For advisers, failing to plan is planning to fail

WASHINGTON — Financial advice professionals who routinely log 60-hour workweeks may be spinning their wheels, a new report suggests.
At the most successful advisory firms, financial professionals use their time wisely and employ a range of business strategies to make their workday most productive, according to a new report from San Francisco-based Schwab Institutional.
The report, “Best Managed Firms: It’s About Time,” focuses on the practice-management procedures of 45 firms that constituted the top 15% of Schwab custody clients that participated in a study conducted by Moss Adams LLP, a Seattle-based accounting and consulting firm. Advisory firms were measured on the basis of profitability, productivity, leverage and time management.
Many of the top firms examined automated routine tasks, delegated duties, outsourced certain roles, had ample support staff for professionals and had leaders who spent time thinking about who they wanted as clients.
“It was surprising how much time the leaders of top firms spent thinking about how they spend their time,” said Dave Welling, vice president of strategic marketing at Schwab Institutional. “They are looking not just to the next year but the next three to five years down the road.’’
These “best managed” firms had professionals who were focused on reshaping their business, not just working day to day, Mr. Welling said. That often included establishing firm guidelines, such as setting minimum account thresholds and minimum fee levels, and developing particular advisory services.
In a business where 70% of the costs were people-related expenses, these firms also had figured out how to leverage their professionals, Mr. Welling said.
The top firms had an average of 1.8 support people to each professional. That compared with a 1.2 support/professional ratio at other firms.
When deciding what functions to outsource, top firms took great care to make sure they always put client service first, according to the report.
Some of the functions most commonly outsourced were human resources, payroll, performance reporting and, in certain cases, investment management, Mr. Welling said.
“A key to determining success seems to be how much time the principals spent pausing, planning and prioritizing,’’ he said. Firms that don’t do this are “basically sprinting and looking at their feet.”
One firm mentioned in the report is Asheville, N.C.-based Parsec Financial Management Inc., which manages about $800 million in client assets.
The firm has grown about 18% a year over the past decade and adds advisers as they gain customers, trying to keep a ratio of one professional per 100 clients, said Barton Boyer, Parsec’s chairman.
When he thought about ways to encourage his advisers to delegate certain tasks, he began with himself by naming another adviser at the firm as president.
“Retaining the chairman and chief executive officer roles allows me to take an overall view of things, and I can have a veto,’’ Mr. Boyer said. Overall, he tries not to micromanage people, so they can concentrate on their jobs.
Savant Capital Management Inc., a manager of $1.5 billion in assets in Rockford, Ill., which wasn’t included in the study, continually focuses on doing everything possible to improve processes, said Thomas A. Muldowney, one of three owners.
“I warn other advisers to stop being Superman,’’ said Mr. Muldowney, whose 21-year-old firm employs nine advisers. He said he hires smart people whose skills are different from his. Therefore, when Mr. Muldowney passes on a task, he is confident that someone with the proper skills will complete it, he said.
Sometimes, of course, there are misfires.
Recently, there was an internal communication problem that caused Mr. Muldowney to show up at the office over a weekend for a client meeting. When the client
didn’t show up, he learned that the meeting actually was set for the following week, though it had been entered incorrectly on his schedule.
“So far, as we’ve grown, the problems haven’t been big ones,’’ Mr. Muldowney said.