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Practice Management > Building Your Business

The Right Staff

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Though Rex C. Whiteside has forsaken a fancy sushi palace for a less pricey Japanese spot when buying his staff lunch, and has cut a few other corners too, this financial advisor is gearing up for growth: He’s hiring FAs and support staff, acquiring new technology, even leasing larger office space.

The worldwide financial crisis has wreaked havoc; but a glint of sunlight shines through:

“This is probably the single greatest growth opportunity [advisors] will have for the next 20 years. We’re not laying off — we’re going in the other direction,” says Whiteside, whose independent Whiteside Investments, in Houston, is affiliated with Raymond James.

At a time when most firms and advisors are making big cutbacks for the expected tough year ahead, some FAs are hiring staff and otherwise investing in their business to handle anticipated growth.

Plus, a number of advisors who exited wirehouses last fall to go independent have opened their own boutique practices.

“Cutting back is the wrong thing to do now — this is the time to go out there and grow. So many investors are unhappy with their existing advisors. [A study says] 87 percent are looking to change,” says Laila Marshall-Pence of Pence Wealth Management, affiliated with LPL Financial.

Managing assets of about $400 million, Marshall-Pence, in Newport Beach, Calif., wants to bring on a financial advisor and another sales assistant to add to her 14-person team.

Even as such activity continues apace, many firms are laying off employees, scrapping branch managers’ stock-matching programs, suspending 401(k) matching, canceling bonuses — and generally trying to do more with fewer people, many of whom can be paid less because they are less trained.

But even for advisors revving up for growth, the order of the day is mindful spending versus business as usual.

“It’s hard to say there’s anything we’re doing that’s usual anymore because the circumstances are so challenging. We’re trying to look at everything to see if we can do it better, more efficiently or more effectively,” says Adam Carlin, wealth management director of the Bermont/Carlin Group at Smith Barney. The team manages more than $1 billion in assets.

Carlin and his partner Richard Bermont, in Coral Gables, Fla., are taking many initiatives to maintain the growth of their practice, whose 2008 numbers topped those of ’07.

As do most growth-oriented advisors, Carlin is adding staff mostly so that he can focus on larger accounts. He is seeking two FAs, one that specializes in estate planning; the other to concentrate solely on research.

“Gathering the shear volume of information that comes our way these days is a huge task, and determining the integrity is very important: Is it fact or rumor? Going through all this requires a full-time person,” he says.

But finding the right FAs to fill these posts is proving difficult since both demand special skills. “It’s tough to find people that are a good fit,” Carlin says.

That’s no surprise: “There’s a real shortage of good people,” says Mark Elzweig, whose executive search firm, Mark Elzweig Company, is in New York City. “Firms want to hold onto their most productive advisors.”

On the flip side, wirehouse FAs in production five years or more and grossing under $350,000 are “very vulnerable right now because firms want to focus their resources” on bigger producers. “You need to be grossing at least $400,000 to be secure at a major wirehouse,” Elzweig says.

Among such firms, in particular, cost reductions are widespread and deep. Client-entertaining expenses have been mostly eliminated; rather than booking direct flights to visit clients, FAs often are required to take cheaper layover flights; and most firms will reimburse only economy-sized hotel tabs. Anything luxury or discretionary has been cut out or at least cut back.

Growth Story

But then there are practices like Pence Wealth Management. It is pegged to grow around 30 percent in ’09, Marshall-Pence says. That means hiring another financial advisor — to total four — who will take on a portion of Marshall-Pence’s accounts and many expected new ones. With one more FA, she’ll then be able to “move up and work with bigger clients,” the advisor says.

In 2007, in anticipation of increased business, Marshall-Pence doubled her office space. “We’re growing by leaps and bounds,” she says. The last quarter of 2008 — when the financial meltdown became a crisis — were “some of our biggest months.”

That uptick is partly the result of educational seminars, Marshall-Pence notes. “Over the 28 years that I’ve been in this business, I’ve learned that in times of bad markets, you do seminars. People are looking for different ways” of investing. The FA takes a conservative approach that protects about 50 percent of a client’s wealth.

But even advisors gearing up for growth are carefully watching the bucks. “We set out very specific rules in our group to try to cut back where we can,” says Smith Barney’s Carlin.

That means, for internal use, black-and-white copies instead of color and printing on both front and back. Also: no more routinely shipping via FedEx: “Unless it’s a necessity, we don’t do it,” says Carlin.

He notes that these measures are not so much to save his practice money but to try to save someone’s job at the branch: Part of Carlin’s expenses come under the manager’s P&L. “If enough people here [cut back],” the advisor says, “it adds up.”

One aspect of Carlin’s growth strategy is to shift smaller clients and non-managed accounts, often time consuming, to other advisors in the firm. This will give the money manager more opportunity to concentrate on larger clients.

“These days,” he says, “it’s best that some clients not work with us; other advisors might be better able to serve them.”

Keeping the Team Motivated

Motivating staff is critical in a down market, and that of course ultimately generates growth too. Wachovia Securities advisor Ronald Hertel, who heads the Hertel Wealth Management Group, in Boston, with $225 million in assets under management, likes to give his staff “autonomy.” “Each person has a voice,” he says.

Counting on further growth, Hertel last Christmas-time ordered faster computers with double screens. Also, he has plans to replace two paid interns with one employee with more qualifications than either intern. The new hire would provide more consistency too. Though higher paid, that person would, says Hertel, “ultimately lead to greater productivity. They would grow to have more capabilities than what we teach our interns.”

To boost motivation, many financial advisors make sure to discuss with staff Wall Street’s latest gyrations; pay employees modest bonuses; and try to keep a calm demeanor in the face of market chaos.

“If I’m not running around like a chicken with my head cut off, it’s going to translate [well] to my staff,” says Whiteside, a sales manager in Raymond James & Associates’ Dallas office before going independent.

Whiteside attributes much of his 2008 record asset-gathering year — he’s up to $75 million now, managing investments for 75 families — to being there for clients when they need to hear from him most.

But in the worst financial upheaval since the Great Depression, many other advisors are making themselves scarce. Bad idea.

“Everything in the financial services business can be commoditized except your service model — so we really push that,” Whiteside says. “Especially in turbulent times, you want to make sure clients realize you’re listening to them and that you care.”

Late last year, whenever the market dropped 2.5 percent, Whiteside clients received phone calls or e-mail describing what happened and why. “Just by the level of service you provide, you’re going to grow,” he says. “We’ve really tried to stay in front of people.”

Though Whiteside might be cooling it when it comes to dining on the most expensive sushi — and has also trimmed costs by switching to a check-scanner system instead of overnighting checks to the Home Office — he isn’t tightening his belt when it comes to client service. For instance, he’s just purchased new client management and financial planning systems.

Whiteside is expanding on the human resources side as well. To handle additional assets and work flow, he’s just hired an office manager.

“We’re defining who’s good at what and what each one really likes to do. You need to drive people toward what they enjoy because that way you get better performance,” he says. The FA intends to add one support person for every $30 million in new assets.

Moreover, Whiteside is in talks with an advisor that he expects to soon join his practice. “I think I can help him out by showing him our process. He’s been a plateaued advisor for a number of years. After a certain period, a lot of advisors hit the max assets they’re ever going to attain. But,” he says, “it’s just a state of mind rather than ability issues.”

The Houston independent is also about to hire a certified financial planner. That will clear more time for him to deal with marketing and investment management. While the new FA, noted above, will have his own clients, the CFP will work mostly with Whiteside’s client base.

“It bores me to death to do financial reviews. But there are people who like that. You have to know what you’re good at and what you like to do — then hire for the rest,” he says.

About to embark on her staff search, Marshall-Pence, in California, is looking for a seasoned advisor who “maybe isn’t doing very well as far as marketing goes,” she says, “but is very well established, knowledgeable and, most of all, ethical…I assume there are a lot of advisors that are really hurting now because people are putting their money in the mattress — unless you give them a reason not to.

“But I don’t want just any advisor off the street,” she continues. “They have to come recommended, or I’ve got to know [of their reputation].”

Marshall-Pence is also hiring another sales assistant — “someone licensed who has been around the block.” She intends to contact a headhunting firm to help fill that spot. “Sales assistants are easier to find than advisors,” she says.

Some Struggle

In contrast to Marshall-Pence, many FAs saw their practices shrink last year and have been forced to take serious cost-reduction steps. One struggling advisor that Whiteside knows laid off his staff last October and brought in his wife to help in the office.

“He ran a really high overhead business — and [the market] went South pretty quickly. That’s happened to a lot of advisors,” Whiteside says. This one has moved to modest office space and is now looking for advisors to share fixed costs.

“He’s trying to turn the ship around, but he’s still struggling,” Whiteside says.

Realistically, some FAs might indeed be better off leaving the business.

“Many advisors who are underperforming should not be in the industry any longer,” says one FA. “Some are being coached to help them stay or are teaming up with other advisors. But a number of FAs are feeling real pressure.

“The people who only make a living in a good market,” he says, “will ultimately not make it in this market.”

Freelance writer Jane Wollman Rusoff is a Los Angeles-based contributing editor of Research and is the founder of Family Star Productions.


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