2011 Top Wealth Managers: Staffing and Survey Conclusions

One sign of the top firms: by focusing on more profitable relationships, they were able to reduce staffing expenses and increase efficiency

top wealth managers logoIn the lead story in the 2011 Top Wealth Managers Survey Special Report, we discussed the overall findings of survey respondents. In the second article, we explored the services offered by firms and the prices charged for those services, while in the third article we focused on staff productivity.

In the fourth article in the series, we took a closer look at the relationship between average client size, productivity and profitability.

In this, the fifth and concluding article in the 2011 Top Wealth Managers Special Report, we focus on staffing levels and productivity, and draw general conclusions from the survey.

A big question for many firms in the past year has been how to manage growth. Many firms are asking themselves if they should be aggressive or prudent in their expansion plans. Here’s what the survey data reveals:

  • Firms that HIRED staff in 2010 grew on average by 2 professionals and 1 support staff.  Their revenue increased from 2009-2010 at a rate of 27%, outpacing firms that did not hire staff by 10%.  On average, these firms tended to take on a larger number of client relationships than their peers with the average revenue per client around $16,000.
  • Firms that REDUCED staff in 2010 saw a huge jump in productivity.  Revenue per staff jumped 35% from 2009 with revenue increasing by 19%. In addition, these firms focused on more profitable relationships with average revenue per client of $23,900.
  • Firms that made NO CHANGE to staffing levels in 2010 grew the slowest with a 17% increase in revenue between 2009-2010.  These firms tend to leverage existing staff with nearly double the number of clients per staff (professional and support) compared to those firms who made changes in their staff count.

It is imprudent to conclude that simply changing the number of staff is a spark for growth. Profitability is a key indicator of whether growth is being achieved effectively and unfortunately this survey does not address that side of the story. However, the numbers do suggest some helpful information. 

Top Wealth Managers--Percentage Change in AUM by Year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Firms that reduced staff may have realized that by focusing on more profitable relationships, they were able to reduce staffing expenses and increase efficiency. Firms that hired mostly looked to employ professionals and seem to have the capacity to build out without disrupting efficiencies.  Those firms who made no change may have been closer to reaching capacity with their existing staff and remain cautious by going with the “status quo”.  The stagnation may have resulted in the slower growth.

In terms of productivity, these firms have found ways to continue growing without the addition of much staff.  In fact, only 44% of the firms grew their staff in 2010. Even with less than half of the firms increasing their employee count, revenue per staff was up in 2010 by 11% to $222,424.  This could suggest a few different possibilities.  The market downturn perhaps created a sense of urgency for the remaining staff to perform at a higher level or firms have found a way to be more efficient and effective with the staffing they have currently in place.

Of the 44% of the firms that made hires in 2010, on average the hires were 2 professionals to 1 support staff. The focus on adding professionals may be due in part to the increasing need among consumers to see the true value that firms are able to provide. The more professionals represented within a firm, the more likely clients are to perceive a strong representation of expertise, knowledge and competence. Studies have shown these characteristics to be some of the key builders of trust in client relationships.  In addition to enhancing client perception of value, it is likely that many firms are still looking to curb additions to overhead and thereby slower in hiring support staff.

The focus on professional capacity may, however, place a strong emphasis on

new support personnel hires.  New hires in this area are now expected to have the ability to support professionals at or near their full capacity.  These expectations likely make openings for these positions very competitive with firms seeking candidates who already maintain the qualifications and knowledge to ramp up quickly.  Also, the unemployment rate for the finance and insurance sectors are still hovering around 6%, which is double of what it was prior to the financial crisis of 2008-2009.  With a slow return to hiring for support staff, there is still an abundance of qualified candidates on the market adding to the competitiveness of these positions.

Collectively, it appears that firms who took action in regards to their staff count during 2010 outpaced firms who made no changes.  While staffing changes may not be a recipe for growth, it does suggest that firms who evaluated their situation and took action may have put themselves in a better position to capture new opportunities. 

Survey Conclusions
The independent wealth management industry has grown remarkably and continues to enjoy high level of success and increase market share amongst high net worth individuals. The challenges are clear:

  • Creating a profitable service model that balances client needs with the productivity and profitability of the firm
  • Managing client expectations through uncertain industry environment and volatile markets
  • Recruiting and retaining talented staff
  • Continuing to grow and maintain momentum so that the firm can create opportunity and income for all of its professionals and staff

Defining excellence is a difficult thing to do. It comes in many forms and is achieved in different ways. It cannot be tied to a single tangible standard such as assets under management, profitability or efficiency. As the top wealth management firms in the country may attest, the pursuit of excellence requires continuous adaptation to keep pace with rapid change in the industry and achieve a reputation as one of the nation’s best firms. Perhaps Aristotle described it best : “We are what we repeatedly do.  Excellence, then, is not an act, but a habit.”

Return to our 2011 Top Wealth Managers home page for further analysis and data.

See our report on the 2010 and previous years' Top Wealth Managers.

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