For about half the group, a technology person was the next significant position to be filled. For the other half, the position of portfolio manager/analyst was filled. The technology person (whether a full-time staff member or outside subcontractor) was hired to more fully automate the office functions, eliminate duplication of efforts (double entry of information) and help ensure the delivery of a quality product. The portfolio manager/analyst developed portfolios and monitored performance. In a few situations, this latter function was filled by the original financial advisor/business owner.
Other functions were filled based upon the needs of the practice. Expertise was often needed for: taxes, 401(k) plans, investment capital, etc.
Very important observation: Virtually all of the top advisors use money management as their primary investment vehicle-essentially using outside expertise.
During the interviews, the division-of-labor questions delved into optimal organizational structures, procedures manuals, quality-control issues, managerial concerns and business valuations. The smaller practices (smaller with respect to the number of people involved) showed similar organizational patterns. The larger practices, almost by definition, required greater formality. Again, in every practice involving more than three people (the vast majority) the person deemed most vital to the success of the practice was the administrator or office manager.
The answers to the technology questions also yielded some interesting results. About one-third relied exclusively on their firm's technology and reports, but had to spend time simplifying the results for their clients. (None was willing to hand clients the massive performance reports produced by the firm's analysts. For the most part, such performance reports are too voluminous, intimidating and detailed for even the most sophisticated clients.) Another third used a combination of software from their firm and from outside vendors. The final third actually developed their own technology and, in some cases, were pioneers in their fields.
In summary, developing a highly successful financial services practice requires much more than product knowledge, good communication and rapport skills, the motivation to succeed and the right attitude. Good business practices that allow others-internally via staff and externally via money mangers and consultants-to help you leverage your time while providing additional value are vital to your ability to deliver a consistently high-quality service.
Steven Drozdeck is a financial services consultant. He has written more than nine books and courses and has trained more than 55,000 professionals. His Web-based training company, www.TheProgressCenter.com offers over 200 courses to increase productivity. He can be reached at (435) 753-8848.
Unique Platforms Equal Real Value Or Market Fragmentation?
Remember when everybody and his brother were building different systems when the PC first came on the scene? Then Microsoft created a common operating platform and licensed it to everyone. It became an industry standard that made demand for PCs explode. The same thing happened to the mutual fund industry in the 1970s and 1980s.
"The investing public became educated and started asking for them-that's when the mutual fund business exploded," says Len Reinhart, chairman of Lockwood Financial Advisors Inc. in Malvern, Pa., and co-author of a recent white paper about the long-term viability of the separate account industry.