In recent columns, I’ve written about how we emphasized three unique strengths–extreme delegation, niche focus, and operational efficiency–to build three extremely successful advisory practices. Now, I’d like to talk about solving a challenge that’s faced by virtually every independent firm that attempts to evolve from a one- or two-advisor shop with some support into a real business: getting the maximum impact from your staff, or as we say in the consulting biz, your human capital.
When I started working with Financial Management Group Inc. in Cincinnati, Ohio, owner Brett Wilder’s 20-year old firm appeared to be one of the best advisory firms in the country–having been listed ten plus years on “Top Advisory” firm lists including nine consecutive times on Wealth Manager magazine’s “Top Dogs” list. With three other lead advisors, and eight staff employees to help him, Wilder generated over $1.5 million in annual revenues providing fee-only, comprehensive financial planning and investment management services. Yet, below the surface lurked the kind of chaos that’s all too common at advisory firms approaching what Pershing’s Mark Tibergien has called “The $1 Million Barrier.”
As Tibergien (in his former life as CEO of Moss Adam’s advisory consulting unit) has described the problem, chaotic growth usually arises as firm growth approaches $1 million in annual revenues, which typically means it has about ten to twelve total staff. In my experience, if the owners don’t address the problems before this point, there will be too many of the wrong people in the wrong positions, the lead advisors will have begun to feel that they don’t need each other anymore, and their inflated egos won’t be willing to work through the pain of reorganizing the firm. The alternatives are often stagnation or breaking up the firm.
Managing Financial Management
At Financial Management Group, each of the eight support staff was attached to an advisor, in virtual silos. Everyone was overloaded, confused, and working very inefficiently. Like many firms, when a new task came up–such as technology, compliance, marketing, or even reception–their solution was to hire another person. The good news was that they had hired very well: the firm really did hire the right people for the right jobs. The problem was that the right jobs simply didn’t exist…yet.
We took three months to sort the firm out, which included interviewing the employees, and observing the work environment. Job satisfaction was low and the staff wanted changes, more professional work and a bit of organization. During that time, I experienced just what the employees were complaining about. Random tasks were thrown at me: do this, help with that, can you fix this mess? I was always putting out fires, confused, off balance, and felt continually unable to catch up, or do what I was retained to do.
With some effort, I extracted myself from the firm’s way of operating, and got Brett Wilder to focus on solving the problem from the top. The firm needed to be completely reorganized, into four separate departments, each under one of the lead advisors: chief investment officer, director of financial planning, chief operating officer (who oversees business management, compliance, and administration), and the owner/CEO, who as the firm’s rainmaker is chief of marketing.
Making an effective, successful, long-lasting transition to a new organizational structure requires two essential elements: staff buy-in, and staff training. Omitting either one is a recipe for disaster. To get everyone working on the same page, our process starts with creating a new organizational chart, a comprehensive new job description for each person in the firm, and a new flowchart that formalizes the process for every element of client work that needs to be done from setting up the initial account to when, where, and how long each file will be stored. Each of these transition documents is reviewed multiple times by all employees, with ample opportunity for them to add feedback and comments.