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Does Your Firm Need A Dedicated Business Manager?

Published: November 23, 2015 by Joni Youngwirth

In your role as a financial advisor, what’s your passion: working with clients, or handling the daily responsibilities that come with running a business? Although some advisors say they enjoy their business management duties, most would rather not cut into time with clients to address a human resources issue, answer questions from marketing support personnel or confront a technology glitch.

And as a firm grows, the advisor/owner’s business management responsibilities only increase, diverting more of his or her time away from meeting with clients. For example, someone has to:

–   Create the annual business plan and review progress on it throughout the year
–   Monitor the profit and loss statement
–   Benchmark financials against similar-sized practices and assess the competitiveness of the firm’s fee structure
–   Ensure that job descriptions and the employee handbook are up to date
–   Pursue training opportunities for staff and advisors
–   Set up a process for employee performance reviews and ensure that they’re completed
–   Document and update core operational processes
–   Stay abreast of changes in technology and conduct due diligence on developments applicable to the firm
–   Oversee the firm’s regulatory compliance efforts
–   Document and monitor the firm’s client classification criteria and service matrix
–   Create, update and implement the firm’s marketing calendar
–   Assess client satisfaction
–   Ensure that the firm is protected from risks, including disaster recovery and succession planning
–   Maintain the office space and relationships with vendors
–   Conduct meaningful staff meetings for employees
–   Nurture a positive culture that supports the vision of the firm

Although this certainly isn’t a comprehensive list, these are the types of tasks that prompt firms to get serious about creating dedicated management positions. What’s clear is that, even in the best, most efficient organizations, advisors have an ongoing responsibility to continuously improve and drive change within the firm—and that change is happening at an ever-increasing pace.

Of course, a firm with one advisor and one support person is in a much different position than an ensemble with 10 or 20 advisors and 20 or 30 staff members. In smaller firms, these business management tasks may not be as formal, and the advisor personally handles most or all of them as the need arises. As multi advisor firms and ensembles become more common, however, we expect to see a greater emphasis on management positions in financial advisory businesses. It won’t be an overnight shift—solo organizations still make up about half of the industry—but even some larger single-advisor firms are starting to see the value of hiring a dedicated business manager.

Leadership And Management Positions: Who Does What?
What types of leadership and management positions are firms adding, and what responsibilities do they typically assume? Let’s look at a few of these roles, from the most common to the more sophisticated (and typically hard-to-fill) positions.

Office Manager. As a firm’s production grows, the number of support staff typically increases as well, even in a solo practice. A firm’s first management hire tends to come around employee four or five—usually some type of office manager who handles operational, training, and HR questions and issues for the advisor’s support staff. Up until that point, single-advisor firms may find themselves in a kind of limbo; the firm’s production might allow for hiring several staff members, all of whom take their direction from the advisor, but not a dedicated manager to supervise the support staff. A certain percentage of the office manager’s time may be dedicated to doing client service work and filling in when other staff members are out. Once production increases to a certain level, the advisor may decide to have the office manager focus solely on supervising other staff members. (Although many advisors say they don’t want to be involved in daily operational issues, some find it difficult to delegate the responsibility for managing staff.)

Practice Manager. The responsibilities of this midlevel position typically go beyond those of an office manager. In addition to taking charge of HR matters and daily operational paperwork, a practice manager might oversee some of the firm’s key processes and deliverables, like managing staff charged with implementing the marketing calendar, as well as making decisions regarding marketing expenditures. The practice manager may also handle some duties that an office manager would typically be responsible for, such as dealing with office maintenance and the cleaning crew; interfacing with technology service providers, coffee distributors and other vendors; and ordering office supplies.

Chief Operating Officer. Falling somewhere between a practice manager and a CEO, a COO would tackle many of the items on the lengthy list of management responsibilities above. Typically, the COO oversees all operational issues for the firm, taking charge of daily workflow so that the advisor is truly free to spend the vast majority of time meeting with clients. As opposed to working with the advisor to determine workflow, the COO researches how other firms pursue daily operations and proposes changes and improvements within the practice, in collaboration with the staff. Although the COO usually isn’t the lead on defining the firm’s culture, as a manager, he or she influences how that vision is brought to life.

Chief Executive Officer. Although plenty of advisors understand and appreciate the role of a CEO, few aspire to be one—especially once they give it a try. Since serving as CEO of a larger firm involves all of the activities listed above and more, little time is left over for client work and the revenue-generating activities that drew most advisors to the profession in the first place. I’d guess that fewer than 10 percent of advisors are a strong fit for the role, with the rest lacking either the inclination or the skill set. Of course, that doesn’t mean the owner of a firm is willing to pay someone else to handle the management tasks he or she has attempted to do all along, successfully or not. The decision to hire a dedicated CEO is therefore one that only a few very sophisticated enterprises are likely to embrace.

Other Emerging Roles. Larger financial advisory firms may also seek to fill other high-level management positions, including chief financial officer, chief compliance officer and chief marketing officer.

The CFO role is seldom a distinct position; instead, the work is typically outsourced to a third party as the firm has a need for more refined financials. At larger, more sophisticated firms, the CEO and CFO roles may be combined into one function.
In response to the heightened regulatory environment, some firms are electing to hire aCCO. Although some advisors might consider the position an unwelcome expense, others see it as a necessity to address compliance risk and relieve the advisor from providing the required supervision.
Hiring a CMO may make sense for firms that aggressively pursue high-level marketing and PR strategies. The CMO heads up all branding and social media initiatives, as well as communicating with existing clients and driving prospecting activity.

The Growth Paradox
Many solo producers with minimal overhead are no doubt puzzled as they watch large firms grow larger. After all, why would anyone bother when such growth means advisors must either embrace tasks and responsibilities they have little or no interest in, or hire someone else to handle them? Growth that requires a firm to fill internal management positions may simply seem like it’s not worth the effort.
And it’s true: the bigger the organization, the greater the specialization and division of labor within the firm—and the more margins may shrink, even as revenue increases. Growing from a solo practice into a large firm isn’t right for every advisor, but neither is remaining the same size and forgoing growth opportunities.


Joni Youngwirth is managing principal of practice management at Commonwealth Financial Network.
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