When owners of independent advisory firms want to increase their revenues, they typically look to add another advisor or two to help them handle a rising number of new clients. More often than not, though, this approach works until it doesn’t. Good advisors are expensive, especially in today’s environment. This means that those additional revenues are, at least in part, offset by additional costs.
Plus, even the best advisors usually take a while to reach their full capacity in a new working environment. Having more advisors also increases the workload of support staff, while changing the culture of the firm — all of which can lead to cost and time increases and further demands on management, as well.
Consequently, when owner advisors come to us looking to add to their professional staff, I usually try to redirect their thinking by asking: “If you had to double the workflow in your firm, without hiring any more people, how would you do it?”
The response usually is: “We can’t do it.” To which I say: “Do you really know you can’t do it, or are you simply assuming that you can’t because you’ve never tried?” The latter, as you might expect, is almost always the case.
Shaking It Up
We all get set in our ways. That’s even more true for small business owners who get attached to the processes and activities they’ve relied on to grow their business to its current point. The business school term for the solution to this problem is “organizational design strategy.”
It means figuring out ways to change your business to be more efficient and more profitable without hiring more people and increasing overhead costs.
For independent advisory firms, organizational design strategy frequently means finding ways for advisors to work with more clients — and to generate more revenues. However, this must happen without increasing overhead and other costs or slacking on client service.
Despite most owners’ resistance, this isn’t really that hard to do.
There are some pitfalls to avoid. For instance, advisors might think that adding clerical support staff would free up advisors to work with more clients.
But remember, my advice is to not increase your overhead. (This also means not adding new partners, marketing programs, technology and services. Simply put, it’s using your brain instead of your pocketbook to grow revenues and profits.)
In most cases, increased support rarely pays for itself. Each new hire usually means losing capacity in the short term and sometimes even in the long term. This is because adding new staff tends to hurt the average productivity of your employees. And, of course, overhead costs go up at the same time.
The alternative is having a strategy. We often suggest that owners and their advisors look for ways to deliver services to clients more quickly and easily — that is, “more efficiently” — before they hire a new employee.
While there are hundreds of ways to do this, here are some starting points:
Specialize. In many firms, each advisor is “a jack of all trades.” He or she handles all the financial needs of each client: financial planning, portfolio design and management, estate planning, insurance, etc.
We’ve found that most advisors are far more productive if they focus on a specific area of service, say financial planning, with other advisors taking care of the clients’ other financial needs.
This allows advisors to greatly narrow their focus, expand the depth of their expertise and decrease the amount of time they spend on the needs of each client.
Think of Henry Ford’s assembly line. Instead of each mechanic building an entire car, each worker specialized in a specific auto part as the demand for cars and their production increased. Doing so increased productivity exponentially.
Shorten time spent with each client. In their efforts to form bonds with clients, most advisors actually spend too much time with them. Finances are only one part of clients’ lives. The best relationships with clients are built upon trust. What people, generally speaking, most want from their advisors is to be comfortable with their financial plan and know that they are on track with it.
If advisors decrease the number of client meetings they have with each client as they grow their business, they leave room for additional clients. The key is to ask clients how many times a year they would like to meet. Give them the control to determine what level of interaction they have with you. When given the choice, clients might require fewer meetings than you expect.
Streamline advisors’ contact with other professionals. Many advisors coordinate with clients’ other professionals, such as lawyers, accountants and insurance agents.
What if, instead of having a phone call each time you need to coordinate something with other professionals, you send them a detailed overview of instructions and “need to know” items?
Have an agenda and allow other professionals to do their job with the information you give them. I’ve seen advisors, for example, send checklists over to other professionals; if these individuals have questions, they can call.
Hold less meetings and rework decision-making. Owner-advisors need to reduce the number of “firm meetings” and shorten the get-togethers that they hold. Yes, firm meetings are important to coordinate everyone’s activities. But every minute advisors spend in these meetings is time they aren’t working with clients.
Owners need to create a culture of trust in which each person knows the boundaries and who makes the final decisions. By doing so, advisors can spend more time with clients.
Encourage advisors to figure out how they can work with more clients. And then give them the support they need to do just that. Some advisors work better at odd hours, early in the morning or late at night. Others work better at home.
Owners need to be flexible with “time requirements.” (After all, these folks are professionals.) The focus should be on how many clients they can service without any deterioration in the quality of that service, not where or when they work.
Once you’ve knocked out some of the quick fixes mentioned here, the key to growing your advisory business is to increase its existing capacity — the ability to work with more clients. The alternative to hiring is organizational (re)design. It’s rethinking your workflow, systems, procedures and structures to streamline the delivery of financial advice without clients “feeling” like they are getting less.
How do you accomplish this? Here are the main steps to follow (in the best order):
1. Define your core business. Simply put, what will you and won’t you do for clients? This creates boundaries. Advisors often over-service clients as their numbers grow for fear of losing them.
When you determine the boundaries, services won’t get out of control. What’s more, when you put up boundaries you increase client trust. This also reinforces your core competence.
2. Streamline workflows. At this point, many advisory firms start documenting everything. But the goal is finding faster ways to do things (like switching paper signatures to electronic signatures). When there is a better — and faster — way to do it, why stick with the old ways?
3. Push the system. Years ago, a business owner told me his advisors could not work with more than 40 clients each, which was low by industry standards. I told him we were going to push it to 80 clients per advisor. His team found a way to do it.
If you want to be truly efficient, ask a busy person how they do it. Then, organizationally design a system around what those productive people are doing.
Angie Herbers is an independent consultant to the advisory industry. She can be reached at email@example.com.