This week, I participated in the 2013 Investment News Best Practices Awards and Workshop in Chicago.
This unique, one-day event featured top practice management experts along with a healthy representation of the best performing advisory firms in the industry.
A key focus of the event was a review of the findings of the 2013 Investment News research studies on compensation and staffing as well as on technology usage. These data-driven sessions were the perfect set up for the panel discussions and advisor case studies that brought the research to light. The advisor award winners in attendance exemplified these industry best practices and provided the content in the form of an executive blue-print for how to run a better business.
The research also pointed out where the industry has undergone dramatic change and as a result, identified where advisors have made mistakes and subsequent areas for improvement.
Study author, Philip Palaveev, CEO of the Ensemble Practice, walked the group through how the industry was changing through the years. “Fifteen years ago, the largest firms were making $1 million in revenue. Today, that same segment is doing $10 - 12 million,” Palaveev noted. These top firms have created a partnership track with defined career paths, a scalable infrastructure along with a unifying culture that was enabling them to grow quickly and attract the best people to join their firms. So much so, that these “super ensembles” were becoming a competitive force. “Advisors shouldn't be worried so much about the wire houses as competition,” Palaveev warned. “Rather they should worry about these emerging RIA market dominators.”
Highlighting the link that technology was playing in the success of the top firms, Mark Bruno, Director of Digital Strategy for Investment News showcased the marked differences between technology innovators. “Simply by making technology a focus, these firms are driving twice as much revenue and seven times the profitability vs. the rest of the industry.”
A key reason for this success was the priority these firms had on making their people more productive. Mark Tibergien, CEO of Pershing Advisor Solutions noted in his remarks that the biggest line item in any firm is the cost of compensation. Thus, from a management point of view, any thing advisors can do to invest in the tools, resources and technology to make their people more effective and efficient will have the biggest payback.
This premise was backed by data in the study as the number one consideration for investing in technology for firms was advisor productivity. But what stood out from study results and from the many comments from the advisors in attendance was that while investing in technology was important, there was a big gap in the actual training and adoption of systems. Oftentimes many firms are barely scratching the surface on the capabilities of their current technology, simply because they haven't invested the time and training to fully deploy their systems.
This missing best practice was highlighted in the study, as “technology training” had the lowest ranking in planned technology investments by advisers. Human Capital expert and business consultant Kelli Cruz of the Cruz Consulting Group sees this as a core issue in firms that are not at the top of the curve.
“There is a clear link between success of your people and the amount of investment you make in training and professional development,” Cruz said.
One of the award winners noted that their biggest and most expensive mistakes in past technology implementations were the ones where they didn't take the time to really train their people on the new system. As a result, staff didn't use it and the firm ended up replacing it a couple of years later.
So, the key takeaways from the workshops are to invest and adopt new technology, automate processes and constantly look for ways to make staff more productive. But to be truly successful, firms also need to dedicate the time and resources to ensure that staff is fully trained and motivated to adopt the new systems.
Timothy D. Welsh is president and founder of Nexus Strategy, LLC, a leading consulting firm to the wealth management industry, and can be reached at firstname.lastname@example.org or on Twitter @NexusStrategy.