Why financial advisers should focus on readiness before growth

Adding significant growth can put a strain on a firm's infrastructure without proper preparedness

Jun 30, 2016 @ 3:46 pm

By Sheryl Rowling

It seems that the goal of every advisory firm is growth. Whether the objective is greater AUM or more revenue, growth is the most sought-after attribute. Yet, is it right to focus on growth before readiness?

Growth can come through passive or active means. Passive growth might occur from occasional client referrals or a 401(k) rollover. Active growth can come about from advertising campaigns, seminars or professional contacts. A firm with relatively happy clients will likely experience passive growth annually. Thus, even without actively seeking new clients, advisory firms must be prepared for some degree of growth each year.

A successful marketing campaign could lead to a large upswing in business. This is good, right? Not always. Without proper preparedness, adding significant growth can put a strain on the firm's infrastructure. If growth occurs before readiness, it can result in mistakes and poor client service. This translates into out-of-pocket reimbursements and, even worse, a bad reputation. To assume that your current organization can incorporate a large jump in activity can be a huge mistake.

So, what does it take to be ready for growth? In my opinion, it takes more than simply hiring additional employees. You must have a truly efficient firm that operates like clockwork before taking on a lot of new clients. In my firm, we call this flow — and that is our focus for 2016. We want to reach flow before we begin substantial promotional activities. Flow is defined in rather imprecise terms. We will know we're there when we:

• Have backup training in every area;

• Have instituted workflows and procedures for major activities;

• Are proactive with clients for planning purposes;

• Can update clients on market events or new tax laws quickly;

• Are on top of all client portfolios daily, ensuring allocations are maintained and tax-loss harvesting is done opportunistically;

• Feel like someone can go on vacation without stressing out the rest of the team;

• Can turn around financial plans within three weeks;

• Can meet with clients when they want;

• Regularly contact clients;

• Are on the forefront of client service;

• Truly look forward to every day at work.

The question is: How do we get there? A major component is technology. We have implemented technology for CRM, rebalancing, tax planning, research, portfolio analysis, virtual meetings, remote access, compliance and portfolio accounting. We need to more fully utilize the tools we have while also adding a client portal, interactive web page functionality, an app, automated billing and quarterly reporting as well as our own newsletter.

It's not that all of these programs aren't available; it's more that we have to incorporate them into our daily routines and experience the benefits that true efficiency provides.

Sheryl Rowling is head of rebalancing solutions at Morningstar Inc. and principal at Rowling & Associates. She considers herself a non-techie user of technology.

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