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Action Plan: Strategic Planning With Schwab Advisor Services

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On a hot, sticky August afternoon in northern Virginia, three Washington-area advisors created their own cool heat inside as they discussed what they learned about themselves and their firms from participating in Schwab Advisor Services’ “Insights to Action” (ITAP in common parlance by participants, if not a formal name for the program). By many of the usual success measures used by RIA firms—growth in clients, in revenue and in assets under management—their three firms were already successful. But Dee Ann Remo, Michael Mussio and Barry Glassman and their colleagues suspected that they could do better, and that there might be different, unique ways to measure success for their firms. That is what participating in the ITAP program—present tense intended—taught them about themselves and their firms.

Over the course of several hours at the local Schwab office, the advisors shared the reasons why they had signed up for the program, what they had learned and where they were headed. “If you were driven by assets under management” alone, said Glassman, “strategic planning would be easy.” Remo said that while her firm was “ready to embrace” a plan, the process of building a strategic, customized plan made her realize that doing so “can get you where you’re going more quickly.” Mussio said that the driver for his firm was a desire to build an excellent client service experience, but that the likelihood of the founder’s retirement made the team members ask themselves, “What’s going to happen when Susan retires?”

Rather than provide direct answers to any or all of those questions, participating in ITAP, the advisors said, gave each firm a structure with which to answer any question, be it succession planning, career paths or all the issues revolving around growth.

Who They Are; What They Want

Michael Mussio is a portfolio manager and part of the management team for FBB Capital Partners in Bethesda, Md., an RIA firm that’s been in business for 25 years but is in many ways a much younger company. It had been acquired by a roll-up firm, but several years back, management went private again. The firm manages about $580 million for mostly high-net-worth individuals and some small institutions.

FBB decided to participate in the ITAP program, Mussio says, because while “up to this point we’ve been successful,” the firm still dealt with issues around growth and strategic planning “on a more reactive basis.” At FBB, he says, “we spend a lot of time on serving clients and managing the portfolios but less time on the actual business.” Following the ITAP strategic planning program presented an opportunity, Mussio says, “to get some guidance from Schwab on how to be more proactive on some of these challenges we’re facing as we grow.” There’s another twist to FBB’s story. One of the original dynamic founders of the firm has retired, and the other may be looking to do the same over the next five or six years, which raised the succession planning issue for management, employees and clients. “We’ve covered the ‘bus’ event,” Mussio says, referring to the proverbial “getting hit by a bus” scenario, but having a “framework around succession planning was a big driver for us.”

Barry Glassman is president of Glassman Wealth Services, a fee-only financial planning and wealth management firm based in McLean, Va. Founded three years ago by Glassman, the firm manages $550 million, providing “family-office-level services” to families that, Glassman says with a smile, “used to be considered HNW clients, though they don’t think of themselves that way.”

Dee Ann Remo is managing director of Richmond, Va.-based Heritage Wealth Advisors, a now seven-year-old firm that she calls a “multi-family office” for varying levels of family wealth. In addition to providing fee-only investment management for those clients, Heritage Wealth also does tax planning (Remo, a CPA, says she “grew up in the accounting world” at KPMG) and tax compliance for the majority of clients, charging separately for “high-level” wealth management services.

Be Ready, Do Your Homework, Go To Workshop

Glassman has a warning for his peers who are considering whether to undergo a strategic planning initiative—whether it’s Schwab’s version or another. “Unless your firm is ready, then it’s not the right time,” he cautions. “We happened to attend the workshop at the perfect time for the firm—three years ago when we started the firm, it was too early; three years from now would be too late.” That’s because, he says, the firm already had goals in place—the technology, research and systems, and human capital.

Having Schwab as its partner was also critical, he says, since it “wasn’t an outside consultant who could come in and put together a mission statement you could frame on the wall in your lobby.” Schwab, he says, “cross-pollinates” all the time, collecting data from “7,000 of its advisors, a thousand in its benchmarking studies, and hundreds and soon to be thousands” who are taking advantage of the ITAP strategic planning process. “Yes, they hope we succeed in a way that will benefit them, if we choose to custody with Schwab, but […] they’ve spoken with and had the experience of people who do exactly what I do, a small and growing RIA firm; they can speak the same language.” That extends to the point, Glassman says, that “the workshop materials that guide us through the process are designed for me and my businesses—it doesn’t necessarily apply to a small construction firm or an electrical contractor.”

Schwab’s relationship managers and internal consultants led by Scott Slater are critical in the process as well, with all three advisors mentioning in particular Bob Ciullo, the managing director for the D.C. area for Schwab Advisor Services, and Lori Silverthorne, the D.C. relationship manager for Schwab. “As we’re going through this with Liz [Manibay, a Schwab senior business management consultant],” recalls Glassman, “she’d call us out on the ‘easy outs’—if we say we can’t do something, she will challenge us because she’s known other firms who have said that before and overcome it.”

Glassman Wealth already had goals, he says, revolving around number of clients and AUM, but that wasn’t enough. “If our goals were based on assets under management, strategic planning would be easy. We’re not driven by AUM. If we sign on a handful of clients every year and are able to manage them and our current clients well, we view that as success.”

Heritage Wealth’s Remo’s readiness sprang partly from “a request by my management group that my top goal for the year was to develop and implement a strategic plan; thankfully, Schwab decided at the same time that this was going to be the focus” of their ITAP workshop programs. “Schwab was able to get us started because they know our industry, they know us. You can get where you’re going probably more quickly because of that.”

Part of the ITAP process is for each firm to complete a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis, and Remo says that “when we sat down to look at our weaknesses, we realized we had some pretty darn good successes.” While she says “the whole exercise was useful,” she also realizes that “we had those successes in spite of ourselves.”

Heritage Wealth had “charged out of the gate as a new firm […] but we probably waited too long to get focused on what our long-term plan was, what people’s roles would be in the firm, what we wanted to be.” Remo also worried about how to marry firm growth with staying true to the firm’s “client first” values. The answer partly came through realizing that sharing the firm’s vision with all its employees, and having clear job descriptions and career paths for those employees, made it possible to not compromise on values while achieving numeric goals and increasing employee buy-in to the strategic plan.

Each firm also realized—through the process of preparing for the in-person ITAP workshops, attending the workshops with their peers, and following up on their own with their Schwab contacts’ encouragement—what was the core of their value proposition to clients.

“As we were defining the actual goals” as part of the ITAP process, Mussio realized the “driver is the experience we want to display for clients and prospects: what our investment management philosophy is, what our client service philosophy is.”

Referring to employees, Remo recalls she “used to say, ‘Choose your title; it can be anything you want it to be,’ but the world doesn’t operate that way. They needed to know their career path, a real meat-and-potatoes job description that adds to accountability.” Remo added, “If you’re really good at doing a bunch of things, it may mean you’re not accountable [for any one thing]. We recognized that clarity [around job descriptions] helps with accountability. We don’t want to lose the entrepreneurial spirit, but people need to have definition in their lives.”

Implementation and Next Steps

For Remo, starting with Heritage Wealth’s value system—always “the client first, the client first”—one of the first follow-ups from the strategic planning process was to “get better feedback from clients.” Using Schwab’s good offices, Heritage Wealth has already completed the first step by using Julie Littlechild’s firm, Advisor Impact, to survey its clients. The results of that survey, however, are only the baseline for ongoing client research efforts. “We want to grow,” she says, but “without sacrificing what’s got us to this point—so we have to keep testing [with clients the implementation of] our strategic plan, to match with client expectations.”

Another key follow-up has to do with creating career paths, job descriptions and accountability for implementing the strategic plan “at every level in the firm.” Remo held a meeting with all employees in which she “walked through the steps in the strategic plan.” Since the firm and its employees now know “where we are going,” that allows you to “back yourself up into shorter-term goals,” she says. Referring to Heritage Wealth’s employees, she says, “people really got it. We’re talking a new language around goals—what we need and want to accomplish in the short term,” but with “every conversation pointing to the long term.”

For Glassman, “because there’s now a common language within the firm, because our core values are shared, it gives us a good filter to know who is a good fit or not” when contemplating a new hire. Also, “we want to outsource everything that isn’t involved with taking the knowledge that’s out in the world and applying that to the time we spend with clients.”

Mussio says that as part of the process, “we learned that we owed it to our clients to spend more time on the management of the business. We need to do a better job internally of reviewing our employees more regularly, providing career definition—not role definition, but career definition—that will help us grow to the next level.” But it’s more than just growth for growth’s sake: “The next stage of growth for us is smart growth,” which he defines as growing from $500 million in AUM to $1 billion over the next three to five years, while making sure FBB “still feels likes a $500 million firm” in terms of its client service and corporate culture.

Remo says that one of the surprising things she learned was “how much we’re engaging with our clients about the strategic planning process: how engaged they are back, how interested they are in it. They’re delighted about it.”

Glassman says the strategic planning process led his firm to raise its minimums to $2 million for new clients. “We’re slowing down growth,” he says, because “we don’t want to get to the point where we’ve reached capacity and our clients suffer.”

Advice for Their Peers

When the three advisors were asked what they would recommend to their peers contemplating going through the ITAP strategic planning and implementation program (or a similar one), Glassman said “there has to be buy-in from the firm’s leadership. It’s like putting together a business plan; you don’t know what the final outcome will be until you go through it—the value is not in the printed plan, but the process of developing the printed plan.” Speaking as a firm owner himself, Glassman says that “anybody in an entrepreneurial role wants to run toward something—not walk, not jog—but without a strategic plan it’s a challenge to know where you’ll be running next.”

Remo concurred, saying the biggest lesson she learned is that “people can’t follow you unless they know where you’re going next.” Now, she says, each individual in the firm will not only have a job description and a place on an organizational chart showing where they stand, but each of their individual goals “comes out of the strategic plan individually rather than randomly,” as used to be the case when employees had their periodic evaluations.

Mussio noted that in performing a SWOT analysis as part of formulating the strategic plan, he looked at internal firm growth over the prior three years and realized that the parts of the firm that were already operating as teams—a senior professional with support personnel—grew at twice the rate of the rest of the firm. “So,” he says, the question is “how do we make that work” for the entire firm? What will help provide service at a particularly high level for all clients? FBB’s management team also realized it needed to focus immediately on succession planning—“We’re going through a formal valuation of the firm now,” he reports—and determine how to “bring in the next level of partners.”        


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