“More people want the professional guidance of a firm like an RIA in times of uncertainty,” says Lisa Salvi, managing director of advisor services at Schwab. “That positions them well as we go into more challenging market environments like 2022.”
Here are six tips for effectively navigating growth.
Start with the end in mind. There’s usually time to prepare for an influx of clients, especially if you’re investing heavily in marketing and client acquisition, says Mark Schoenbeck, executive vice president of advisor engagement at Kestra Financial who helps firms prepare for growth.
It’s important to have a plan before you hire. Consider what your current structure looks like, and where the stresses are. In what areas are you overstaffed or understaffed? What kind of practice do you want in the future? How many times a year is ideal to meet with clients? What’s your current capacity and what might be needed in the event of an influx of business? Can you leverage technology better?
Answers to these questions can help you determine your hiring and growth strategy, Schoenbeck says.
Determine your service model. Instead of focusing on core competencies, “most firms are running a lot of business on exceptions,” says Matthias Kuhlmey, chief development officer at Hightower Advisors. They try to be all things to all clients, but that often requires the need to bring in additional staff to support the exceptions “rather than to support the growth and clarity of the business,” he says.
He offers the example of advisors that diverge from their common portfolio strategy, allowing clients to transfer in legacy positions, or advisors that do individualized reporting instead of using a scalable model for all clients. “There’s no shame in saying we don’t do these things,” he says.
If you see there’s a pattern of needs you can’t service, like alternative investments for example, it’s an opportunity to partner with someone, bring in technology that can help, or it can be an area you look to build out through your next hire. Make these business decisions based on perceived or actual need, not on one-off situations, Kuhlmey says.
Seek efficiency. Dynasty recommends advisors keep anything in-house that is related to their firm’s “secret sauce” and outsource the rest. Dynasty says good candidates for outsourcing include investment management, technology, compliance, marketing, and finance.
When making hiring decisions, Ross suggests firms consider whether they can double their assets under management without hiring one more person. If the answer is no, they need to look at their technology and processes to see where they can achieve economies of scale, he says. “Technology can do the work of several people,” he says.
Firms might also look at creating in-house positions to handle some of the more mundane tasks to free up advisors’ time. Matt Kilgroe, president and chief executive of Cyndeo Wealth Partners in St. Petersburg, Fla., for instance, recently created the position of client onboarding specialist to help with opening accounts, online setup, and client follow-up. The position could eventually morph into a client relationship position if the firm gets to the point where the role, as envisioned, isn’t needed, Kilgroe says.
Don’t wait until you have too much business to hire. Some advisors may be hesitant to hire ahead of an actual business need. That’s a mindset that might need to change if they really want to grow, Schoenbeck says. He suggests advisors think about hiring as the investment it is. Say it costs $60,000 for an additional staff person, but the hire will help you bring in $25 million in new assets under management. At a 1% fee, that’s $250,000 of revenue. “If you can spend $60,000 in order to make $250,000 more a year, every year, that would be a no-brainer for anybody,” he says.
Go for the gold level of service. Matthew Liebman, founding partner and chief executive of Amplius Wealth Advisors in Blue Bell, Pa., does a sizable amount of multigenerational family business, working with about 600 clients from 200 families. While at his former employer, the ratio was about 150 clients per advisor, his goal is keeping it closer to 100, so he hired additional advisors and support staff accordingly. This allows the firm to provide higher service levels, he says.
In terms of support staff, Ross says a good rule of thumb is to employ one support staff member for every $1 million of revenue. The support team for each advisor should not be more than 10% of that advisor’s revenue, he says.
Allocate office space wisely. Amid the pandemic, many companies moved into a virtual world, but it’s not so cut-and-dried in the advisory space, which is inherently a people-facing business. Firms that are thinking about growing geographically still need to put down roots in communities and open up new office space, Ross says. “You definitely still need to open up that new office, but it can perhaps be smaller,” he says.
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