Page 40 - Investment Advisor January/February 2022

the best investment a firm can make
in growth is adding to the capacity to
grow. Advisory firms make clients happy
and keep them by ensuring that there’s
plenty of service capacity.
It’s tempting to hire more support
people in the hopes of solving capacity
problems; they’re cheaper than advi-
sors, after all. But experience has taught
us that, while they can help a bit with
the capacity gap if they’re used properly,
they can’t close it. Once you’re clear on
your firm’s target ratio of advisors to
clients, it’s time to do some organizing.
[Today] when clients contact an advisor
2. CLEAN YOUR CLOSET.
Imagine you have a messy closet: Every with a question or concern, they expect a
time you’re not sure where to put some-
thing, it goes in the closet. You keep response in an hour or two. Advisors who are
filling that closet with more and more tasked with serving 250-plus clients, which
random objects every year. When you’re
looking for that odd something or other, is common in the industry, simply won’t be
you search the closet, but of course it’s
in such disarray that to find anything, able to meet these new expectations.
you have to take everything out, and
then put it all back in. firm to add a substantial amount of advisors have the bandwidth to do the
The chaotic closet is, unfortunately, a growth. And you will have created a work that really impresses their clients,
good analogy for financial advice firms’ good foundation to which you can add referrals tick up. As clients join the
organizational structures — how they advisors when the need arises. firm, advisors are hired to keep the firm
divide responsibilities among their peo- in the client/advisor ratio sweet spot.
ple. A well-organized business is like a 3. READY, AIM, HIRE. Then, if firms want to ratchet up growth
well-organized closet: When you need As your firm grows and adds clients, it’s even more, they can look at layering on
something, you can open the proverbial important to make objective, clear-eyed marketing programs.
door and grab it quickly, without wast- decisions about hiring. Many firms fall Unfortunately, most firms seeking
ing productive potential. into the trap of adding advisors based organic growth start with what should
Firms that assign new responsibilities on temporary capacity constraints. be the final step — beefing up mar-
to different advisors willy-nilly quickly Advisory firms go through workload keting. If marketing yields new clients,
lose a realistic understanding of their cycles; tax season and the end of the they are assigned to existing advisors,
capacity to serve clients. When new cli- year are usually busier than, say, the who become overwhelmed and leave the
ents come in the door, these firms don’t summer months. firm. Firms react by hiring advisors in a
know where to put them, so they become During those peak-load periods, firm game of catch-up.
another object thrown into the closet. leaders can feel overwhelmed, advi- In the course of my consulting career,
Many firms layer on marketing or add sors may complain of overwork, and I’ve found that the top reason firms stop
advisors without creating a sustainable on an intuitive level it will feel right growing organically is because their lead-
organizational structure that can accom- to bring more advisors aboard. But the ers fear the firm won’t be able to accom-
modate the entire growth curve of the best gauge of when to hire is related modate the growth. The answer is simple:
business. They end up with the business to internal benchmarks, such as your Hire more advisors. The work needed to
version of a cluttered closet, and their firm’s advisor-to-client ratio or advisor- get to that point can be substantial, but it
growth and profitability suffer as a result. to-revenue ratio. will pay off in the long term.
So to maximize organic growth, Once firms get a good handle on their
understand your capacity requirements capacity benchmarks, do the organizing Angie Herbers is an independent consultant to
and make sure responsibilities are well work and position themselves to hire the advisory industry. She can be reached at Adobe Stock
organized. That alone will allow your wisely, growth picks up naturally. When [email protected].

38 INVESTMENT ADVISOR JANUARY/FEBRUARY 2022 | ThinkAdvisor.com