From the November 2006 issue of Research Magazine • Subscribe!

Raising the Bar

Are you managing growth or is it managing you? It's an issue that's top of mind for successful advisors, no matter the stage in your career.

F&D Advisors was an Atlanta start-up in 1998 with zero assets. Today, the firm has $800 million in assets under management and 23 employees.

But as David Fisher, one of the firm's three principals, notes: "The general consensus is, 'If I just get to $120 million everything will be perfect, if I just get to $500 million, everything will be perfect.' We take a more philosophical approach. It's a long journey and there will always be things out in front of you. You're moving forward but the bar keeps moving, too. You have to have new answers."

One key solution at the core of smart growth: institutionalizing your practice. If it isn't a buzzword yet, look for it to become one.

Kerry Bubb, chief wealth manager of KWB Wealth Managers Group in Redlands, Calif., puts it this way: "Every Monday, we huddle and talk about things as a team. It's not just Kerry dictating. We are trying to look holistic, delivering one message, one experience. A client can expect the same level of service whether he's talking to me, or any of the other advisors. And that comes from building a more institutional-type practice."

At the Financial Planning Association's annual conference in Nashville late last month, Stephanie Bogan, a financial services management consultant, was scheduled to moderate a panel of principals of high-growth firms -- small, medium and large -- and the challenges they face. Expected topics of discussion: making time for business building; managing a profitable client base; leveraging technology; smart hiring; creating scalable operations; and using coaches and consultants to take business to the next level. [Note: Panelists Fisher, Bubb and a third participant, Marilyn Plum, are clients of Bogan.]

In an interview in advance of the conference, Bogan said, "A big part of success is not about being a great financial advisor. It's being a good business owner. We find clients get a lot of clarity when they think about what they're doing, why they're doing it, what their ideal business looks like, how much money they're making. It reminds people of what they intended to become in the first place. You can talk about compliance issues, a problem staffer and client problems, but at the end of the day you're talking about business problems."

Battling Inertia

One of advisors' biggest hurdles is battling inertia.

"We go to conferences, come back with all these good ideas, but when it comes to actual implementation, it's like the saying goes: We're working in the business, not on it," observes Bubb, whose LPL affiliate has $360 million in assets under management and 10 employees.

Bubb says he keeps reminding himself of the "very important but not urgent box" that contains his business-building blocks.

"It's writing another client letter; revamping internal client-review processes; figuring out what works and what doesn't. Am I doing the important things and handing over the other stuff to the staff? If I don't pay attention to that box, it bothers me," says Bubb, an advisor since 1987.

"For instance, I'd like to send a letter to clients telling them we're coming to the end of the year; make sure you tell us if you sold a house or inherited money because there are things we can do in your portfolio to offset taxes. We will do just fine not sending that letter out," he adds. "We'll keep focused on our day and business will go well -- but not as well as it could. These are the things that separate the men from the boys."

Over the past few years, Rick Happle, senior vice president of Happle Wealth Management in Tampa, has taken a number of steps to sharpen the operations of his Raymond James & Associates affiliate.

He hired an investment associate, began targeting corporate executives, brought on a planning associate, developed some scalability and hired a coach who has counseled him on human resources matters.

With $180 million in assets under management, Happle has just finished his 2007 business plan. In the works: hiring an associate financial advisor.

His biggest regret? The length of time it took him to spearhead change.

"You have to have the willingness to change, and to recognize that failure is a common occurrence in trying something new," says Happle, who has worked in the industry since 1981. "I feel like failure is something that discourages people from making changes. I recognize it as a normal sequence to growing a business -- to getting to what it is that is going to make you more successful."

Smart Growth

With growth comes challenge -- and also opportunity.

Here are some "best practice" management tips from Bogan, her FPA panelists and Kirk Hulett, senior vice president of strategy and practice management for Securities America.

Hire smart. It's not about finding staff -- it's finding the right staff with the right skills. This can be a daunting process that pushes advisors out of their comfort zone, according to Hulett. His top recommendations: Outsource the project to your broker/dealer or a human resources consulting firm; there's no reason to go it alone.

Remember in the selection process that past behavior predicts future behavior. This can be a valuable screening tool. Give your new hires a good launch with months-long support that includes training, clear job expectations, and added incentives for superlative performance. Establish a career path. If you make the wrong hire, correct the behavior when you first see it and let the employee know there will be consequences if it continues.

Use technology to enhance productivity and improve internal processes. F&D Advisors this year began using a software system that aggregates all client holdings. It's saving 36 "people days" a year, according to Fisher. Ultimately, the firm plans to go fully paperless.

Identify your inefficiencies. Two years ago, Marilyn Plum and her partner Lynn Ballou, principals of Ballou Plum Advisors in Lafayette, Calif., realized that their desire to help everyone was subverting their growth track. They also knew they needed to refine their market.

They were reluctant to implement the 80-20 rule, but when they took a hard look at the clients that were dragging them down, they transitioned 20 percent of their clients to other advisors. They also decided to focus on $1 million-plus accounts so they began marketing -- a first for them -- to centers of influence: CPAs, estate planning attorneys and divorce lawyers. The firm, with $150 million in assets under management, more than doubled its assets in two years.

"First, it's recognizing you have issues, then trying to find the tools to evaluate and proceed," says Plum. The firm's broker/dealer, LPL, has a data-tracking tool that allows the firm to identify income-per-client. "It's become a very important number. We look at it at least monthly," adds Plum. "Once you identify clients you are going for, it makes it much easier to say no to the wrong clients.

Institutionalize your practice. This is a Bogan specialty and Fisher, Bubb and Plum all talk about the importance of creating an institutionalized client experience. Part of it is technology-driven, part process-driven and part people-driven. In the end, says Plum: "We want consistency. It's a matter of internal efficiency. We want someone to walk in the door one day and take over our practice. So it's about succession planning, too; it has the benefit of making you more marketable."

The principals at F&D have applied the 80-20 rule to the client experience. Eighty percent of the advisory engagement is going be similar for all clients while 20 percent will apply to unique client circumstances and issues. As Fisher notes, "Really, the root of it is training and work flow internally. All of our teams are trained in the same routine, so every team offers the same experience. The biggest challenge is making training a priority. If you don't train, the void will be filled by an individual or a team, the exact opposite of what we're looking to deliver."

Create an entourage. A lot of senior advisors are superstars with clients, but can't talk to their own staff. "At the end of the day, when they're with a client, it's all about the client. When they're in the office, it's all about them," says Bogan. "If you want to build a great business, the best thing you can do is stop believing it's all about you. If you don't have great, happy, motivated people on board, it's a set-up" for failure.

Bogan's fix in the case of one high-net-worth advisor: She helped him hire a sales assistant who accompanies him to all client meetings. Afterward, the assistant follows through with the advisor's team. "You can't be a superstar without what we call an entourage," she says. "You're the talent, but to maximize your abilities you must have these people around you."

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Steps To Smart Growth

o Assess yourself honestly. Do you have the skills to be a boss? If not, consider hiring a business manager to run your firm.

o Get advice from professionals: coaches, management consultants, corporate psychologists.

o Revisit your core values, core purpose. In all likelihood, you'll reconnect with the elements of your practice that inspire you the most.

o Develop an institutionalized experience across your firm.

o Make training a priority.

o Build your team to create the greatest leverage.

o Invest in technology.

o Cull your clients.

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The Challenges to Growth

Advisory firms face different challenges at different stages in their growth. Here are the top hurdles, according to Stephanie Bogan, president of DP Group, a Redlands, Calif.-based financial services management consulting firm:

o For small firms, with $1 million in revenue a year, the foremost challenge is building leverage in the organization. Typically, there is no one under the principal to design systems or run operations. And there's an upfront cost to developing that. One solution: bringing a business manager on board.

o For medium firms, with $1 million to $5 million in revenue, it's all about getting control of your clients. It is not unusual for 50 percent of clients to generate 20 percent of revenue, a statistic that is out of balance and suggests a system that is not working well. The challenge: making the client relationship profitable. Possible fixes include adding another advisor and culling clients.

o For large firms, with $5 million or more in revenue, the ongoing challenge is managing growth in and of itself. You can add, for example, $200 million in assets but if you're still doing everything in a people-driven way, you will be crushed by it. As Bogan notes, "The challenge is staying entrepreneurial in terms of the spirit of it -- but relying on systems and developing scalability in operations." At this point, firms are also looking at building career paths for a second generation of advisors.

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