When it’s time for a change

Industry focus today is on professionalism and the quality of advice.

This means advisers have to spend as much time as possible either servicing clients or keeping up to date with market, product and regulatory changes. This doesn’t leave a lot of time for day-to-day management of a practice if you are a business owner and adviser.

Most advisers joined the industry because they enjoyed servicing clients.

Starting your own business meant handling every client and every task just to make ends meet.

The natural progression then is towards some organisation and delegation by necessity because the workload gets too much for the owners to do by themselves.

This is where many businesses stop. The owners are still involved in day-to-day decision-making and administrative tasks that take them away from client servicing. The practice may do some planning and forecasting, but the business model still relies heavily on the owners’ involvement at every level.

As one frustrated owner/adviser said to me recently, in his best Al Pacino voice, “Every time I try to get out, they pull me back in”.

What is called for is a separation of ‘front office’ and ‘back office’.

The front office is where the adviser should be spending most of their time, maximising client contact, maintaining relationships, retaining existing clients, finding new clients and maintaining their professional development.

The back office is the people, systems and processes that deliver the client service offerings. The back office is where fund managers are followed up, where clients are contacted to schedule reviews, and where smaller client requests and transactions are dealt with.

This separation is hard work — at first. It takes careful planning and investment in time and technology and is therefore often left in the too hard basket.

However, if the planning and investment is made and the hard yards put in, the business can become a structured practice where profitability, productivity and business value can be accurately assessed.

This is the stage at which the practice becomes a corporatised business. There is a stable organisational structure where everyone knows their responsibilities and what is expected of them. The focus is on profitability and increasing business value. There are more revenue generators and the business is not dependent on any individual within it.

But how do you do this without killing the business and losing motivation in the process?

Case Study: Harry’s practice — an example of successful transition

Harry owns a financial planning practice in partnership with one other adviser.

Before moving to a corporate business model Harry had a paraplanner, a receptionist and two administration staff.

The adviser/principals were still involved in task delegation for all staff and day-to-day decisions

Each staff member understood their role, but relied heavily on the advisers to direct their activity. There was a business plan, but the practice was having trouble reaching its set targets.

Transition to corporate model

Harry and his partner made the decision to move their business to a corporate model.

They wanted to ensure their clients could expect the same level of service no matter whom they dealt with in the office. They wanted their staff to know what was expected of them and how they could reach beyond their current roles to further their career plans. They wanted to be able to prove to their referral partners that any clients referred would receive excellent service and attention. They wanted to be able to build their business into one that would be sought after by others.

Day-to-day management of the business

While planning an efficient practice is as important as having the right technology and processes in place, people form the final component of a successful environment.

Each practice will require someone to physically monitor, manage, utilise and evolve the systems and processes of the business.

Therefore, the first step in the process was finding out who was the best person in their business to organise and manage all the day-to-day practical necessities of running the business.

Both partners felt they were better off servicing clients and finding new business. So that meant looking at the other staff within the practice.

One of the administration staff members was a good organiser and made decisions effectively that the others were happy to follow. She also had spent enough time in the business to understand how it operated and what its strengths and weaknesses were. She was a good candidate to be promoted to practice manager.

Management of staff through change

Changes to systems and processes will have a huge impact on the human resource element of the practice, as some employees may have to take on new tasks and undergo specialised training.

Current position descriptions will need to be revised to reflect these changes and communication will be required to transition the changes. Change will have to be managed carefully, with open lines of communication between management and staff.

In order to make the position of practice manager the most effective it could be, it was necessary to ensure every staff member understood clearly what their role was and what the expectations from the business were. This meant focusing on accurate job descriptions, developing objectives to be reached and setting regular performance review dates.

It was also crucial to the clients’ experience that all staff shared the best behaviour in processing client requirements. This meant centralising knowledge and standardising processes.

Documented processes

Many advisory businesses do not have documented processes that are relevant to their business positioning and value proposition. Therefore, the first step in centralising knowledge and standardising processes is to document how the practice works. Once this has been done, the business has a starting point from which to review and refine its working practices.

Each member of the staff (including advisers) was asked to document every task they performed over a given week.

These tasks were collected and linked together to determine entire processes.

These processes were analysed for gaps and inefficiencies by the practice manager in consultation with the advisers.

Best practice turnaround times were given to the processes so tasks could be measured for efficiency.

Where it was clear that the advisers were performing tasks that could be done by others, the tasks were reassigned. Time to spend on client contact was maximised for each adviser.

Rewarding excellent performance

Once each employee’s tasks were clearly documented and agreed upon the position descriptions were updated.

Everyone had a meeting with the practice manager to define their development objectives and set targets to achieve for the year.

Bonus targets were set, with staff understanding what had to be achieved to receive an end of year bonus. A six-month performance review was scheduled to ensure everyone was on track and kept motivated or to identify any issues that staff might be experiencing within their roles.

At regular team meetings, staff members were asked to comment on how they were dealing with the documented processes and discussed any issues they were facing or improvements they thought necessary.

Culture of continued improvement

New tasks were documented as new processes developed, and a culture of continual improvement of efficiency and productivity evolved.

The practice manager kept the ball rolling and everyone on track by managing the whole back-office operation so the advisers could concentrate on clients.

Staff were proud of their work and could more clearly understand how their contributions weaved together to reach the practice’s larger goals.

Client segmentation

Once the advisers were confident their back-office staff had become more efficient in meeting business needs, focus could be turned to the clients.

With a more efficient back-office delivering services to the clients, how could the clients become more efficient within the business?

The clients were divided according to value to the business. Value was judged on the basis of revenue received, referrals and family or business connections to other clients. Each division, or segment, was assigned particular services (reviews, newsletters, quicker turnaround times for call backs, event invitations, and so on) that could be delivered profitably to that segment.

The practice’s price structure was reviewed to ensure each segment could be delivered the set services sustainably. The service offer was then articulated to clients progressively as they came in for reviews or initial meetings. Client expectations were easier to set, while the staff now knew exactly how to meet them.

Board of advice

Now that Harry and his partner had taken a step back from the running of the business, they could concentrate on the bigger picture. They scheduled quarterly meetings to discuss the future of the business, address any problems it was facing and assign timeframes for reaching set goals. They invited peers they respected to join them and give them a more objective perspective of how the business was going. This formed the business’ board of advice. The decisions of these quarterly meetings were handed over to the practice manager to implement.

Technology

After the tasks were centralised and improved to fit the business’ needs, it was decided that somehow automating workflow would further improve efficiency and make it easier for the practice manager to measure how everyone was performing.

The software solution had to be easy to use and address the business’ most urgent needs, being client management and workflow automation (time recording and task completion).

The practice manager was assigned to research the most suitable system.

Teething issues

Not every member of Harry’s staff embraced the changes.

The administration person who didn’t become practice manager was unhappy with the way she saw her role changing.

She was used to doing her tasks as she had always done them. She didn’t appreciate being given new tasks to perform, especially by someone who used to be her equal.

The practice manager and Harry spent extra time with this staff member to allow her to talk about the problems she had with the changes being made. She was offered training to develop skills that she was interested in improving. The practice manager made sure she kept this person up to date with how efficiency was improving to help her understand the bigger picture.

This staff member ended up being a great advocate of the entire process, and when new technology was introduced to assist everyone’s workflow further, she was given the responsibility to drive the implementation of the new system.

Leadership issues

Harry’s partner was supportive of the processes becoming centralised and standardised. However, he did not follow the tasks set for him or adhere to processes that had been agreed upon. As an owner of the business, this was disruptive for the rest of the staff’s adherence to the project. Harry and his partner had several meetings to discuss solutions to this problem. They decided the partner should work with the practice manager to revamp the processes to suit both the staff and this partner’s way of working. A compromise was eventually reached.

Business value impact

Harry’s example shows the possibilities of how to transfer a business to a corporate model. It is something that takes time and commitment to succeed. However, your return on this investment will very likely be happier staff, more clients who are happier working with your business, the ability to go on holiday without having to check in with the office daily to ensure all is running smoothly and business growth without the need to always grow your resources at the same pace.

The changes Harry made to his business are worth a premium when adopting an earnings before interest and taxes valuation approach.

The business will not only be more likely to be in the top quarter of practices for profitability, it will also be able to cope more readily with change and more quickly achieve scalable growth.

~ Be savvy: understand the market;

~ Be relevant: align to the future needs of clients;

~ Be focused: develop the right offer for the right clients;

~ Be efficient: have the infrastructure to support; and

~ Be capable: have the right team to deliver the results.

Graham Peatey is managing director of The Encore Group .