Kitces & Carl Ep 161: Avoiding Staff Management Duties You Don’t Want By Paying A Virtual Assistant For Only What You Need

***Editor's Note: Can't get enough of Kitces & Carl? Neither can we, which is why we've released it as a podcast as well! Check it out on all the usual podcast platforms, including Apple Podcasts (iTunes), Spotify, and YouTube Music.

Show Notes:

• 

  David Allen: Getting Things Done:

• Claude
• The Art Of Delegation: Maximize Your Time, Leverage Others, And Instantly Increase Profits, By Charles C. Malone
• Ruby
• Delegated Planning
• Consider It Done

Kitces & Carl Transcript

Carl: Oh, I got to do that. Here we go.

Michael: Well, good afternoon, Carl.

Carl: Hello, Michael. How are you?

Michael: I'm doing well. How are you today?

Carl: Things are really good. Yeah. The snow finally turned on, which is really exciting for us. So it's good.

Michael: By the time you're saying that snow is turning on. By the time this airs, snow will probably be turning off...

Carl: I know.

Michael: ...as we approach the spring season here.

Carl: I know. We all start to feel hopeful that we made it through. Made it through another one.

Michael: You made it through.

Key Questions For Determining The Underlying Issue With Managing Contractors [00:38]

Michael: So for today's discussion, we had another one of our great listener kind of write-in questions, “Hey, would y'all talk about this on the podcast?” And I think it's a really good discussion. So for the sake of anonymizing, we're going to call this advisor, Darryl. So Darryl writes in and says, I'm a solo advisor, $175 million of AUM, and three admin staff supporting me. And I never imagined it would be so difficult to manage three admins. So Darryl's question to us can we talk about how solo advisors or smaller advisory firms use virtual assistance more effectively? And literally, it's like, how does it work? VAs don't typically place trades. So how does trading work? Or my retired clients don't all use DocuSign. So does the VA email a PDF? Do they make a hard copy and send it to me and then I prep it and send it to the client? How does this work?

And the part that I thought was interesting as well, Darryl comments, so cost of a VA seems to be something in $65 to $120 an hour. At least that's what Darryl has said he's found, which seems to be relatively expensive. But then again, how much is an office admin actually working when you start taking out like lunch, set up time, goof off time – Darryl's words, not mine – etc.? So I just thought it was an interesting discussion. To me, there's so many different things here. There's managing people versus using VAs or sort of the implications like they train the person and manage them. You just tell them what you need and then they handle the rest. There's management dynamics. There's task and delegation, sort of like tactical stuff here. There's just thinking about the pricing of full-time team members versus external outsourced. So where would you start with this, Carl?

Carl: Yeah. I think it's a great one just because we'll have two very different takes and maybe even more importantly two different sorts of skills, experience sets because I think all delegation starts with deleting, right?

Michael: Okay.

Carl: So I would just start by saying, hey, what is it that... I always think like delete, delegate, do. That's probably from David Allen. I think some say version...

Michael: Yeah. I was going to say that's a version of David Allen's "Getting Things Done."

Carl: Yeah, yeah. And I think, but delete, to me, is really push on the edge of delete, right? Like really, are you sure that you need to do all those things? So that's where I would spend most of my time would be like, why? And then let's pretend like you... And we could talk, and I think we probably have talked about examples of that where you were sure that there was a thing you needed to do, right? And then you were surprised. Yeah?

Michael: Yeah. I just like, look, as you start prompting that, my head goes down a whole other different path here, which... So look, Darryl said, $175 AUM. He didn't share revenue or clients directly. If I sort of assume, call it air quotes, like ‘typical advisory firm fees’, he's probably somewhere between $1.3–1.5 million of revenue because most of us don't really actually get a cool 1%. There's breakpoints and discounting, and there's a big client that has a low breakpoint that's a large portion of our assets. So if he's something like $1.2 million with four people like him plus three, that's actually a pretty well, like, a pretty healthy revenue per employee staffing ratio. That sounds pretty good.

But I do look at some firms like this and start wondering how much revenue does the bottom segment of this client base generate? Is it even enough to cover one of the admins? If you wound down your client base by a third, could you wind down your staff by a third and you would literally net the same thing out of the business and just have less management duties? Again, we can find gracious ways to transition those, as we've talked about often in the podcast like you are. Our C clients are still someone else's A clients that they would love to serve and serve really well because they're just at a different maybe stage or place in the business.

But I just when I hear the comments like, yes. I start wondering like, what are all the things they're doing? Are those all things that clients really value? But I've seen a lot of advisory firms like this where it's something the effect of you have too many clients. It's like, well, yeah, I know. But they really don't take that much time. They barely call. I'm like, well if they barely call, why do you need three people working for you? They may not call you that often, but unless you walk out in your main office area and see everybody lounging around and playing solitaire, apparently these clients still have a lot of work obligations that might not come to you.

Carl: Maybe that's what ‘goofing off’ means.

Michael: But it's hitting your team and... But the bottom segment that aren't generating that much revenue might not actually be that profitable when you consider how much time, how much it costs, and salary and management in your time that apparently, Darryl doesn't like managing people. So not really where I meant to go the conversation. I'm curious for your thoughts about some of the areas, but just your comment around what can we stop doing in the business. Sometimes it's, are there tasks for clients that we don't actually need to be doing and it would just simplify the business. And sometimes it's, do we have so many admin staff we have to manage because there are a lot of clients that aren't actually a good fit. And we say that they don't take much time, but then we have to manage the people that are protecting our time. And if you don't like managing people, that's not necessarily a net positive.

Carl: Yeah. I just want to let's just talk about this just for a minute because I can sense sometimes even the frustration of when you wait, wait, wait. That wasn't my question. And I think this is really, really valuable to be thinking about like, okay, are we asking the right question? Because if you don't, what we often do is we end up just on this treadmill of new tasks, you know? We answered the wrong question. We answered the wrong question.

Michael: Is the problem, I don't like managing people? Or is the problem, I don't like saying no to small clients, and therefore, I have to manage a whole bunch of people that I don't like managing because I'm not ready to deal with the fact that I have clients that aren't a good fit for my practice at this stage?

Carl: That's a great... Or is the problem that we're actually delivering a bunch of stuff that clients don't necessarily don't need and they only know they want because we train them. So just ask all those questions. And then let's say that you're still left with this pile of...

Michael: Yeah. No, with that being said, again, if Darryl's net revenue is anywhere in the neighborhood of what I'd said, I mean, it's a good benchmark out there. Just take your gross revenue and divide by how many people you've got, it gives you a number of revenue per employee. And for a firm that's $1 or $2 million of revenue, $300,000 of revenue per employee is a good number. Often firms under a million I see struggle just to get to $200K to $250K. Firms that are one to three, and sometimes even as high as five million of revenue are often just trying to get from $250K to $300K. Really big like large-scaled RAs, sometimes get to $300K to $350K. But Darryl's numbers sound pretty reasonable to say, you really might need this much staff given how much revenue just they have to do work for to provide the service to retain the clients so that you can continue to do what you're doing.

Carl: Yeah. So then we start talking a little bit about, okay, how do you, assuming that outsourcing is something you want to do? How do you effectively do that? We've talked a little bit about this in the past, but I think it's valuable to talk about how do you find the tasks that are easy to hand off to a virtual VA. And then what do you do with the pile that's left over? Maybe we could point to trading. What do you do? Even in the trading sphere, there's ideas on how we can outsource some piece of that to get it prepped, etc. So let's talk a bit about that.

Taking Delegation To The Next Level By Determining What Only The Advisor Can Do [09:23]

Michael: Yeah. I do find that the... Well, like I was saying, delegating is kind of an art because I think someone literally wrote a book called "The Art of Delegation." I don't remember who it was. And the way I find it crops up for a lot of us is just figuring out the pieces to actually delegate versus not. So trading, to me, is a great example. So many of us in the solo world get some version of I feel like I can never take a vacation because a client might need to trade and I'm the only one on the hook. And I sort of infer from Darryl's comments here that someone on his team is licensed to do trade so that he can because now he's concerned if I went from employee admins to virtual assistants, who's going to replace the trades?

And, to me, this just gets into an interesting dynamic of getting really clear about what you delegate or what you don't delegate or what you...how much you can expedite if you repackage it a little bit. So, for instance, just trading, to me, is such a good example. I see a lot of advisory firms with something in the effect of I want to be able to take vacations. So I need to be able to delegate trading. It's like, I get it. Don't want to answer phone on vacation. But there's a midpoint to that. I don't want to answer the phone on vacation, and then have to answer the call, find out what they need, pull up their information from the portfolio system. Look at their positions, look at what their performance has been, look at what realized gains they have, look at how much gains they already have for the year. Figure out what their capital gains budget was. What the tax implications were going to be. How much was their tax picture already? Just there's all this stuff. And, all of a sudden, you're like, okay, I've now been off the beach and in my hotel room for an hour trying to figure this out for a client. This is very energy-draining to my vacation.

But it doesn't have to be that the only alternative is or I've got someone that can do all the trading. This could come down to, okay, so my VA can gather the information about what the client needs. They can prep a portfolio, like, a statement of their holdings, performance year to date, unrealized gains and losses of all the positions, realized gains and loss of the positions. Pull whatever I've got for my planning software CRM about what an acceptable tax budget was this year for how much in gains were allowed to realize. Prep all this information for me so that if I've got to spend some time on it, I'm going to spend three to five minutes just looking at their stuff saying, okay, we had this much we could take in gains. This position is up this right amount. This is the one we're going to grab and I can hop onto my system and do this trade. And it doesn't mean I'm a lead alleviated of the responsibility, but I might cut it down to five minutes instead of 30 to 60 minutes, which makes it hopefully not such a big deal. Heaven forbid, I might even actually be able to do this on my smartphone given the technology these days.

So I just find a lot of the mentality is either I've completely let go of the thing or I haven't. Rather than to say, okay, what's the smallest unit that I might still have to do as the advisor? Make the final call about what we're selling and maybe I'm the one that needs to key in the trade. But if every other bit of information is served up to me in advance, the actual time to do this gets minuscule. It's a version of the doctor-nurse model. The nurses get so much of the information and the details and the prep and everything that by the time the doctor comes in, they can really just do only the things that doctors do and nothing else because everything was... They don't just come in blind. Everything was prepped for them. Everything around just the actual bit that they have to be there for.

Carl: Yeah. The framework I would use is from my doctor friend, Dr. Dave, who when he took me to the ER, we came in because I cut my head open and he took me to the ER and we went in the back door and everybody was so excited to see him. The admin, the nurses, everybody. And I was like, what's that about? He's like, well, things get really stressful around here when they get backed up. So I have a rule that I only do what only a doctor can do. And he wasn't on right then. So he's like, look, and it was another one of our, another friend I knew that was an ER doctor who I'll just call Will. That wasn't his name. He was like, look at Dr. Will. He's on the phone right now trying to get a hold of the primary care doctor.

And he said, now, Will has never thought through what part of this can only a doctor do. He could have said, get the primary care physician on the phone. Let me know when he's ready. Or he could have even said, here, get the primary care physician on the phone. Here's what I need to know, right? And so I think if you really push on that edge of, what can only you do? And then, the second thing I would ask is, why are you in a position where you have to do a trade on vacation anyway? But that's a whole other subject. That's like training clients and...

Michael: Sometimes clients just see cash, Carl. Okay? We're going to assume Darryl's not day trading from Turks and Caicos.

Carl: It's not an emergency room. It's not an emergency room. Everything will be fine. I'll be back in two weeks. But I'm just kidding there. But I think that idea of really thinking carefully about what can only you do and be really like you would on the delete side. Be like really push the edge of that. And it can actually be quite fun. It's one of my favorite games now to say, how much of this could somebody else do? And what you'll find, unsurprisingly or maybe surprisingly, what you'll find is there are actually people who will do all of that stuff better than you if you'll just give them the appropriate tools and training on how you want it.

Delegate Better By Creating Training That Explains The Advisory Firm’s Why [15:34]

And so let's talk a little bit about that, like, how do you take something? Because the way you want something done, it could even be the level of how you answer the phone. What sort of language we use in emails. Even down at that level, taste the culture and a taste of how we communicate with people. That can't be transmitted unless you get it out of your head. So what are some tips and tricks for how to do that? Get that out of your head so you don't end up like, “They can't even write emails.”

Michael: So, for me, I just literally try to brain-dump it out of my head. Some of this gets to the way I also write because there's sort of a creative process here. But I've been through this for everything from training how we built financial plans at my prior firm where I was the director of financial planning to train advisors on the plans. Up to, now that we have multiple team members on kitces.com, everyone has to know how to write articles that are "Kitces-style articles," even if it's not me authoring them. And I find almost all of it comes down to just literally saying, writing out, speaking, whatever your style is. I like to write it out. I like to dump it on paper and then edit it to clean it up a little. What is good quality excellence mean for whatever the thing is and just being really clear and specific?

So even down to when we're writing emails out to clients, you will always start with the salutation. You will always then start the email off with some points to connect with the client personally before you get down to business because we are in a relationship business. So please ask them how the kids or the vacation or whatever it was that we were interacting with them recently to make a more human connection before you get into the thing. When you explain whatever the thing is in paragraph formula, we're going to be doing this trade and executing this up, always then write a brief summary of so just to repeat, here's the bulleted point thing that we said. We're going to do this trade of these shares of this much in this amount for this much capital gains, boom, boom, boom. So they can skim through.

And this was specific to my style of how I communicated, and therefore, wanted to see the team communicate. We just got that specific. Here's what it looks like. And just when you see one of those crop up, you write it down or record it or make a training video or make a Loom video or whatever it is. And as you accumulate those eventually you've just got a library of here's all the things and how we do them around here, which you can use whether you're then training virtual staff or your own, individual team members.

Carl: Yeah. And we could just use an AI hot-tip trick.

Michael. Sure.

Carl: We just talked through, I just talked through this with an advisor on a consulting call to just get a Claude account. Start a separate project, it's called in Claude. Take 100 of your emails, meaning anonymize them, pull out any, whatever you need, right?

Michael: Yep.

Carl: Load those in the Claude and say, help me write. You can literally tell Claude, please write an editorial guide for how we send emails. And then you save that guide in that same project. And then you give anybody on your team access to that project and say, use this project whenever you write an email, and all you do, the prompt is simply, please use the 100 emails you've reviewed, plus the editorial guide to help me write an email to Martha. It needs to say this, this, and this. And you don't put in Martha Smith in Providence, Rhode Island. You just put in, so you have to do a little editing afterwards, of course, but that sounds like a lot of work. But it's nowhere near the work that it takes to get...

You're just training a tool, then you, I'm not, you could have that write, you could have that be the tool that speeds up your process. But I think even better in this case is that's a tool that speeds up the process for whoever it is that's going to do that thing for you. And then that person drafts that email, it sits in drafts until you go in and approve it and hit send. That's another example of do I actually have to like so many of us I can think of?

In fact, today, there was an email I needed to send for a huge, related to the book launch, a huge partner that we're trying to work out a situation where they put the book on the counter of it might be a coffee shop, right? So, and I would have spent three weeks staring at a blank page. And instead, I just opened up that same tool. I spoke, I literally just dictated and asked it to help me. And so much of these things are spent, you know, thinking about changing the light bulb. That lightbuld really needs to be changed versus just doing it. So I think that's really good advice. What can only I do? How do I train people to do it using screen share, Loom videos, voice dictation, examples, maybe an AI tool that you train?

Michael: I made Version 1.0 of all of our training tools ten years ago with Screencast-O-Matic. That's literally what the software was called.

Carl: For sure.

Michael: I just literally did the thing, recorded a screen share of me doing the thing, and talked into the mic explaining what I was doing to live narrated as I was doing it. And then gave it to it to a team member and said, "This is now your thing to do. Watch the video. I literally show you exactly how to do it, step by step, on the screen while talking through it. If you're not clear, watch it 17 more times until you're clear. And if you're still stuck on it because I screwed something up let me know." But 90% of my delegation was I literally just screen-captured the thing I was doing, explained what I was doing as I was doing it, and then never touched it again.

Carl: Yeah. And I think all of that can apply to taste. It can apply to how we treat people. It can apply to, like, I think you can get a lot of that culture stuff out, too.

Carl: And then, I think you just recognize mistakes will be made. And you develop a culture among your team that, when there's a mistake made, nobody takes it personally. But we gather together, we look at the mistake, like gather together whether that's virtual or not, we look at the mistake, and we decide what was it about the documentation, the training, the material that led to that mistake. Okay, how do we fix it? And I think, I mean, I just think I'm increasingly convinced that pushing on those edges, what can I delete, what can only I do, and then you find somebody to help you. And then the last thing I would say is, look, I've just recently discovered, and this is, like, recently means the last ten years that there are pros out there in every job. There are people who can get eight hours of what you thought was eight hours of work done in two and a half if they've got the right tools and the right instruction. And you don't come and interrupt them with a bunch of other stuff, right?

Michael: Mm-hmm.

Carl: So then the last thing is, find a pro, and don't stop until you find a pro.

Calculating The True Cost Of An Outsourced Admin (Vs. Full-Time Employee) [23:16]

Michael: Yeah. In that vein, I do want to get to Darryl's comment at the end, right? The cost of VA seems to be $65 to $120 an hour. And again, at least from my experience that's kind of the neighborhood. I don't see a lot of folks as high as 120 for general planning, but if they start doing para planning or something more specific there are folks out there at that price. So as Darryl frames it, that seems relatively expensive but, as I'll paraphrase it, but how does that really compare to the true cost of an admin in the office?

So here's how I would think about it and, granted, I'm in the DC area. Everything's a little bit more expensive here, so if I'm getting a good assistant, good admin with some years of experience, at least in administrative work generally, maybe not a lot of deep personal experience, I'm probably going to be in for $60- or $70-grand salary around here. So, just a rough math. There's roughly 2,000 working hours in a year, 40 hours a week times 50 weeks a year. So base salary for someone is the equivalent of $30 to $35 an hour.

Now if I'm going to put on bonus, benefits, reimbursement budgets, they need office space, they need a computer, all the rest like this. You often can easily add 15% to 20% of the cost just for the the overhead of a team member. So you're really probably more like 40-something now. Then on top of that, it may still take 10% or 15% or 20% of your time to manage a team member or two, which means, they're really not 40-something. Now they're more like 50- or 60-something an hour when you consider the cost of your time. Then there's the fact that either, A, they get vacation. Not everybody is 100% productive all the time, just people need breaks and such, as Darryl put it, goof-off time and lunch. But just in general, people can only work so many hours.

One of the interesting effects for VAs is you literally only pay for the hours that you use, not the rest. So if someone's really only truly productive 80% or 90% of their time. You're really not now like $50, $60-something dollars an hour. You're really more like $70-something dollars an hour if you want to compare to what the real cost would be just for paying on the outside. And so just by the time you add in base salary and bonus and benefits and computer and rent and software licenses and your management time and how much time is someone really actually productive when you pay them for a full-time job even when they're they're pretty good and on target. I can easily get to a number where you're already might be at $75, $80 an hour of equivalent. And you haven't spent any time to hire them, to train them in your software and systems, to handle turnover, to do annual performance reviews and one-on-ones, and all the other things that you've got to do to manage people. Or I count the management time but hiring turnover training and the rest that also would typically get done by an external service.

And now, you just start backing to all the costs. Your person really can cost you the equivalent of $90 to $100 an hour. Not the $30 that you pay in base salary by dividing by 2,000 working hours a year. Now if you're an advisor, and you're trying to make your professional time productive at $250 an hour or more, full-time staff that costs all the things I just layered in is still totally a good deal. So this isn't, therefore, don't hire because it turns out staffing has hidden costs. But if you're paying what was your $65 to $120 an hour for only the exact hours you need at the exact amounts you need with no commitment to make pay more and no payroll obligations and no hiring and training and management obligations. This can get to be a pretty decent deal really quickly. Especially if you don't really, really actually need a truly full-time person because if you really only needed someone for 50% to 75% time and you said, what the heck, I'm going to hire a full-time position, they just might not be as busy every day. Now the equivalent cost is $125 or $150 an hour and they pay for what you really only use. Outsourced VA, just flat-out better deal.

So I don't know if it necessarily gets the point that folks like Darryl if you want to do this with three of them because you just really, really don't want to manage people that's maybe a little bit of a different dynamic but I've seen people that do this as a split. I'm going to outsource the para planning but I'm going to keep the admin. I'm going to outsource the admin but I'm going to keep the para planning. I'm going to keep the para planning but I'm going to outsource all the investment stuff to just a TAMP platform to let them handle all that stuff and then I never have to take the call on vacation because the TAMP does it. So lots of different ways that you can configure that. I will admit, I see this more when someone is just trying to hire their first person or part of their first person because they don't want to do the full-timer yet. And there may be sticker shocking at $60, $70, $80 an hour. It's like, yeah, it's still going to be cheaper for you than the full-time costs of hiring and managing, and benefits, and productive time, and all the rest that goes with it.

So just a different way to think about the cost. I do see a lot of folks get stuck on what that hourly rate ends up being and it's like, yeah, that's just because they're truing up the actual cost of what it takes to do the service hour of work. And you're just kind of blending out a 2,000 working hour year. But you weren't necessarily really getting all the value for that. And you've got benefits, and bonus, and management, and time off, and turnover, and hiring, and training, and a whole lot of other things that go in there, almost all of which you alleviate with a VA.

Carl: Yeah. And I also think, too, there are different types of VAs. And there are people who specialize in lower-priced tasks that you may want to think about as well. That number's, I mean, there are plenty of places where that number could be lowered depending on the expertise that you need. And so I just think all of this, to me...

Michael: It's a good point because some folks I'll see they'll split it up as well. I use Ruby receptionist as my virtual receptionist because they'll literally answer the phone, I use Sue Chesney's delegated planning to do my paraplanning work, and I use Consider It Done for my admin staff. And it doesn't even have to be the same provider for all of them, and again, the slight bad news is you've got a couple of vendors to manage. The good news is again, you only pay them for what you use.

Carl: Yeah. And I also love the idea of having somebody else manage that, right? I think often I've got one particular team member where I'm just like how many more assistants can I let that person hire for themselves? So that person can keep sort of doing the same thing, right?

Michael Yeah. Level themselves up.

Carl: They're moving up, they're moving up, they're moving up, and they happen to be really good at managing and delegating and keeping track of things and organizing things and writing things down, all things I'm terrible at. So it's not about hiring a new one over here that I now have to deal with. It's how can I get more people to report to that person not ever even know that I exist. So, but I think it all starts with, okay, make sure you're asking the right question, right? Growth is awesome, having more people. Growth is measured by headcount. Great. It gets you something to talk about at the cocktail party, I guess, right? AUM growth by headcount. Great. But that's probably not what you're really after. So what you're really after, like, ask smart questions, think through it because there's certainly an answer, and push on the edges of these questions because you've seen this in the work you do with clients. Half of your job seems to be clarifying what they really, really want over time. And the same thing for you.

Michael: Amen. Thank you, Carl.

Carl: Cheers. Yeah, it's fun. Thanks.

Michael: Appreciate it. Awesome.