“Sometimes we stare so long at a door that is closing that we see too late the one that is open.” This astute observation by Alexander Graham Bell, inventor of the telephone, is just as relevant to the advisory industry today as it was to Bell’s peers.
The closed door? After a tough 2008-2009 in which registered investment advisors experienced contracting revenues, assets, and profit margins, some advisors were forced to cut back on support and administrative staff. The average number of administrative staff per average RIA firm decreased from three in 2007 to one in 2008, and the average number of customer service team members fell from four in 2007 to one in 2008.
Staff cutbacks are always difficult, but these cutbacks, combined with clients’ demand for more time with advisors, created a significant challenge for advisors–providing clients with the face time they sorely needed in the wake of less staff.
Many advisors (30%) believe that having the right team of people is the key driver of growth in the near future. While many firms trimmed staff to survive the market turmoil, there were other firms that managed their practices exceptionally well and maintained client service support levels. The good news is that there are steps all firms can take to turn this challenge into an opportunity–or, as Bell says, find the open door.
How to Reengineer Your Practice with Fewer Resources
In fortifying your business, it’s vital to focus on client relationships. It’s also equally important to focus on your employees, as they can broaden your ability to support your clients’ needs. So even in a time when your resources might be constrained, be sure to continue to:
l Communicate consistently–whether it’s good news or bad. Personnel costs are among the largest expenses for the average advisor, so getting a return on human capital is vital. One third (33%) of advisors surveyed admitted that successful communication with employees can be a barrier in strengthening their business. However, communication provides a proactive approach to maintaining employee engagement. Once considered a “soft skill,” communicating to employees is now widely accepted as having “hard” business impacts including reduced turnover and absenteeism as well as increased client satisfaction. Whether communicating your vision for your firm’s future or soliciting employee ideas for fortifying your practice, open and honest communication with employees will make them feel more invested in your business–and motivate them to put in extra effort. Remember to communicate both the positive and the negative–if it’s relevant to employees.
- l Invest in training. Even with limited resources, investing in your employees can be a solid investment. Those identified as “best practices” by Rydex|SGI AdvisorBenchmarking view staff development as critical. Paul Bennett, managing partner at the Great Falls, Virginia-based c5 Wealth Management, says that personnel is one area his firm doesn’t skimp on. His firm pays for employees’ advanced degrees and certifications and, as a result, has a highly credentialed staff. But what if you don’t have the budget to send members of your staff to formalized training or help them get securities licenses? Invest your own time to mentor and cross-train your employees to maximize their value to your business–and to your clients.
- l Share client relationship responsibilities when possible. Instead of trying to handle all client relationships on your own, explore how you can have your staff share client-relationship responsibilities with you. This is a win-win for you, your staff and your clients. By sharing client-relationship responsibilities with your staff, you’ll be taking some pressure off yourself, demonstrating the faith you have in your team, giving your staff additional growth opportunities, and, most important, increasing the amount of time your firm spends with clients–your ultimate goal.
Benefiting From the Silver Lining
When poor economic times arrive, there is a direct impact on more than just the bottom line. Employees can easily lose trust in leadership and faith in the future of the organization. Successful practices view these challenges as opportunities. To view a chart listing what advisors considered the biggest threats to their businesses click here.) Communicating consistently, investing in training, and sharing client-service responsibilities (which increases the scope of employees’ responsibilities) are ways to turn these challenges upside down and emerge in an advantageous position.
Remember, too, that there is a glut of talent available in the market, which may present an opportunity for hiring highly qualified staff members. In past years, finding good employees has been tough, with nearly two-thirds (58%) of advisors citing this as a challenge to their business in 2007. While finding qualified staff is less of a challenge in 2008 (35% of advisors cited this as a challenge for their business), many firms are taking advantage of the sudden availability of qualified candidates and are planning on adding staff. In fact, the average advisory firm is anticipating an average 35% increase in staff for 2010.
While the official word is that the recession is over, the U.S. economy still doesn’t seem to be out of the woods and unemployment remains stubbornly high. Rather than viewing this as a closed door, successful RIAs will see the open door: the opportunities to grow human capital. By building effective organizational structures, compensation plans, and staff development practices, these RIAs will be taking proactive measures to ensure the success of their firms today and in the future.
Maya Ivanova is a market research manager with Rydex|SGI AdvisorBenchmarking She can be reached at [email protected].
Rydex|SGI AdvisorBenchmarking is a research and analysis center focused on the registered investment advisor (RIA) marketplace. The service is aimed at helping advisors grow and enhance their firms by comparing how their businesses fare against other advisors. Advisors also learn best practices of the most successful advisors in the business.
AdvisorBenchmarking is an affiliate of Rydex|SGI. The analysis on Rydex AdvisorBenchmarking.com is based on the number of completed surveys and reflects only information from those surveys. This information is intended to be general in nature, and these overviews are no substitute for professional, legal or consulting advice. This information should not be construed as advice from Rydex Investments|SGI and it affiliates or any of its affiliates.