Having built the Advanced Business Development and Team Consulting structure and content for Smith Barney, I had an opportunity to work with some of the most sophisticated and productive wealth advisory practices on Wall Street. To manage those practices both administratively and operationally required one staff person for every 1-1.5 million in production. What concerns me in this latest episode is that Trent is currently running at about two times that ratio, (with a recommendation to go to three times that ratio) attempting to throw "another body at the problem” may ultimately be masking some major structural and systemic challenges in his practice.
While I don't have an in-depth diagnostic of his current business model and managerial approach I've noticed a few characteristics and comments that might be illustrative of some key issues that Trent could address:
1."We see 3-4 clients and/or prospects every week”.
If we do the math, that's between 700-800 meetings per year assuming some vacation time. This appears to be some version of the old, "quarterly review" system still utilized by many practitioners. This is a holdover model from our days as transactional/portfolio managers working off a quasi-institutional construct. Many institutions require quarterly reviews of their financial holdings and we have simply overlaid that model on to our personal business.
I recommend 12 "touches" per year for a platinum client. This includes one comprehensive in-depth annual review, one or more "social engagements" and on the off months one outreach call to check in by a senior staff person. The process of constructing a Compelling Annual Review model is metaphorically similar to building a house from scratch. It normally takes between 18 and 24 months, requires a number of meetings with the architect, the general contractor and the interior decorator, and once the process is complete, you move into the home and live in it.
The process of constructing a comprehensive long-term (often multigenerational) wealth management model is similar in that it requires a number of meetings with the financial advisor, the estate-planning attorney, the insurance specialist, the mortgage and banking specialist and normally takes 6 to 12 months to finalize. Once this comprehensive long-term plan is finalized and funded, the heavy lifting is complete…and the need for a quarterly review ceases. Just like you built the customized home to live in, you've built this highly customize wealth management strategy "to live in".
Meeting once a year to do an in depth strategic review and make any necessary tweaks should be all that's necessary to keep the client buckled in and on track.
2.“I spend a lot of time placing trades”.
This could be any number of things, but I'll take a stab at it. I believe a financial advisor's role, expertise and time is best suited to orchestrate the comprehensive wealth management process and provide the client the philosophical, psychological and historical context necessary to help them stay the course during times of uncertainty and volatility. I believe the actual portfolio management should be left to professional portfolio managers who spend all day, every day immersed in the markets. A sole practitioner simply doesn't have the bandwidth to compete effectively in this extremely demanding arena.
Now one caveat: If you have a large multidimensional team and one of the members is an extremely talented portfolio manager with a very style specific model, then feel free to go to town. Simply wrap your other portfolio managers around that style and you're home free.
3.“I'm a control freak and have trouble delegating”.
This is a relatively common malady that afflicts people in our industry, myself included. Let me try another metaphor. As parents we have all gone through the process of teaching our children how to make the bed. We patiently show them the process, observe their progress and after some period of time they master the new skill. Now if we used the approach with our children that I often see us use with our staff here's what would happen: we would quickly show them how to make the bed, hover over them, get extremely upset when they didn't perform up to our standards and finally get so frustrated that we simply push them aside and make the bed ourselves.
The most common excuse I hear from advisers doing staff work is, “I can do it faster and with better results than my staff can”! This is nothing to brag about. If we took this approach with our children we would still be making their bed when they were 30! Take the time to help your staff master the skills and techniques necessary to do their jobs, which will liberate you to do yours.
By attacking these three issues and adding a junior partner to take the bottom 150 relationships, I think the burden on both Trent and the staff could be dramatically reduced.
Paul Blease, is the Director of CEO Advisor Institute at OppenheimerFunds, Inc., the sponsor of the first season of InvestmentNews' new web video series, Practice Makeover.
These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the date of this presentation and are subject to change based on subsequent developments. Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc. Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008 © 2014 OppenheimerFunds Distributor, Inc. All rights reserved.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc. Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008 © 2014 OppenheimerFunds Distributor, Inc. All rights reserved.