Advisors: The Unspoken Risk in Your Business (Hint: It’s Staffing)


Risk is all around us in this business – and not just investment risk. (In fact, I could go on a long rant about how some tend to confuse investment risk with volatility, but that’s for another day.) Here’s what else we are not going to talk about today, risk-wise: compliance, business, fiduciary and volatility risk.

Today, I want to talk about another risk – personnel/staff risk.

When is the last time you took a good hard look at your staff and gauged what would happen if one or two people decided to leave?

Dead man walking

I meet with a lot of firms. Sometimes, the meetings are more formal consulting relationships and others are just one-off conversations. The typical conversations are about growth, branding, differentiation and creating efficiencies in an advisor’s practice. But one of the areas that most advisors are not prepared to discuss is their staffing. As an outsider, it is easy to see the inherent risk of depending on one or two key people. But advisors typically tout loyalty and a close “family-like” relationship with their staff as a key reason not to be worried – until that key person leaves and the advisor is left holding the bag.

A while back, I met with a very large firm in the southeast. The firm was a well-oiled machine when it came to the back office. They had daily huddle meetings on client projects and follow ups. The staff had all worked together for a while, but it was obvious that there was one key employee who had evolved to be the leader. She was the organizer, the “systems person,” the backbone of the group. She was the go-to person for any question or problem and everybody knew it. Unfortunately, she met with the advisor infrequently. He quietly dismissed the conversations about her personal and professional growth and the desire to be named COO. He assumed that her compensation and loyalty would be enough to satisfy her – until it wasn’t. On a Friday afternoon, she gave the advisor her resignation letter and informed him that she was leaving for a true COO position at a rival firm. No one in the firm was surprised – except the advisor.

Fast forward a year later, and the advisor was struggling. The staff is unhappy and unorganized. Mistakes were being made, deadlines were being missed and those daily huddles were a thing of the past. More importantly, the processes slipped, as there never was a manual to define exactly what to do. The advisor was spending more time on operational issues than meeting with clients.

Advisors: The unspoken risk in your business (hint: it’s staffing) Click To Tweet

Risk assessment

It only takes a few minutes to step back and do a risk assessment on the staff in your firm. The assessment has to be honest. Don’t project what you think, but list what you know. Some of the questions to ask are:

  1. How long has my staff been in their current roles? Is there a clear progression to the next step in their careers? When is the last time I performed a review and listened to what they want to do, not what I think they want to do?
  2. Is the compensation structure and benefits that I offer competitive with the market? What would it take to replace this person? More importantly, what productivity loss would I suffer in trying to find and hire a replacement?
  3. What is the culture of the firm? Do we have fun? Do we share successes? Do we train our employees on all aspects of the business? (Side note: training of employees had a huge correlation of highly referable firms.)

Prepare for the risk

You can’t know if an employee is going to be injured, sick or have an extended absence. You may not know if the employee isn’t happy or may decide to move across the country. What you CAN do is be prepared for the disruption. By starting now, you can reduce the stress that your office would go through. Don’t wait until they give their two-weeks notice (if you get that long) to prepare for those key departures.

  • Start with documentation. Ask each person in the firm to document what they do (and you first; show them the model you want replicated.) Documentation will help you understand their core functions, should they leave.
  • Formalize. Create job descriptions for each person on staff. Look at what they do today and what is expected of them in the future. Is your staff aligned with the job descriptions? Share your results – get buy-in from the staff that there is alignment between what you expect and what they do. Is there potential for growth in their careers?
  • Build a process manual. Think about the flow of your business. The manual can cover everything from how to get ready for a client meeting, to how to change a client address with your custodian. The manual shouldn’t just be operational. Add in the processes in place for choosing a fund or manager, what your sales process looks like, etc. Remember, if you want the staff to build the manual, you have to do it, too.
  • Automate. If possible, take those documented processes and add them into your CRM. Automate as much possible. Your new hire will be trained more easily if they have direction and workflows, rather than trying to guess what to do next – and your current staff can benefit, if someone has a day off or illness.

The firm I mentioned took months to get back on track, but only after hiring a true COO. The advisor lost precious client- and prospect-facing time and more importantly, his clients lost some of their confidence, as errors and simple mistakes were made. He underestimated the staff risk in his office. He didn’t prepare for a loss in continuity and there wasn’t a process in place to replace a key person.

If a key support person in your firm left tomorrow, would you be ready?

Share Button
John Anderson

John Anderson

John Anderson is the creator and lead author of Practically Speaking blog and Managing Director of Practice Management Solutions for the SEI Advisor Network.

Learn More About John Anderson



HNW Whitepaper

Recent Tweets