In 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.
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.