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
Scouting for Recruits
Enrollers can make good advisers, advisers good support staff, and your best source for referrals—what adviser firms look to first when seeking new hires—could be right down the hall. So say senior retirement industry executives, who shared this wisdom and more about recruiting good staff for your practice.
Steve Cunha, founder of the retirement plan services department at Baystate Financial Services LLC in Wakefield, Massachusetts, has a particular sweet spot in mind when hiring new advisers: good skills plus a minimum of three to five years working directly with qualified retirement plans. “I look for someone who’s been around long enough to know he wants to be in this business, to understand the overall picture, but not so long he’s accumulated bad habits you have to ‘untrain’ him of,” Cunha says. 401(k) plan enrollers—i.e., educational specialists—tired of the road warrior lifestyle can be a good fit, he says.
Similarly, advisers in your own firm who discover “they’re just not the hunter type, not really the marketing type—they have more of a support, team-member personality” may excel in other roles, Cunha says. He seeks referrals from co-workers but also from DCIO [defined contribution investment only] wholesalers, who are situated to know of advisers and well-credentialed call center representatives who might want to switch.
The advantages of such referrals are many. “You can speak to their former employer, get testimonials, references. They’ve got licenses; you can check their background. So there’s a track to run on there,” Cunha says.
Perhaps for those reasons, 87% of respondents to PLANADVISER’s recent Recruiting Techniques Survey favor recommendations when hiring, well over their second choice—social media—at 33%.
Whatever way Russell Warye finds recruits, he puts character and common values first. The president of Benefit Partners Financial Group LLC in Libertyville, Illinois, then looks for consistent success in school or former jobs. Candidates should also be well-spoken and present nicely, he says. “If they have these characteristics, I don’t need experience; the rest I can train.”
Advisory firm Janney Montgomery Scott, which combines experience and character in its ideal-employee profile, also stresses fit, says Jerry Lombard, president of the firm’s private client group in Philadelphia. Candidates spend a day at the firm, meeting with everyone, from executives to support staff. The person must be collegial, “because that’s the culture we believe in,” Lombard says.
While firms are assessing candidates, that exercise is often mutual. Because of the growing need to replace advisers who are retiring, competition, especially for young recruits, is strong. “What they’re looking for in an employer is different than, say, my Baby Boom generation,” Lombard says. This means a firm should adopt a flexible outlook, a willingness to change over time. For example, “[Millennials] want to work for diverse organizations, so we’re making sure we’re an employer of choice when it comes to talented young people,” he says.
Janney’s approach appears to be working. “We seem to have no trouble finding good talent,” he says.
NEXT: Training Advisers
Advisers in Training
For top adviser firms, effectively training new staff is critical to ensuring the practice’s success—but it goes beyond just teaching them the required information.
Sentinel Benefits & Financial Group of Wakefield, Massachusetts, moves retirement plan adviser trainees through a multi-year program combining study, exposure and experience, says Eileen Greenspan senior vice president, retirement plan advisory services. Formal training starts with an approximately two-year general immersion in Sentinel’s business, giving trainees the chance to absorb the firm’s culture while learning how different investment divisions operate.
The specifics of retirement plan advising are taught through a credentialing and mentoring process, Greenspan says. “Before a plan adviser can advise, he must have at least a Series 65 [securities] license. Once obtaining that, he can explore all the products [Sentinel] has to offer,” she says. To learn about plan consulting, trainees are teamed with a mentor. “They tag along with our more senior plan advisers to as many client meetings as possible” and are asked to help prepare presentations to sponsors and participate in employee education meetings, she says.
To ensure mastery of their trade, the firm later requires that they earn an Accredited Investment Fiduciary (AIF®) designation and encourages additional certification. Learning is further supplemented with webinars about investments, at least quarterly meetings run by the firm’s chief investment officer (CIO) and bi-weekly adviser team meetings where they share their experiences and learn from one another.
Pension Architects of Los Angeles takes a less formal but, nonetheless, still intensive approach to training. In their first year, new advisers learn what methods make the firm successful and unique, says partner Philip Steele. “We want them to understand and appreciate how we view qualified retirement plan design and marketing, so they’ll carry the torch in the same way all of our teammates do.”
Foremost, this means instilling the practice’s core principles—“that people have a better chance of a sustainable and predictable retirement if they’re working with us than perhaps former relationships,” Steele says. Senior practice members make the point by preaching what they believe and why they believe it, he says. “Proof is usually data, metrics and results you can use to say, ‘This is why we put so much energy, and focus our resources, into this part of it instead of that part of it.’”
When given a pile of case studies of clients and new plans to review, trainees are asked to think critically, Steele says. “We want them to study that and start feeling the rhythm of each of these designs and understand the common threads they see regardless of plan size, industry or demographic specifications.”
An important goal of hiring and training is retention, both executives believe. Steele points to the cultural as well as the financial losses that result from turnover. “The more you can hire people who’ll be around for a long time, the more it helps the culture of the firm. And I think the happier the culture, the better the work you do for the client.”
NEXT: Assigning Tasks
Dividing Up the Roles
Because a retirement plan adviser firm’s greatest resource is its staff, how you segment employees’ talent to maximize their value is critical.
For some advisory firms, specialization is where you start—at least as a long-term goal. “It hit me years ago that it was impossible to be an expert in all the different areas of financial planning,” says Brian Allen, a founding partner and president of Pension Consultants Inc. in Springfield, Missouri. This insight led him to develop a business model where teams were built based on function—i.e., investments, compliance, participant education and vendor selection. “We’ve only had this total structure in place for maybe 30 months,” Allen says. “So, as each of these disciplines has crystalized, we’ve developed very specific job duties. We’ve been very stable with [the roles].”
Advisers should also consider skill levels when assigning responsibilities. Allen used to have new employees attain licensing and sometimes shifted people’s roles as the team grew. Today, though, his firm hires experts from the start. J.D. degrees are needed for the ERISA (Employee Retirement Income Security Act) compliance team and a Certified Financial Analyst (CFA) designation to serve on the investment team as either a fixed-income or equity analyst.
Graystone Consulting Cincinnati also seeks experienced support staff, which minimizes on-the-job training. “We tend to hire people with a lot of seniority instead of training people from scratch,” says Joel Handorf, first vice president, institutional consultant and senior portfolio manager.
And of course, what responsibilities need to be filled is somewhat dependent on how much is handled in satellite offices versus home office. While Pension Consultants’ manages its own operations, Graystone can leave many of those duties to parent company Morgan Stanley and focus on clients, Handorf says.
Also to be considered when a firm divides responsibilities is a practice’s client base. Graystone Consulting Cincinnati assigns service teams based on a client’s needs. Handorf himself has found a niche with physicians’ practices that are hold-outs from joining large medical systems. Medical office plan design is very different than design for manufacturers, he explains. Likewise, the firm’s other institutional consultants each have focus areas: fiduciary services, investments, plan design, employee education and financial planning.
Once service teams in the Graystone Cincinnati office are
formed, they generally stay intact. Reviews are important—the team has
six-month formal reviews—but consistency is key, so these do not lead to
reassignments, Handorf says. “Most projects we’re working on are much
longer-term in nature than that. Movement typically occurs when the current
full-time analyst is ready to advance toward institutional consultant.”
NEXT: Ongoing Education
Motivating Your Staff
How a retirement plan adviser firm approaches ongoing education begins with company culture. At least that’s true for Francis Investment Counsel and Channel Financial, two independent firms whose training philosophy reflects their companies’ vision.
The word “education” pervades Francis Investment Counsel’s website—much because the firm was started to teach middle-class Americans how to save for retirement, says Michael Francis, firm president and chief investment officer (CIO), in Brookfield, Wisconsin. So it stresses education for its 16 team members, providing a three-tiered system to develop them professionally and personally.
“External professional development” refers to acquiring and maintaining credentials—especially Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP)—which Francis believes are crucial in the field. “We have a fairly significant budget every year for training,” he says. The firm keeps team members current by sending them to the range of educational opportunities their specialization provides. Even still-uncertified educators must meet the same continuing education requirements, so they can grow in their role, he says.
In “internal professional development,” the employees learn from each other. At day-long quarterly companywide meetings, they discuss industry trends, plus explore some point from the firm’s operational manual, to strengthen their compliance skills. Additionally, the education team meets for a half day every month, with each member presenting a personal case study from the field and receiving input—and maybe counseling tips—from the rest.
The “personal development” piece is a wellness program. “We’re trying to get people more focused on healthy living, and being better stewards of their own situations as well,” Francis says. So, the firm arranges for annual wellness exams and contributes to employees’ health savings accounts (HSAs) for points that they earn exercising, seeing a financial planner, etc. “I think the people who work here stay because we keep it interesting. They can continue to learn and grow,” he says.
Less methodical—or maybe more organic—is ongoing training at Channel Financial, in Golden Valley, Minnesota. “The culture comes before anything else,” Partner Jim McDonald explains its hiring, and training, philosophy. “There are no egos, we don’t take each other seriously. We’re free to point out each other’s mistakes. I hate to say, but it works very well.”
In what he calls this “fun, hardworking” environment, staff feel able to self-present the floating “D.A.”—or “Dumb A__”—Award for some personal gaff. Education takes many forms, McDonald suggests, and calling themselves out cultivates humility. “That’s what we remind everybody—to keep humble with the folks we work with.”
As to formalized training, “We’re not big enough to have ‘this is how we train everybody,’” he says. Not that size would change their perspective. “All  of us at Channel come from large corporate cultures where everything is structured. In the relationship business, relationships are not always a repeatable process. It’s having the person understand what it takes to meet this particular client need.”
Hence, Channel’s training is more dynamic. Staff teach to their specialties, as needed, tuning their approach to the learner’s personality. Employees are urged to learn by doing and to not fear making decisions. Everyone learns at the regular GSD (Get Stuff Done) meetings where the last two weeks’ business gets discussed, McDonald says.
NEXT: Seamless client service when someone leaves
Minimizing the Loss When
When a retirement plan adviser leaves your practice—whether moving on, going back to school or, himself, retiring—his clients may consider leaving as well. To ease the transition, and help ensure clients remain happily with your firm, experts suggest the following.
Kathleen Kelly, managing partner at Compass Financial Partners in Greensboro, North Carolina, believes in “a preventive approach” to keeping plan sponsors onboard. From the start, “we make sure the client understands its relationship is with our firm,” she says. This means the client is shown that a team services its needs. “If the client truly feels there’s an organization behind that one [adviser] that looks out for [its] needs, there’s an easier transition,” she says.
ProCourse Fiduciary Advisers LLC in Carmel, Indiana, goes a step further in providing continuity. From the get-go, two advisers attend each client meeting, says Doug Prince, CEO and a principal at the firm, “so if someone did leave, it’s not a brand new face coming in and saying, ‘Hey, we’re brand new—we’re going to take care of you.’” No adviser has left his firm, he says, but if one did, one of the principals would meet with each client and the replacing adviser. “We’d go through a history—talk about what the client valued the most out of the relationship with the other [person],” he says.
Continuity in service delivery is also important, Prince and Kelly agree. Each of their firms has developed a consistent process to help advisers give all clients the same level of service. This way, if a team member does leave, Kelly says, “a new person can step in and quite seamlessly have everything in place, at his fingertips, to know historically what has been done with the client.”
Client history, for any adviser taking over an account, is a vital tool. So is a good mechanism to access and study it, says Sean Patton, a senior consultant and founding partner at Westminster Consulting in Rochester, New York. “Here, I can go into our system and see all of the notes; it gives me a sense of that 10-year relationship so I can carry on,” he says.
Patton believes replacing any successful advisers depends on re-establishing trust, which inevitably will be shaken when the person leaves. “I think that’s probably the biggest concern from the plan committee and plan sponsor,” he says. “‘Will that new person have that same expertise, and will I have that same chemistry and trust with him?’” For that reason, some plan committees perform a request for proposal (RFP)—especially if the adviser firm is smaller, “when there’s not depth of the bench behind them,” he says.
Not surprisingly, good communication is critical throughout the changeover. Kelly says her firm informs clients in advance when an adviser plans to leave. Then it follows up with them directly, afterward, to make sure they are happy. Ultimately, she says, “people want to know everything is fine, that they’re being looked after, and their participants are being taken care of and that they won’t feel the impact of a change.”
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