When financial advisers did their business post-mortems after the 2008-09 economic downturn, many were alarmed to find that their firms weren't well-prepared to handle such a crisis.
As a result, many advisory firms have been re-examining their business structures and making big changes, not only to cope better with the next meltdown but also to run more smoothly during good times.
Some firms are completely abandoning “flat” organizational structures with few, if any, levels of management for more complex and hierarchical setups by adding chief operation officers and other executives. Others are hiring coaches and consultants to help establish clear job functions, chains of command and procedures for running their offices.
“During the downturn, leadership was absent in most firms,” said Mark Tibergien, president and chief executive of Pershing Advisor Solutions LLC. “Advisers started asking if their businesses were structured right, and realized those structures weren't functional.”
When the market blew up in 2008, Jay Heller, chief executive of HJ Wealth Management LLC, quickly realized that his firm's relaxed atmosphere — in which workers shared many responsibilities and job functions — wasn't giving optimal service to different types of clients.
“We had wanted a flat structure without a lot of organization, and it was really nice until the market tanked,” said Mr. Heller, whose firm manages $300 million in assets.
“All of a sudden, we had to take control. I needed to start running the office instead of running clients,” he said.
For starters, Mr. Heller took the reins as chief executive.
He then gave each staff member a job title and specific duties to perform, and created an organizational structure for serving clients. For example, he created separate divisions to handle the firm's 401(k) business and high-net-worth clients, and appointed executives to oversee each unit.
Other firms have also discovered that their advisers were juggling too many responsibilities and needed to hire additional workers.
Adviser Gregory L. Olsen, a partner at Lenox Advisors Inc., which manages $1.2 billion, for years had been the firm's chief investment officer simply because he was one of the most senior employees at the company. Last year, he hired as its new CIO David Carter, formerly the chief investment officer for investment management firm Spinnaker Trust.
“It got to the point where I had to do real soul-searching and admit that there's someone else who can be better at this than me,” Mr. Olsen said. “I needed to be holding my clients' hands, and not reading the tea leaves every day.”
Similarly, Michael Anderson, vice president of True North Advisors LLC, realized during the downturn that his firm needed a chief operating officer. Prior to 2008, several advisers pitched in to handle the day-to-day activities of the firm, which manages $850 million in assets.
“We needed to bring in a chief operating officer so that those of us who had been carrying those roles could get back to what we should be doing — which is managing clients,” said Mr. Anderson, who last July hired Bank of America Corp. executive Vic Esclamado as its COO. “I'm a firm believer in bringing in people that are best-suited for a function.”
Other firms discovered that they had created the right positions but had filled them with the wrong people, said Elizabeth Jetton, a principal with RTD Financial Advisors Inc. She coaches eight advisory firms.
“People who are really organized and detail-oriented aren't the same people typically good at financial planning and seeing the big picture,” Ms. Jetton said.
“One of the real issues I see is when an adviser gives a mix of tasks and projects to one person. The person will typically be good at either tasks or projects, but not both,” Ms. Jetton said.
For example, Dennis Nolte, a senior wealth adviser with Partners Wealth Management, in 2007 hired an assistant who had a banking background but lacked the necessary securities experience.
“We needed someone with a securities license and a lot more industry experience,” said Mr. Nolte, who manages $100 million in assets.
“There was a real disconnect in the position. There was an obvious unfamiliarity with securities issues,” said Mr. Nolte, who in December 2009 found a replacement with a Series 7 license for that assistant position.
Meanwhile, to help make sure that executives and advisers perform their jobs well, many firms are sending workers to classes.
For example, Mr. Olsen said that in the past, his firm's top employees took public-speaking courses to improve their speaking style when pitching to clients and prospects. But four months ago, the firm began giving all employees such courses.
Jason Lilly, a certified financial planner and director of portfolio management with Rockland Trust's investment management team, which manages $1.3 billion, recently completed four days of leadership training. In one exercise, he was asked to explain a business strategy that involved conflicting ideas.
“They put you in this exercise, and I totally botched it,” Mr. Lilly said.
“Instead of listening to the concerns, I just kept talking,” he said. “This directly relates to our business because we talk to high-net-worth clients who have concerns.”
Mr. Heller has also started taking courses on retirement planning with the College for Financial Planning. Advisers at his firm are also taking classes with Fiduciary360 LLC, a firm that trains advisers in fiduciary and retirement issues.
Mr. Heller is also in the process of hiring a coach to help him better organize and market his company for its retirement-planning services.
E-mail Lisa Shidler at [email protected].
