequently, advisors don’t necessarily know what their practice needs or how to go about assessing those needs. “What I usually see is that advisors have two issues: capacity and the right people in the right job,” says Ginny Hudgens, CEO of Back Office Advisor in Baton Rouge, La.
Caleb Brown, CEO of New Planner Recruiting in Dallas, Texas, sees inefficient systems as a culprit in many financial advisory practices struggling with capacity and attempting to identify the “right” hire. He finds that by sitting down with advisors, interviewing their staff members and really gaining some insight into the dynamics of the practice, he can help advisors clarify what the problem is and figure out which solution -- hiring staff in house, outsourcing or technology upgrades -- will help their practice grow.
The Problems
Before advisors hire a new employee, they need to examine where their business is in the growth cycle, what tasks they are doing that they don’t enjoy, and what they’d ideally like to be spending their time on, says Hudgens. Then, they can backfill what they don’t want to do with technology, automation of work, outsourcers or in house, skilled personal. Advisors who don’t engage in this process may hire the wrong person or buy technology that doesn’t fit or isn’t easy to use.
If hiring someone is the right solution, one big problem that smaller RIA firms have is the inability to recover from a hiring mistake, says Brown. In larger firms, a hiring mistake isn’t necessarily a critical problem because there are other staff members to pick up the slack. A small firm lacks that ability, so identifying the exact job that needs to be one and then finding the right person to fill it is essential, says Brown. Brown encourages advisors to engage in a deep due diligence process to assess their own needs and to really consider what types of skills will help grow and scale a practice. The process can include personality tests, skill tests, a series of interviews, reference checks and more.
When a hire is made, even if the hire is the right one, advisors frequently don’t anticipate the amount of time it takes to get that hire up to speed and keep them on track, says Diane MacPhee, CEO of DMAC Consulting Services in Manahawkin, NJ. Advisors who don’t have the time to commit to supporting an in-house staff member may be better off outsourcing to an expert who can hit the ground running.
For firms struggling with capacity that already have staff members, Hudgens finds that frequently the staff members may not be the right ones for the job. Advisors tend to be very loyal to the staff members they have worked with over the years, she says. Loyalty is all well and good but when the wrong person is in a job it can drain time, energy, and money from the advisor and the practice, taking a toll on the professional and personal life of the firm founder.
The Solutions
Whether the identified need is for technology or human capital, the key is to identify the need that has to be filled and to acquire the correct resource to fill it. In some cases, Brown has been hired by financial advisory practice to hire a new staff member, but finds after interviewing the founder and staff members that a piece of technology is actually what is needed to complete the work.
Hudgens frequently finds that firms need to trim staff and hire the right person, rather than add staff. If the right staff is in place and everyone is working at their capacity, the solution is pretty simple, she finds: find out what tasks current staff wants to offload and either outsource or hire to get those done. In any case, clarity is key in avoiding making the wrong hire.
Here are some thoughts on what solutions may fit your situation:
Outsourcers. Outsourcing is an increasingly popular solution as you can pretty much outsource any function in a financial advisory practice to an American-based firm except for actually sitting down and delivering advice. Also, it is a good stepping-stone for your budget as the per-hour, fixed retainer or project costing is more flexible than a W-2 salaried individual. As Brown says, “All outsourcing options should be on the table in terms of functions that can be done outside of that advice-giving piece when a firm wants to scale.”
Outsourcing is not as complicated as you might think and many firms already outsource their bookkeeping, portfolio reconciliation work and website design work. Due to leaps in technology, you can now outsource many functions while still maintaining control over the work product and be in the know about what progress is being made on behalf of which clients or contacts.
For advisors who aren’t comfortable with staff that they can’t see working in their office, outsourcing might not be a good solution, says Hudgens. For others, particularly Gen Y and X planners, it’s possible to outsource everything outside of a planner’s core competencies, and some sole practitioners and small firms are doing just that, says Brown. Outsourcing can be much less expensive than in house staff because there aren’t the benefits, office space, or overhead to pay. There is also the gain in the advisor’s time as less training is involved.
Outsourcers are experts in their area of the business and more often bring best practices to your firm. Finally, the use of outsourcers helps define the roles you need within your firm and the responsibilities of each role. It is an easy and more affordable way to define the proper roles and job descriptions necessary before transitioning the work to an onsite, full-time staff hire.
In House Staff. If in house staff is needed, Brown has found, in many cases, that a recent graduate of a financial planning college program can be a good fit. Many of them have the technology skills that advisors and advisory practices lack and are eager to learn different aspects of the business in preparation for taking an active planning role in the future.
“The learning curve for many young graduates is shorter than for older hires,” says Brown. “They have grown up with technology, they have fresh ideas and can offer a different perspective. They can help out in many different areas including client service, operations, technology and administration.”
Advisors who are looking to hire more experienced staff should look at hires with complimentary rather than similar skill sets. Advisors that are planning toward selling the practice, succession planning or delegating the rainmaker role to someone else will need a higher-level hire. Frequently an advisor needs someone with operations, rainmaker and technical advisor skills so having a formal interview process is highly recommended to truly learn about the person’s passions, skills, experience and traits that will compliment the other personnel at the firm.
For staffing, the key to avoiding the nightmare of the incorrect hire is written job descriptions and the creation of clear career paths to provide professional development opportunities and advisory firm growth, says McPhee. Without job descriptions and career paths, staff members and the advisor gets frustrated about expectations and critical jobs don’t get done in the right way.
Technology. There are so many technology solutions available for advisors that it can be hard to know where to turn. Consultants can help untangle the universe of options. In many cases, individual software pieces can be very helpful in terms of solving a particular task that is time consuming and repetitive, such as rebalancing software. Technology integration, especially integrations that allow automated workflows, can also be particularly helpful. Automated workflows allow technology to perform the work that would otherwise be done by staff members.
A Final Word
Ultimately, the goal of any additions, whether via staff or technology, is to increase the scalability of a financial advisory practice so that the advisor can achieve a better quality of life, have the time to spend on tasks in their core competency while giving the practice the ability to grow and become more profitable. That starts with the advisor creating the vision of what he or she wants the practice to be and increasing efficiency via in house or outsourced human capital.