The financial planning profession has changed significantly over the past ten years. The era of one-person firms is becoming less common as increasing regulation and client demands present a greater challenge for smaller firms.
Today, one of the greatest irritants sole practitioners have is the small amount of time they can spend with clients. Most of the working week is spent keeping the plates spinning as they switch from tasks such as answering the office phones to applying for professional indemnity insurance.
However, firms that are seeking to grow are realising that to deliver a truly professional level of service to clients, it’s almost impossible to do everything alone.
Bringing in support
One option is to bring in a business manager to run the business for you, freeing you up to focus on client-facing work. However, the obvious questions arise: Where do you find a business manager? How can you ensure you recruit the right person? Fitting into a small, ‘unique’ firm may not be that easy. What if they completely change your processes, confusing you and your clients? It can be a costly mistake.
There are practical ways to reduce the risk of hiring the wrong person. This is particularly crucial for a small firm in which the business manager may only be the third or fourth hire in the business’s history.
“In that instance, you’re talking about hiring a third or quarter of your business,” says Mark Horstman, CEO of management consulting firm Manager Tools. “Imagine a big company with 1,000 people suddenly hiring 250 more and them all being bad. You’d crush the business. That’s the problem with hiring the wrong person, if it’s the fourth person on your team.”
"The purpose of an interview is to find reasons to say no to someone"
To avoid this, Mark says business owners should start building their recruitment pipeline, or ‘bench’, from day one. This means constantly looking for people who you click with in terms of values, professionally and personally. Attending two to three conferences a year is a good way to meet people to fill your recruitment pipeline.
“When you do finally identify that you’re ready to hire, you want a lot of people to pick from,” says Mark. “You certainly don’t want to just advertise and let your decision about whether or not you’re going to spend the next 10 or 15 years of your life sitting right next to someone boil down to an hour or two-hour face-to-face interview.”
Once you’ve built a bench of potential recruits, build a high wall around your firm for them to get over, Mark advises. This hurdle protects the firm and its existing employees from the wrong hire. That wall is built from a rigorous three-step process that involves assessing a candidate’s CV, putting them through a half-hour phone screening and then bringing them in for a full or half day of interviews.
Mark Horstman’s three-step interview process:
Mark Horstman, CEO of Manager Tools, describes the interview process as one of constructing a wall around your business which is designed to allow only the best to get over.
Step 1: The CV
Review a candidate’s CV to compare what they have done in the past with what you’ll be asking them to do in the future.
Step 2: The phone screening
Put the candidate through a half-hour phone screening. Look for all the things that you would expect of a professional colleague: punctuality; their undivided attention; a pleasant and polite demeanour; and a cheerful voice.
Step 3: The interview
Hold face-to-face interviews with the candidate for at least half a day to explore their suitability for the job. Encourage your employees to interview them too. This longer process will allow you to make an analytical decision rather than one made on gut instinct.
To ensure every candidate has an equal chance, have your interview questions in front of you and ask everyone the same questions. This will also ensure that you focus on listening to the candidate’s answers rather than thinking about the next question you’re going to ask.
Use behavioural interviewing techniques, which are based on the assumption that the best predictor of future performance is past performance. Construct questions that draw examples from the candidate of behaviours that you see as critical to the job you’re hiring for.
Every single step in this process is a hurdle for the candidate to get over, says Mark. “If you interview four people and end up saying yes to all four of them, you haven’t built your wall high enough.”
“The purpose of an interview is to find reasons to say no to someone,” Mark says. “If there is anything that bothers you about a person, don’t hire them. The only thing worse than having an open position in your firm, even if your firm is struggling with growth, is hiring the wrong person because if they don’t do what you want them to do, you’ll still be struggling for growth but now you’ll have less time because you’re busy managing the conflicts and the difficulties that the wrong person brings with them.”
Before starting to recruit, business owners should do some ground work, advises Phil Young, a consultant who coaches business owners and senior managers.
First, make sure you’ve agreed the scope of the role and written it down. Phil often sees business owners looking for an ‘operations person’, which can very loosely mean ‘all the things I don’t want to do’, but without defining what it will involve. If you’re not clear on this, your new hire may think they have a broad remit and you’ll then be in the awkward position of having to disempower them by telling them certain things are off limits.
Second, operational and finance roles in a small business will often need to cover several areas, so it’s important to decide where your weaknesses are and which aspects you want to retain.
However, even before thinking about how to recruit a business manager, business owners will need to identify whether this is the right option for them. Many firms will use the talents of a business consultant to help them identify next steps for growth. Consultants will cover client segmentation, analysis of fees and charges, marketing and branding exercises and a fresh look at the business goals and plan. Alongside a business plan, they will help you to articulate your vision by asking the following questions: What is your value proposition? How does the service model and process work? Is it consistent and sustainable? Having a clear vision of what you want your business to look like is vital, and creating a business plan will help to cement the vision in your head, and eventually, in the heads of the staff you recruit.
Dominique Sieradzka is founder of RIE Solutions, a business consultancy helping firms become more efficient and profitable.
To help uncover the right solution, she begins by identifying the strengths, weaknesses, likes and dislikes of the key individuals in the business. Often, the main business owner is also the face of the practice or business and it is likely that their strengths are client-facing and their weaknesses, the ‘boring paperwork stuff’.
"If there is anything that bothers you about a person, don’t hire them"
Next, she works out their capacity throughout the year using her trademarked ‘Capacity Calculator’. Once you take away weekends, holidays, training days and team meetings, you start to realise how little time during the year you have for all of the different key responsibilities that are within your remit. Often, this is quite an eye-opener when the owner realises how little time they have for face-to-face financial planning with clients. The third exercise is to list the tasks of the business, which, for an average financial planning firm, is over 100.
“If your objective is to grow, you need to go out and find someone who is going to complement the skills and experience that you have,” says Dominique.
Justifying the cost
By appointing a specific individual to handle the running of the business, not only are any areas of potential difficulty regarding the division of responsibilities avoided, but business owners are able to concentrate on their actual job of financial planning for clients, as well as being free from any conflict of interest that trying to carry out both of these roles could create. However, many small businesses question how they can justify the added costs to their business of an additional person.
Phil says: “Many financial planners, like their clients, value peace of mind over anything else, and while some firms recognise that they need to bring in managers to grow, others want to get some of their life back after establishing the business and are happy just to hand over things like line management, HR, finance, regulation and all the other stuff they never dreamt of doing when they set up a business. I always warn that hiring a manager is a pure cost so be honest about what the return will be. It isn’t always financial.”
Indeed, understanding that the ‘other bits’ of the business are crucial is a light-bulb moment. Creating an excellent client experience from start to finish, with well-managed structures and processes underpinning everything, will increase profitability. After all, if your eventual goal is to sell your business, no investor will look at you unless you have these basics in place.The outsourcing option
Some of these roles and ‘jobs’ can be outsourced. Outsourcing specialist areas such as HR, IT, administrative, legal, compliance and paraplanning may free you up to concentrate on increasing client numbers and improving service.
For example, you may be keen on using digital technology to provide your clients with a 24/7 view of their net worth, income and expenditure, financial documents and financial planning strategy. Fully engaging with technology may increase your business efficiency and help you deliver tools with multigenerational appeal. This will ultimately have a positive impact on your profitability, but you must choose an outsourced IT company that will interact seamlessly with your database, processes, contact history and client documentation (see our article
about integrating technology into financial planning).
Casting a wide net
For those who decide to go down the recruitment route, recruiting the right person doesn’t mean you have to restrict your search to the financial planning or wealth management professions. Jason Betteridge, managing director of Edinburgh-based financial planning firm Sutherland Independent, had already decided to hire someone for his business to drive growth and embed his vision, when, during a business dinner, someone recommended an ex-banker to him. Five years later, Jason says she is integral to his firm’s business performance. From working initially five days per week, she is now employed to keep things on course just two days per week. The decrease in the time spent on the business doesn’t mean a decrease in business efficiency or improvements. The firm has followed her strategies for growth and she can reduce the time she spends on implementation.
Recruitment can be through a variety of sources. Beyond building a recruitment pipeline through networking, as Mark advises, the more traditional routes include advertising, recruitment consultants, headhunters and LinkedIn. Typically, from identifying the need to recruit to having a person in place can take nine months, according to Dominique, and geographical location can have a huge impact. In London or the major cities, it may be easier to recruit an individual with the requisite skills, qualifications and experience. The talent pool decreases outside these regions. In cases like these, small businesses have done extremely well using the talents of a practice manager on a project basis to whip the business into shape.
Remuneration is a barrier for some. The role is a senior one and must be remunerated accordingly. This person is going to ensure that they bring your vision to life while you see clients. You want the right candidate in the seat because you need to know that not only will they drive the business forward, but that they will do it better than you.
The original version of this article appears in the Q4 2018 print edition of The Review. All members, excluding student members, are eligible to receive the quarterly print edition of the magazine. Members can opt in to receive the print edition by logging in to MyCISI, clicking on My account, then clicking the Communications tab and selecting ‘Yes’.
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