From the June 2009 issue of Investment Advisor • Subscribe!

The Fast Track: Letting Go

Sometimes you have to step back and let your people do what they do

Recently, I had my weekly call with my client Bob Reed, of Personal Financial Advisors, LLC in Covington, Louisiana. Like many advisors today, Bob was very concerned about his business in this recession: how the economy will affect his business going forward, how his clients were handling the downturn, and even how well it was going to survive.

I just had to smile. I'd been working with Bob since 2005, helping him create a plan to grow his business based on his personal goals, and then helping him implement that plan. In a nutshell, the goal was to create a firm that he didn't have to run, so he could concentrate on managing investments and spending time with his family from his new home in Tuscaloosa, Alabama. Our plan was working: revenues, which had nearly doubled over the past 3 1/2 years, remained steady during the past six months, as had his $80 million assets under management, thanks to $12 million in new client money over the past year. What's more, client portfolios under his management have done far better than most of the other practices I've seen. Not only did Bob Reed have nothing to worry about, his firm is still ahead of the goals we set four years ago, and positioned for continuing success, even in this market.

The success of Bob Reed's firm--and its resilience in the aftermath of the Mortgage Meltdown--is one of three varied examples that I'll write about in this and the next couple of columns, which illustrate the power of what I call indentifying the "unique ability" of each advisory firm (with a tip of the hat to Dan Sullivan, the Strategic Coach). More often than not, advisors want to be told how to make their firms fit a predetermined business model. But over the years, I've found that lasting success comes from helping advisors determine what they and their firms do best, and then custom-building a practice to maximize those skills. This strategy can take a bit longer (up to four or five years to see the results of a new business plan), but as Bob Reed and the others will show, it's well worth the time and effort.

Bob's Two Strong Abilities

In the case of Personal Financial Advisors, Bob Reed had two very strong abilities, which provide an invaluable lesson for any advisor who is following the current trend of growing their practice by adding professional employees: He had a very clear vision of what role he wanted to play in his firm--managing client portfolios--and he has the rare ability to get out of the way and let his people do the other jobs that need to be done. He delegates authority, trusts the people he hires, and doesn't micro-manage.

Back in 2005, Bob's "firm" (comprising himself and an administrative assistant) was generating about $400,000 in annual revenues. At the time, he knew he wanted to grow his practice, and he knew he needed help to do that. But unlike many advisors, he wasn't looking for a consultant to come in and solve his business problems; just someone to help him create a plan that he could implement. He also wasn't driven to make a lot of money right away, which enabled him to set very realistic goals: $1 million in revenues within seven years (by 2012).

Yet even with all this going for him, it took Bob about 1 1/2 years to get comfortable with the plan that we created together, before we could implement it. It's my experience that it's far easier to devise a business plan that will make an advisory firm successful than it is to implement that plan successfully. That's because for any plan to succeed, the owner(s)/advisor(s) have to believe in it, and most advisors need time to get comfortable with a plan before they really buy into it.

Bob Reed knew he wanted to focus on investments: portfolio structuring, asset allocation, research, investment selection, etc. So he needed help with the other phases of the financial planning process. His big decision was whether to take the traditional path and hire what I call a client service advisor; an entry-level advisor who would simply take the more mundane tasks off his desk, and over time, gradually assume more complex duties until they became qualified to handle their own clients. His other option would be to make a leap of faith, and hire an experienced CFP who could perform all the other planning and advisory functions from day one, except investment management.

The reason most advisors opt for a client service advisor rather than an experienced lead advisor is not only because their "investment" in this new employee is smaller, should things not work out as planned, but it's easier to mold an inexperienced advisor into the older advisor's way of doing things. While less risky, the problem with this solution is that it's also less effective: it leads to young advisors trying to be clones of their mentors, rather than developing a style based on their own strengths.

Although it took him a while to become comfortable with this strategy, Bob Reed eventually agreed to jump in with both feet, and hire an experienced CFP to be the firm's lead advisor and conduct the annual client reviews. Because he wasn't under any pressure to grow, we had the essential "luxury" of taking our time to find just the right person (generally, the more experience you seek, the longer it will take to find that person). In Bob's case, it took about eight months to find Lauren Gadkowski (now Lauren Lindsey).

The daughter of Centerville, Massachusetts, financial planner Linda Gadkowski, Lauren had her own hourly advisory firm in Boston. But with a significant other in Baton Rouge (who has since become her husband), Lauren was looking to move to Louisiana. Bob's first step toward not micro-managing was to let her move to Baton Rouge (about 45 minutes from the office in Covington), and figure out for herself how often she had to come into the office to get her new job done. That new job would be to take over virtually all annual client meetings and follow-up contact regarding their financial plans. Bob would handle the investment planning.

Letting Her Do the Job

Bob's next big step was to encourage Lauren that she could indeed work with bigger clients, and then to turn her loose to do just that. He had her contact the clients, introduce herself (that she works for Bob Reed), and set up a time for them to come in for a review. Many of his clients were in need of a more comprehensive "annual review" and the best way for us to get Lauren started was to specialize her where the greatest need was--the annual review process.

Bob sat in the first few meetings, liked what he saw, and let her run with it from that point. What he didn't do was to tell her how to communicate: He let her do it her way. Consequently, Lauren was more confident, better organized, and appeared more knowledgeable than if she had tried to communicate with clients "like Bob did."

He also didn't start her off with "smaller" clients, clearly communicating his belief that she was qualified to do the job she'd been hired to do. Overall, she was a big success: even connecting with some clients on a deeper level. Less than 10% of the total clients indicated they'd prefer to work with Bob. Lauren flagged those clients after meeting with them, having Bob follow up with a phone call.

Bob rarely introduced her around town to local businesses and networking groups; he let her establish her own reputation rather than as his assistant. All together, the plan worked better than we expected. In her 2 1/2 years with the firm, with Lauren focusing on the financial planning and Bob focusing on the investments, this team has nearly doubled its assets under management, adding $15 million in AUM from existing clients who had assets Bob didn't know about, and while rainmaking isn't part of Lauren's job description, together they added another $20 million in new client assets from Lauren's community involvement and Bob's reputation.

Today, Personal Financial Advisors has three employees in the "home" office in Covington: Two young advisors and Lucy Banquer, Bob Reed's former administrative assistant who now largely runs the operation. Bob lives in Tuscaloosa, and Lauren followed her new husband to Houston, teleconferencing with clients and commuting when she has to. The firm now has revenues approaching $700,000, and should easily hit Bob's $1 million goal on schedule, despite the recession.

The true success of Personal Financial Advisors, LLC is Bob's hands-off delegation and trust in his team. This has freed him up to concentrate almost exclusively on client portfolios, which I believe enabled his better-than-average performance during our recent challenging markets. Bob Reed and the great team he built to support him are doing better than ever--even in this environment.


Angela Herbers is a virtual business manager and consultant for independent financial planning firms. She can be reached at angieherbers@cox.net.
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