Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Dear Bev,
Do you think that outsourcing is a good solution for most advisory firms? We have been tracking our expenses and can’t seem to improve our profit margins, even though our fee revenue has gone up quite a bit this year. When I look at our expenses, a lot of it goes to salaries and benefits. I know this isn’t unusual for small businesses. But are other firms avoiding these increasing costs by outsourcing? If so, what do they outsource? What are the best functions for an advisory firm to outsource?
I’m not interested in letting most of my staff go. But I am also not up for adding to staff and therefore expenses.
J.P.
Dear J.P.,
As a consultant who offers my time and talent to many different organizations, I am predisposed toward outsourcing! And, as a small business owner who needs to cover a lot of bases and wants to do it with as little an investment in salaries and benefits as possible, I do also look for ways to outsource functions in my own business.
So, the answer is “yes,” there are many opportunities for financial advisory firms to improve margins by outsourcing. That said, you have to be careful. You can’t outsource the oversight or the responsibility for managing the function. For example, I have seen advisory firms outsource marketing (this is a great area to consider if you are paying a part-time or full-time marketing person), but you still need to have someone inside the firm who approves things, works with the outsourced firm on strategy, and makes sure the messaging and materials are on point for your firm.
Other areas of opportunity are the operations, technology and compliance functions. These are mostly “overhead” areas that are of high importance to the firm’s success, but often times they can be done well remotely. You still want to have someone internally who is the point person. But the overall function could be done outside of the firm. If you outsource these functions, you also have another firm sharing in the liability. They are being paid to do well and protect you, so it could be even more beneficial than an insider.
One critically important area advisors can outsource is the investment function. If you have advisors who are very attached to the investing part of what they do, this is often a difficult area to let go. But it can make so much sense from a time and efficiency perspective. And there are so many great TAMPs and other options from firms with staff that spend all of their time focused on this.
I’m hoping readers will write in and talk about some of their best outsourced experiences to help J.P. make the best decision for their firm.
Dear Bev,
I read an article recently about the decline of new younger advisors in our industry. We are blessed with excellent young talent and I thought I’d share some of the things that are working for us:
- We talk about and live our culture. We have a dedicated group that believes we are in this business to give back. Our team is always looking for ways to do this. We find the younger advisors and team members are the ones who come up with great ideas and often lead them. It’s a great way to get involved but it also increases their leadership skills.
- We have fantastic benefits – we offer unlimited paid time off (few people take even the traditional minimum because they love working here), family leave, mental health days and excellent health and well-being benefits. As a smallish firm (we have 23 employees) we do not have a full-time HR person. But we have great outsourced help including an employee assistance program (EAP) when needed.
- We give our young team members lots to do. We’ve found they learn a lot in their college and graduate schools about leading and about working in teams and about having creative ideas to then implement. We want them to contribute and be part of what we are doing right away. We don’t see a need for them to “earn their stripes.” They contribute and are energized about new ideas.
I am 63 years young. I don’t think we have an age-gap in our industry. We have an ego gap.
E.B.
Dear E.B.,
Wow, I couldn’t have written this any better. I received a number of responses to my article about unlimited paid time off and I was heartened to see how it is gaining favor in our industry. Shout outs to Tommy Martin, CEO of Vestia, who offered to provide its employee handbook on the topic and to Bob Sturtevant of GIBSON Insurance in South Bend, IN. Both wrote to Advisor Perspectives and me talking about this benefit for their team members. I still see so many firms with the attitude that you should take calls from clients during dinnertime and vacations, so when I hear about those who are valuing work/life balance it is really impressive.
I teach undergraduate and graduate students each semester (most of my grad students are very young, too) and they are quite motivated and engaged. I agree that if you give them something to do and you trust them to have good ideas and be creative and thoughtful, many of them are fully capable of achieving success.
The younger generation is more connected to firm culture. When I looked for my first jobs, I would not have even thought to ask about culture (in retrospect, that was a big mistake!). It was uncommon to even think about that years ago. Now people want to work for a company that they can believe in and be part of. I often counsel advisors when they are writing job descriptions and trying to attract the right candidates that they focus on their culture and what it feels like to work there. When you think about the amount of time most people spend at work, you realize we all want our work to be aligned with our values and what matters most to us.
I hope your note can inspire some of our readers. Please write in if you have a great culture for younger team members and tell me what you are doing. It is helpful to share real ideas and insights from others in the industry.
Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry in 1995. The firm also founded and manages the Advisors Sales Academy. She is currently an adjunct professor at Suffolk University teaching undergraduate and graduate students Entrepreneurship and Leading Teams. Beverly is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).
She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including The Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.
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