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Practice Management > Building Your Business

When Fear of Firing Leads to Fear of Hiring

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Advisors are sometimes reluctant to hire the additional staff they need out of fear that they’ll have to let them go in case of a business setback. That’s a self-defeating attitude, our interviewees agreed.

Bhaj Townsend, president of Focus and Sustain, counseled, “If you need the staff now, hire them, and deal with setbacks if and when they arise with the help of these staff members’ insights and wisdom. You may be surprised at the solutions they suggest to cope with the setback.”

Christine Moriarty, president of MoneyPeace, noted that advisors would be wise to take their own advice: “If someone does good work and your business takes a downturn, it makes sense to have an emergency fund so you can keep them employed while you ride out the storm.”

“I’m a strong advocate for paying professional staff a percentage of their billable time,” said Sheryl Garrett, founder of the Garrett Planning Network. “Before I retired from individual client work, I was part of a four-person team of CFP professionals who served the firm’s clients. As the owner, I was paid for 100% of my billable time. My lead planner, who was responsible for marketing, compliance and some supervisory duties, received two-thirds of her billable time, and our staff planners were paid for one-third of their billable time. Bottom line, when we were very busy, everyone worked more and we made more money. When things were a bit slower, we caught our breath and everyone’s income went down for that period of time.

“We didn’t experience much cyclicality, given that we were primarily working with middle Americans and do-it-yourselfers,” she said. “In fact, the business setback I was most concerned about was not being able to complete quality work efficiently, which would slowly erode our good reputation. So being understaffed was as much of a concern as being overstaffed.”

In this respect, Garrett might have been channeling the views of Pershing Advisor Solutions CEO Mark Tibergien. “The best-performing advisory firms are those who are able to deliver a consistent client experience, profitably and ethically,” Tibergien said. “The biggest growth challenge for these firms is the lack of capacity to serve their clients well. In an ideal world advisors would hire when they are at 80% to 120% of capacity, measured in clients per staff and clients per advisor.”

Without adequate capacity, “everyone is overwhelmed, so people take shortcuts,” he said. “That’s when errors occur. The answer is to hire more staff to influence work flow so you can operate more efficiently and effectively.”

In Tibergien’s opinion, advisors who manage for the worst case are paralyzing their business. “That’s like being afraid of going outside because the weather might turn,” he pointed out. “Good leaders create a vision, structure their business to support that vision and consistently deliver to their clients based on their expectations.”

— Read more from Mark Tibergien on dealing with setbacks in your firm in Six Advisor Experts On Client Setbacks on ThinkAdvisor. 


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