Just a decade ago, I would hear advisers say:
• "I want to spend my time only on seeing clients — nothing else."
• "I hate anything to do with human resources because I'm not good at it."
• "I don't need all that practice management stuff."
Fast forward to 2018, when one adviser recently told me, "I just finished writing a book on the innovative and great practice management systems within my firm."
That's quite a shift. So what has changed? As their firms have grown, advisers have matured. They've embraced working on their businesses as a critical skill set that actually has made their lives better.
Today, larger firms fill a position called "practice manager." The leaders at these firms see managing their businesses as a key component in their growth and recognize that their success is based on being smart about running their organizations.
No Universal Definition
There is no accepted industrywide definition of what practice management entails. Using the kitchen-sink approach, here is a list of responsibilities that might be included within the term.
• Overseeing financial profitability
• Developing new business from existing clients
• Developing new business by bringing on new clients
• Overseeing the pipeline to ensure growth of new clients
• Defining and implementing short- and long-term strategies
• Creating model portfolios
• Defining portfolios
• Managing business risk (i.e., insurance, disaster recovery, preventing technology disruption)
• Overseeing compliance
• Assessing and implementing new technology
• Defining the mission and vision of the firm
• Branding the firm
• Promoting the brand
• Leading the internal organization
• Hiring, developing and terminating employees/advisers
• Overseeing human resource and personnel matters
• Developing staff and advisers
• Office management
• Communicating with clients
• Communicating with other leadership regarding the firm's direction and progress
• Investing in internal communication
• Creating the firm's culture
• Managing physical space and equipment
• Completing paperwork to execute on client work with the adviser
• Monitoring how often the firm submits paperwork that is not in good order
Reread the list and determine which of these items you handle yourself, which you delegate and which you simply don't do at all.
If we asked 10 advisers what practice management incorporates, we would end up with 10 lists. The single-adviser firm with one support staffer may delegate only completing paperwork. The 40-adviser firm with a single founder and leader may delegate everything except overseeing the firm's profitability, managing business risk, defining the firm's mission and vision, leading the organization, promoting the brand, creating culture, defining strategy and investing in internal communication.
Limbo land is the space between:
• When an adviser needs to use his or her time seeing clients as the key way to generate revenue and
• When an adviser needs to use his or her time to focus on being CEO.
Let's say that a CEO is focused on growth — an organization needs to be of substantial size to sustain a CEO — but his or her strategy to achieve this goal is to acquire other firms instead of acquiring more and more individual clients. In this example, limbo land is the space between the CEO's needing to see clients to generate revenue and building a business that is attractive to another firm that might want to be acquired.
As a firm grows to 10 advisers, then to 40 and then to 100, its practice management infrastructure grows and its number of non-adviser positions increases. Strategic decisions regarding how to grow will dictate whether more infrastructure is needed.
Some Things Can't Be Delegated
No matter how large a firm grows, some things can't be delegated. You can delegate compliance oversight, but not ethics; human resource functions, but not culture; paperwork and operational oversight, but not the overarching priority of service and quality; daily operational control, but not long-term strategy and vision.
Today, practice management is more sophisticated. As consolidation within the industry occurs and larger firms emerge, practice mergers, ongoing role changes for advisers and decisions about the best compensation model to employ, as well as the optimal channel for affiliation, are common.
Regardless of a firm's size, practice management is important. The larger your business, the more critical it becomes. If you wrote a book about practice management, would you have something to say about the innovative and great practice management systems within your firm?
Joni Youngwirth is managing principal of practice management at Commonwealth Financial Network.