Broker-Dealers

Becoming a thriving enterprise

Financial advisory firms have evolved from home-based businesses, to one-man shows, to full-fledged, thriving enterprises with multiple professionals and sometimes many staff members.

With those changes have come many organizational design issues and complexities.

There is value in understanding the organizational issues faced by thriving businesses, though, of course, there is no typical organization. This article traces the mind-set of a market-dominating firm that is generating more than $5 million in revenue, with multiple financial advisers and staff members. It peels back one organizational issue at a time, following the firm back to its start as a solo firm with no staff, less than $200,000 in revenue and less than 10 years in the financial business.

Key decisions include:

Shall I hire a chief executive?

An adviser or who leads a market dominator must focus the organization and deploy resources according to plan, create a culture that fits with the company’s mission, mobilize a team to pursue that mission and guide the firm’s financial viability — all while continuously improving the organization. Such an adviser may decide that all of this isn’t how he or she wants to spend time.

There are many people in the firm. How can I manage them all?

As a business grows to multiple advisers and staff, it is a challenge to manage all those people. Staff members need to know what is expected of them and that what they do fits into the bigger whole. They also need to have vacations approved and more.

Finding time for all these responsibilities can be overwhelming. Hiring a chief operating officer to whom all staff report, or an office manager for support personnel and a business development manager to whom advisers report, is one option. Another is to hire a compliance officer.

As the business grows, how should advisers be supported?

Should each adviser be supported by personal support staff or should all advisers tap into a pool of support people? The pool approach increases the likelihood that work is efficiently processed in a repetitive way. It also increases stickiness by making it difficult for an adviser to leave and take support staff with him or her.

Dedicated support works better, however, if each adviser is a specialist and needs unique processing approaches.

What about hiring other advisers?

When an adviser realizes that he or she can’t do any more in a 24-hour day, that person will need to consider hiring multiple producers as a means to increase revenue. Should additional advisers be specialists in different areas or should they be replicas of what the hiring adviser creates as a standard in the organization?

Organizations must decide whether to hire an adviser with a developed book of business or to seek a junior adviser who can be molded. If the adviser hires someone who can be molded, he or she will have to be brought up to speed. If the new adviser is good, will he or she break away? If the new adviser isn’t good, will he or she stay forever as a mediocre producer?

How many people are needed to support a single adviser?

Before an organization grows to the point of hiring multiple advisers, it grows by adding support staff. This can range from multiple people, all of whom juggle similar tasks, to specialists who take on particular duties.

The advantage of the juggler approach is coverage. When someone is out, another person can pick up the slack. The advantage of the specialist approach is that the adviser finds a broader range of tasks to delegate.

An administrator might schedule appointments, maintain files, meet and greet, and so on.

Sometimes a planner hires, generally as a fourth position, a marketing business development specialist whose key function is to schedule appointments with prospects as opposed to clients.

Are you ready for your first support person?

For a solo producer, hiring the first employee can be terrifying. Learning how to write a job description, screen applicants, interview effectively and so forth is a robust experience.

Whatever position you are looking to fill represents the most important decision you can make. Each strategic decision builds on decisions made previously.

And to keep the scenario realistic, remember that through all the iterations above, employees come and go, technology changes, clients grow, the compliance environment thickens and the market goes up and down.

Joni Youngwirth is a vice president of practice management at Commonwealth Financial Network in Waltham, Mass. She can be reached at [email protected].

For archived columns, go to investmentnews.com/practicemanagement.