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When to Call a (Non) Professional

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In last month’s column, “Diamonds in the Rough,” I wrote about our dramatic new strategy for reorganizing independent advisory firms. Diamond teams match a senior advisor and two lead advisors with a single associate advisor whose primary job is to sit in every client meeting, taking notes and learning how to be a lead advisor.

Originally designed as a solution to better train young advisors to work directly with clients, we found that in practice diamond teams offered additional benefits such as creating a clear career track for young advisors, a succession plan for lead and senior advisors, an exit strategy for owner-advisors, increasing productivity of all advisors—and consequently making diamond-team firms employers of choice for many young advisors.

As I mentioned last month, it’s not easy to get firm owners to buy into paying associate advisors to mostly sit in client meetings. What I didn’t talk about then is that to get the many benefits of diamond teams and to operate at maximum efficiency requires one more step: to create and staff a fully functional back-office support group or, as we call it, “centralized client service and operations” (CCSO).

The goal of client service specialists is to take as much off the plates of our advisors as possible so they can focus on servicing their clients, attracting new clients or managing the firm (in the case of owner-advisors). We’ve built CCSO departments for all of our client firms, whether they use the diamond team structure or not. They more than pay for themselves in advisor productivity and—as a bonus—make their lives easier.

In all of our client firms, the non-professional staff works in our centralized client service departments. They handle all the contacts with custodians or broker-dealers and other vendors, keep the technology systems fully operational, enter financial planning data into software, maintain CRM files, and perform routine client contact such as taking phone calls and emails, setting up appointments, creating and mailing or emailing communications, and gathering information or documents. The sole responsibility of client service specialists is to ensure that every client of their firm feels they are getting the best, most personalized service possible.

The majority of these CCSO positions are filled by non-professional employees such as administrative people and client service or operational representatives. Generally, these employees have little desire to become professional advisors. Instead, they prefer the relatively low stress and shorter hours of back-office work. This dedicated support staff greatly increases the experience and expertise of our back offices, while it reduces both employee turnover and the training and retraining commonly associated with hiring support advisors who eventually move out of these roles into advisory roles.

The typical career path for our dedicated CCSO positions leads to supervisor, manager and eventually to chief operations officer as the firm grows. We find that a supervisor is necessary for every $1 million in annual firm revenue, while at about the $1.5 million revenue mark, firms see the need for a manager to oversee the entire department. These positions will vary from firm to firm, but as a rule of thumb, when we find that one or more of our client service staff is spending more of their time on administrative duties and overseeing other staff rather than directly on client work, it’s time to promote one of them to supervisor. Then, when the number of supervisors reaches four or so, including IT, bookkeeping, report generation and custodian or BD interface, we usually create the position of department manager to coordinate all these efforts.

At around $2 million in gross annual revenue, we usually see a need for a chief operating officer emerge in advisory firms to coordinate the efforts of the burgeoning operations staff and to undertake strategic planning for filling the expanding demands on client services. Traditionally, this COO position tends to be filled either full-time or part-time by a reluctant partner who is essentially forced to perform this role by the growing operational demands within the firm. However, we’ve found that a dedicated client services staff that includes supervisors and managers who have grown in responsibility as the firm has grown are far more qualified to oversee operations. Owner-advisors have ample opportunity to direct operational strategy in management committee meetings (on which the COO sits), but are better off—and happier—leaving the hands-on management of operations to someone more qualified.

The job of a client service specialist does not require advisory knowledge, but it does require a basic understanding of financial planning and investment management processes, and mature customer relationships skills to handle non-advisory questions—all of which can be taught on the job. Some firms use this as an entry-level position for candidates who are pursuing an advisory education, but have not earned a degree or designation in financial planning. However, for reasons stated above, we prefer to promote employees from our administrative staff. CSSs do not attend advisory client meetings, but they do handle the vast majority of the non-advisory follow-up and back-office paperwork.

I should point out that in larger firms, diamond teams also are supported by an investment management department. Usually, within the diamond team structure, one of the lead or the senior advisors (or a group of lead and senior advisors) will develop a specialty in investment management. When a firm reaches sufficient size—usually in the $4 million to $5 million revenue range—one or a group of these advisors will break off from their team to form what’s commonly referred to as an investment management department. This department then takes responsibility for managing all of the client assets of the firm, including investment research, security selection, portfolio management and rebalancing in accordance with the overall guidelines set by the investment management committee of the firm. These investment managers also work closely with the lead and senior advisors in each diamond team to customize their client portfolios and to educate those advisors about specific investment decisions and portfolio performance data.

To build an investment management department, at least one of the lead or senior advisors will assume this as their primary role in the company. Often a chartered financial analyst (CFA) is hired to oversee the new department. The investment management department is typically the very last department to be built in the company. Ironically, as the company gets bigger and bigger this department also assumes a diamond team structure with the CFA or portfolio manager at the top of the diamond, two research analysts at first and third base, and a trader at home plate.

Overall, our goal is to make sure that our advisors are spending all their time in the office working with clients, prospecting, setting goals for the business, and nothing else. It is this foundation—built on a client service department and, eventually, an investment management department—that allows senior and lead advisors in each diamond team to work without the need for traditional support advisors, and therefore makes the diamond team structure work. For firms that have not yet adopted a diamond team structure, it creates leverage that enables senior and lead advisors to serve their clients better and more efficiently—and gives them more time to attract new clients and grow their firms.


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