Search results for: "virtual assistant"

When an advisor runs their own solo advisory firm, their capacity to meet with current and prospective clients is limited to the extent that they are also responsible for all of the non-client-facing tasks of running their firm. Which may not be a serious limitation when they are just starting out and don’t have a lot of clients to serve, but as the firm grows, they will eventually run out of time available for working with clients – at which point, it becomes necessary to decide whether to stay a solo firm (without taking on more clients) or to hire support staff to free up more time for the advisor/owner to prioritize client work and optimize advisor capacity.

Advisors who have never hired before may have little idea of what to expect once they do decide to hire. Will they be able to support themselves with the additional overhead cost of their employees? What type(s) of employee should they hire? Will they actually get to spend any more time working with clients, as was the original goal?

Data from the 2022 Kitces Research Study on “How Financial Planners Actually Do Financial Planning” provide some answers about what advisors can expect when going beyond a solo practice, shedding light on the impact that hiring has on advisor capacity. According to the study, solo firms with no employees had a median of just 40 clients per advisor, while 2-person firms had 70, and 3-person firms had 96, as the advisor leverages themselves and their time by building a support team of a Client Service Associate (CSA) and an Associate Advisor around them. Notably, though, at 4 employees and beyond, the number of clients per lead advisor tends to go down from its peak of 96, as teams at this size typically begin to add another lead advisor. In other words, a 3-person team really seems to be the sweet spot where advisors are able to maximize their capacity, meaning that solo owners who want to hire 1 employee to focus more on client-facing work perhaps really ought to consider hiring 2 instead – while those who are already on a 3-person team might want to think twice about going much farther beyond that!

Additionally, while many firms tend to first hire a Client Service Associate (CSA) as their first hire and add an Associate Advisor later as their second, the actual job description of an initial hire really depends on what types of tasks the advisor wants and needs to delegate first – which in practice tend to be some of the advisor’s least-favorite work (hence why the CSA’s paperwork-heavy duty often gets delegated first), but can mean that an initial hire can really be more of a hybrid role, growing into one that is more specialized as the advisor delegates more and more tasks as the firm continues to grow. And to some extent, the needs of the first hire will vary depending on what the advisor themselves is good at doing (e.g., advisors who struggle with paperwork may hire a CSA first, while those who excel at building systems and process may hire the Associate Advisor first, and later a CSA to leverage them both).

Ultimately, what’s most important for advisors looking to hire is to have a plan for growth since the significant overhead cost of employees can greatly erode a firm’s profits until it can add enough revenue to make up the difference. Fortunately, what the data show is that hiring can open the door for this growth by boosting the advisor’s capacity and (as is presumably the primary goal) giving them the time to meet and bring in new clients!

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When a financial advisory firm owner first starts their business, much of their time is spent on finding clients that they can serve. But as they (hopefully) onboard more clients and get busier with servicing those clients, they will also find that they eventually start to run short on time. Because in addition to providing ongoing services (e.g., annual plan reviews) to their current clients, they will continue to prospect and onboard new clients as well. And at some point, they might find they hit a 'capacity wall' where they no longer have the resources to service new clients (often once they reach 30-40 clients) and where their wellbeing starts to suffer because of the time demands of a growing client base that they can no longer manage without recruiting additional help or outsourcing financial plan preparation.

One potential solution for advisors nearing such a capacity wall is to hire a full-time employee to take on some of the tasks that are eating up the advisor's time (e.g., a client service associate to handle various administrative and client communication tasks, or a paraplanner or associate advisor to work on more planning-centric issues such as building out drafts of financial plans). However, some advisors might not be ready to take on the burden of hiring an employee (from the time spent recruiting and managing the hire to the dollar cost of providing a salary and benefits). For these advisors, an alternative approach would be to outsource the tasks they want to remove from their plates.

Looking at the financial plan development process specifically, a variety of outsourcing providers are available that can perform the range of required tasks, from data entry to scenario modeling to the creation of plan deliverables. Given that most advisors probably won't want to outsource the entire plan development process, they can take a methodical approach to identify the tasks that they do not enjoy and/or that take up too much of their time (i.e., creating a "Stop Doing" list) and then review the range of outsourcing partners, assessing their core proficiencies, fee models, rates, and company structures, to find the best fit for their work needs and budget.

Ultimately, the key point is that because solo firm owners who approach their capacity walls can become overwhelmed with the wide range of responsibilities on their plate, finding ways to outsource certain financial planning tasks can help free up time and help them avoid hitting their capacity wall in the first place! And while some advisors might choose to make a full-time hire to handle items from their "Stop Doing" list, others who do not feel ready to do so (or simply prefer not to bring on full-time employees) can consider outsourced planning providers as an alternate solution. And while choosing this option does involve time and monetary costs, doing so could pay worthwhile dividends – not only for the firm's growth and profitability but also for the advisor's overall wellbeing!

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For the past several decades, platforms for advisors have differentiated with the quality of their technology. The focus on ‘tech’ was a natural evolution for advisor platforms away from their roots – which was originally to differentiate by the quality of their proprietary product shelf, the primary means that brokerage firms and insurance companies attracted advisors to them in the 1960s, 70s, and 80s. As product shelves became increasingly open architecture in the 1990s and 2000s, what mattered wasn’t the particular products made available to advisors (because the answer increasingly was “anything you’d want is already there”), but the technology that the advisor platform made available to implement those products and help the advisor better run their business.

However, the reality is that it’s very expensive to build and maintain technology, especially when considering the full range of CRM, portfolio management, financial planning, and more than a dozen other sub-categories of technology that financial advisors use in their firms. Consequently, the technology that most of today’s advisor platforms (e.g., broker-dealers, RIA aggregators, TAMPs, etc.) are touting is not actually their own proprietary technology… it’s a selection of third-party technology tools they’ve woven together to become the ‘tech stack’ they offer to their advisors. Which is usually one from a list of just 3 leading providers in any particular category. Such that, in the end, advisor platforms are increasingly all offering the exact same technology tools… and signaling an end to differentiating advisor platforms with technology altogether!

So what’s the alternative for advisor platforms to differentiate in the future? In a word: Services. Because advisory firms still – and will always – continue to need team members to provide service and handle the tasks that go beyond what technology alone can automate.

In practice, support services from advisor platforms might include a wide range of consulting services – from compliance to an advanced planning team, operations to technology – that advisors could engage for a fee as needed. Though arguably the even bigger opportunity is for advisor platforms that provide ongoing staff support services in the key areas where advisory firms need ongoing support – from (virtual) assistants for administrative tasks to ongoing compliance support, bookkeeping, and financial reporting to paraplanning, trading and investment research, and more. Staffing needs that already consume 15% or more of the typical advisory firm’s revenue today… as compared to the barely 4% of revenue that the typical advisory firm spends on technology. Which means that providing services is actually far more of an economic opportunity to serve advisors than it is to ‘just’ solve their technology needs!

In the long run, the growth of advisor platforms as service providers – not ‘tech’ platforms – will also create more opportunities for differentiation, as some will inevitably be better at delivering services than others and/or will be better at the needed services for particular types of advisors with whom they can specialize. Which also gives the most successful service-providing advisor platforms more pricing power in what has become an increasingly commoditized payout-centric competitive environment. As well as the opportunity to drive greater margins for themselves by reinvesting into technology – not for their advisors, per se, but for themselves – to better deliver their services to advisors as ‘tech-enabled service providers’.

The key point, though, is simply to recognize that advisor platforms are not large enough to build all of their own technology from scratch, and cannot sustainably differentiate themselves by offering the same suite of technology solutions that more and more other advisor platforms are offering as well. The opportunity comes in the gaps between technology – the service work that humans must still accomplish – that drive most of the costs of advisory firms as service businesses in the first place. Which means the most successful advisor platforms in the future will be those that best deliver services that allow advisors to run the human parts of their businesses more efficiently!

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