The quality of any organization begins and ends with its people. The knowledge and experience that employees possess is central to building, maintaining, and improving businesses of all kinds, including financial companies. Highlighting this fact, the 2011 Investment News/Moss Adams Adviser Compensation and Staffing Study found that “top human capital firms outperform all others financially.” With 31.2% more clients, 54.4% more AUM, and 48.5% more income per owner, the numbers are difficult to ignore. The simple truth is that advisors who have a strategy for managing their human capital will outperform those who do not. What does having such a strategy entail?
Invest In Enough People
Many advisors are reluctant to hire people because of the cost involved, but this is flawed thinking. Here’s why: Let’s assume that your personal production generates $300,000 per year in revenue. At this level, your effective hourly rate is $144.23 per hour. If you only spend one hour per day doing paperwork or other menial tasks, that time is costing you $37,429 per year. In most job markets, you can hire a skilled assistant for that amount. And think of what it’s costing you if you’re wasting two hours or more!
If you want to earn more, you must be willing to make an investment in hiring the right people. By doing this, you will free up your time to focus on the things you are uniquely qualified to do. What activities do you think will have a bigger impact on your personal production: filling out new account forms and typing letters of instruction, or spending more time with your top clients and prospects?
Choose the Right People
The only thing worse than a staff shortage is having the wrong staff. According to a 2012 study by CareerBuilder, 24% of businesses said a bad hire cost them over $50,000. Just losing one client because of a mistake made by an employee could easily cost your firm tens of thousands of dollars. How can you increase your chances of hiring the right person for the job? Follow a stringent hiring process.
1) Application In Person – Accept resumes online, but before you invite someone for an interview, ask them to visit your office to fill out an application in person. This will give you a chance to see what kind of impression they make before you waste time in meetings with them.
2) Telephone Interview – Because your employees will spend a significant amount of time interacting with your clients on the phone, making sure they have a good phone personality is vital.
3) Face-To-Face Interview – Be prepared with a list of questions in advance. Rate each candidate in several areas including communication ability, dress and grooming, relevant skills, interest in the position, etc. Have at least five tough interview questions lined up that will let you see how well each candidate responds in high-pressure situations. Invite key employees or managers to sit in on interviews to offer an additional perspective.
4) Personality Profile – Use a service like Caliper or HireSelect by Criteria Corp (I have used both services, but HireSelect is my preference because I believe it is easier to use and more intuitive). Reports like these will help you identify potential strengths and weaknesses you may not have picked up on during the interviews. Often, the reports will also recommend additional interview questions and techniques that will help you dig deeper with the candidate.
5) Potential Second Face-To-Face Interview – If you’re not 100% convinced that you have the right candidate, invite them back for another interview. In many cases, you will find that a second meeting with the person will completely change your perspective of them; for good or bad. It also gives you a way to measure their commitment to the job. If they will come back to your office for a third time, you’ll know they are serious about the opportunity.
6) Job Offer – Only after you have completed the first five steps should you make an offer of employment. Use an online service like payscale.com or salary.com to find out the going rate for similar positions in your area, and then offer an amount that is 15-20% above that rate. Part of your compensation package should be in the form of bonuses that are tied to performance. Drivers like client satisfaction, number of referrals, and procedure enhancements can all be part of your bonus plan.
Systemize and Prioritize
Even if you hire the right people, your job is far from complete. Creating an environment where you and your employees can thrive requires that you implement written policies to govern activities and conduct. While this takes considerable time initially, you will make this time back hundred-fold once your procedures are up and running. Having written job descriptions and policies in place will make your practice scalable and will free up your time to focus on revenue-generating activities rather than menial tasks. At risk of oversimplifying:
1) Decide how you want something done.
2) Have someone write your requirements down in checklist, numbered, or bullet-pointed form.
3) Distribute your new procedure to staff members and explain it to them. Have it saved in a place where people can refer to it in the future.
4) Review your procedures as needed and modify them where appropriate.
In addition to implementing written policies, you must set aside time for weekly staff meetings where you can address issues and provide supplementary training. Send your employees to outside classes and seminars at every opportunity. Have them sit in on industry webinars. Subscribe to coaching programs that can help you implement time-tested policies and procedures.
In conclusion, let’s focus on one principal again: Advisors should only do what they are uniquely qualified to do. This is the reason why firms with a human capital philosophy outperform other firms. When employees understand that an advisor’s sole job is to meet with clients, make recommendations, and gather assets, they should do everything in their power to ensure nothing distracts from this focus. This, in turn, frees up the advisor to focus his or her time exclusively on activities that drive business. Imagine: If you had employees doing everything for you except meeting with clients and prospects, how much could you increase your production? 48.5%?