Client Service

Considerations for Advisers When Managing Staff

As retirement plan advisers build their business, there are many considerations about how to add, manager and train staff.

By Karen Wittwer editors@strategic-i.com | December 23, 2016
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Following is the compilation of 2016's six "Practice Development" columns from the PLANADVISER magazine. This year's theme was on developing your staff.

Guiding Your Business’s Growth
No matter the size of your firm, if you are thinking about expanding, you face the same basic questions: Is it time to expand? Can you afford to expand? And, if so, how do you proceed? This article discusses the first two questions. “How” will appear over the next five issues.

A variety of factors may prompt an advisory practice to expand. These include overextended staff, underserved clients and opportunities outside your market. Additionally, new business may call for competencies lacking in your current  employees, says Daniel Bryant, CEO of Sheridan Road Financial, headquartered in Chicago. “As you take on more clients, and especially larger and larger clients, you need to have broader, deeper skill sets,” he says.

For example, plan sponsors’ growing demand for 3(21) and 3(38) fiduciary advisers may nudge an adviser firm to create or expand fiduciary offerings. Heffernan Retirement Services, when opening its New York City office, hired an Employee Retirement Income Security Act (ERISA) attorney as one of the three employees, says Blake Thibault, managing director, in San Francisco.

Adding people, of course, brings other requirements. As a firm grows, a human resources (HR) department may be needed. To attract top talent, a firm must consider what extras it can offer, including benefits and intangibles such as career path.

Bryant observes that such steps may exceed most firms’ ambitions. “Many people in the retirement industry want to work with their client and give them the best advice they can on their 401(k) plan, and it’s very difficult to do that if you now have to deal with leases, health insurance, benefits plans, profit sharing, bonuses, IT,” says Bryant. “I think that’s the biggest impediment that keeps people from expanding: Do they really want the headaches involved in running a real business, vs. a practice?”

According to the experts, revenues ultimately dictate most firms’ staffing plans. When the money is there, they can hire. Thibault says Heffernan had followed that model. “When we first started out, expanding staff was based on revenue. And, when we had a certain amount of revenue, we felt that was time. Then we realized it was more based on the number of clients we bring on and the workload per client.” When the average adviser needs to handle more than 35 clients, expansion may be needed, he suggests.

 Still, to do so, most firms apply the revenue model, typically hiring one by one—a slow go, Bryant says.

“You have to be willing to have capital to be able expand, then expect a return on your investment over time,” says Randy Long, managing principal of SageView Advisory Group, headquartered in Irvine, California. “Sometimes it can take two or three years to get that return back.”

Equally important to free cash flow, he says, is the people. “You need to make sure you have the right people on your team. A lot of that is spending time in profiling job descriptions and looking at what each person’s role is.”

NEXT: Recruiting new talent