Virtually every survey of advisors indicates that the majority of them face a daily battle--how to best allocate their time, energy and resources. Most advisors, whether sole practitioners or partners in a larger firm, struggle with the two great challenges: time and margin compression.
Hitting "The Wall," is what Bob Veres calls it. A longtime industry observer and publisher of subscription-based "Inside Information" (www.bobveres.com), Bob said in a recent newsletter that today's biggest practice management issue is how to cope effectively with too much opportunity. Having worked as a fee-based advisor for many years, I have experienced capacity, productivity and other business issues over the course of my career. Ultimately, my company found a way to get over The Wall--and we've tried to bring with us as many other like-minded advisors as possible (or steer them toward other viable options if our philosophies didn't match).
It's an awful feeling when you realize you've hit The Wall. And, sadly, the solutions are not always obvious.
WHAT'S DRIVING THE PROBLEM
Let's back up for just a minute and explore the source of the problem: As more and more consumers demand independent wealth management services, financial planning businesses have filled to capacity--and beyond. This does not necessarily mean the advisor has all the business he needs and wants; it just may be that he's too busy handling what he's got to efficiently add more. To compound the problem, advisors who slowly transitioned from a transaction-based structure into a fee-based advisory business are likely struggling under the weight of multiple, inefficient systems and conflicting philosophies.
The challenge from a service perspective is maintaining a quality experience for clients. In order to do so, advisors often add more and more staff and then wind up managing the systems, processes and the additional staff, too. Eventually, many advisors feel trapped in a daily grind. They make less money and work longer hours, doing things they don't like, things they may not be particularly good at and that they ultimately shouldn't be doing.
Some even hire other planners to manage their client relationships. If you read my last article in Wealth Manager (March 2006), you know I like to challenge "the commonly accepted wisdom." So to those who've hired a junior planner because you "just don't have the time" to meet with clients anymore, I ask: Why would you want to do that? Didn't you get into the business to work with clients? Does the client really want to work with "junior?" And how long will they put up with the substitution just because there's not enough of you to go around?
Call me crazy, but the advisor who removes himself from frequent, quality client interaction is headed in the wrong direction. Clearly, he's lost site of some original goals--not that goals and vision shouldn't change over time, but most of us established our firms because this was a "people business:" We like meeting with our clients and the folks they refer. And it seems to me that our clients picked us because they liked and trusted us enough to turn over their hard-earned cash and stake their futures on the advice and guidance we offer. Unless this strategy is a part of a business succession plan, delegating client relationships to a junior planner or staff member just doesn't make sense.
But delegate we must if we are to succeed, and having some staff may be a necessity. Time compression is a real and painful phenomenon. Knowing how to find the right people is the first hurdle. Then training, motivating and managing them becomes the challenge. And how about the classic problem, when the tenured employee attempts to hold the principal(s) hostage! So what's the solution?
OLD WAYS MUST YIELD TO NEW SOLUTIONS
Back in the old days, the common wisdom said to hire an assistant even before you could afford one. And this made a lot of sense because the idea was to free the advisor from all non-client activities. As the business grew, too many advisors extended that thinking; the result was that every time they got bogged down, they hired another staff member. Thus, many advisors' jobs became managing staff. But that was then; this is now. Thanks to today's technology and an abundance of options, advisors have more opportunities to effectively outsource than ever before. The new reality is that adding staff may not always be the best solution.
David Drucker and Joel Bruckenstein, co-authors of Virtual-Office Tools for a High-Margin Practice: How Client-Centered Financial Advisers Can Cut Paperwork, Overhead, and Wasted Hours (Bloomberg Press, 2002) wrote: "There's no arm's length when it comes to employees. After they've been around a few months, they begin to get absorbed into the family culture most small planning firms strive to create. At that point, they are telling you their personal problems, asking you for vacation time during your busiest season, and getting upset when you deny their request for a raise that would put their pay scale beyond the market rate for their job description. In short, they need a certain 'care and feeding' that an independent business entity doesn't require."
I, too, am a big proponent of outsourcing everything you can to a "Virtual Work Partner" or a number of outsource solutions. A Virtual Work Partner can be either a single service provider or a firm that provides a bundle of services. Unlike employees, they are likely to maintain emotionally detachment, come with built-in resources and expertise, and are entrepreneurial in their thinking.
According to the recently deceased business management and productivity guru Peter Drucker, "The best way to predict the future is to create it." Following are a few ideas to break up the occasional or chronic log jam:
List all the things you do on a regular basis. If an item is not directly related to creating and presenting a financial plan, meeting with clients to review their situation and build the relationship or promoting your business, you can (and probably should) delegate or outsource the task.
These "not-to-do" items might include: bookkeeping, payroll, tax filings, creating and maintaining compliance manuals, filing, database management, routine document creation, building a Website, creating marketing materials, managing HR and benefits packages, trying to become a technology expert, spending hours on investment research, maintaining computer equipment and systems, financial plan case writing, securities trading, account reporting and reconciliations, building asset allocation models, and rebalancing portfolios.
Track your time in 15-minute increments for a couple weeks. This tried-and-true time management exercise will help you evaluate and analyze how your time is spent. Why is it that you are feeling pressured and can't spend all the time you should with your clients?
Determine whether or not the item listed even needs to be done. How important is it? Should you (or anyone) do it at all? If you can cross it off your list and someone else's list, so much the better.
What's left on the list? Are you efficient at it? Do you enjoy doing it? Does the activity drain or energize you? For instance, most of us actually like meeting with clients and doing the financial planning (an energy-creating item) more than the administrative and management tasks (an energy-draining item).
Hire (judiciously) or outsource (preferably) to solve the problem areas. If you're feeling bogged down, there are no easy answers, but we can learn from one another and from others who've made it safely around, through or over The Wall. Whether you find a handful of Virtual Work Partners and put together your own dream team, or use a more comprehensive turnkey solution, outsourcing everything that's on your newly created not-to-do list makes sense. It's about profitability and about lifestyle. What can be better than having a nicely profitable business and time for a rich and full personal life, too? If we as financial advisors can't model that kind of balance for our clients, who will?
Brent Hicks, CFP, (www.FocusPointSolutions.com), is a financial planning veteran and a fee-based pioneer. He is the founder and president of FocusPoint Solutions, a firm that specializes in helping financial advisors build profitable fee-based businesses.