News » Growing Advisory Firms Learn How to Be Lean

Growing Advisory Firms Learn How to Be Lean

Advisers cut paperwork to make more time for clients, prospects

To really grow, a financial advisory business needs to find ways to become more efficient. Those ways often involve new technology and systems to make their expanding ranks of advisers more effective at tending to clients and their money, and bringing in more of both.

But different firms choose different approaches. Some take their data and processing tools to “the cloud.” Some outsource certain functions, while others bring in new staff to handle them.

Here are some of the steps taken at three firms that made a decision to expand their business.

LLBH d/b/a Coastal Bridge Advisors, Westport, Conn., five senior advisers, about 150 clients, $1.4 billion in assets under management. Five years after the firm’s creation, LLBH d/b/a Coastal Bridge Advisors’ five partners decided it was time to hire a chief operating officer. “We should have done it earlier, now that we see how great it is,” says Jim Pratt-Heaney, one of the partners, of the step they took seven months ago.

Some of the steps firms typically take to increase efficiency weren’t necessary for them, Mr. Pratt-Heaney says. “We have great technology, we can’t really cut costs.” But they agreed that efficiency meant “the partners are not sitting in a room deciding what kind of new copier to buy.” Jeff Fuhrman, hired as COO, set up formal score cards for the company’s performance. His efforts to “identify what we do really well, what we don’t do well, what don’t we want to do in the future…gave us focus,” Mr. Pratt-Heaney says.

Partner meetings got shorter, and are now focusing on specifics like client acquisition so not all partners have to attend all meetings. Mr. Pratt-Heaney was able to give up his role as managing partner, which included managing the staff, and another partner gave up the chief financial officer role, freeing himself from managing the budget–all to have more time for clients and prospects.

Savant Capital Management of Rockford, Ill., 34 advisers, 3,100 clients, $3.7 billion in AUM. Savant hired Illinois Manufacturing Excellence Center, a nonprofit that partners with several universities, to overhaul the process of transferring new clients to the firm and better use the existing trading system. Sometimes it takes an outsider to see what needs fixing; management is often too close to the issue that needs to be resolved, says Richard Bennett, Savant’s chief operating officer.

As a result of the recommendations IMEC made last year, the firm has cut an average four hours from the process of transferring the assets of a new client and doubled the number of trades it can do with the existing trading staff. Four hours “doesn’t sound like a huge number, but we added 340 new clients last year,” Mr. Bennett said. “It turns into some meaningful time saving.”

IMEC worked to help employees understand the existing systems better and to improve communication between traders and portfolio strategists. That saves time and increases trading capacity without additional staff.

Waldron Wealth Management of Bridgeville, Penn., nine advisers, 110 clients, $1.1 billion in AUM. The company is expanding the use of its customer relationship management software, to further automate routine tasks that might distract staff from focusing on customer service. Already, the firm has freed up hours a day for its advisers, says Matthew Helfrich, the Bridgeville, Penn., firm’s chief investment strategist. Mr. Helfrich said his firm reached “an inflection point” two years ago when it grew beyond a staff of 20. “What you can’t lose is the personal touch your clients have come to expect,” he says. Waldon now has a staff of 30.

“We had used our CRM as a Rolodex” rather than a truly interactive tool, Mr. Helfrich said. Client onboarding and client reports are now done electronically rather than manually, and keeping track and manage contacting clients is next to be done through the system, he says. Waldon identified many of the potential efficiency gains itself, but a year ago it also hired a consultant to help keep up the pace of improvements. “When you do it internally, it can always get pushed to the back burner,” Mr. Helfrich says.

WorthPointe LLC of Austin, Texas, four senior advisers, about 300 clients, $300 million in assets under management. WorthPointe tossed out its computer network server in 2006–and with it the software, updates and the bugs, says Christopher Van Slyke, partner and co-founder. “What kills you in a small business is when the owner has to spend three days fixing the computers,” he says. “Now The software maintenance is somebody else’s problem,” he says. “We don’t get sidetracked.”

His firm no longer needs an in-house information technology expert. Client portfolio rebalancing is done in a cloud-based system that Mr. Van Slyke calls “super easy” compared with the old spread sheets advisers used. Bill payment, accounting and some other administrative tasks were also outsourced. Doing those tasks itself “would wipe out our profit,” he says. For example, the firm pays about 250 bills a month and having somebody else manage them “is huge,” Mr. Van Slyke says.

Exencial Wealth Advisors of Oklahoma City, 10 advisers, about 700 clients, $1.25 billion in assets under management. The company spent around $60,000 to implement technology that allows the firm to employ one trader to do the job of three and to store client information that saves time for advisers to prepare meetings, said John Burns, the co-CEO of Exencial Wealth Advisors Compliance reports, billing, reconciliation, is all done with the new technology, installed in 2005.

The investment was “probably well ahead of what a firm our size should have done, but it made a huge difference for us,” Mr. Burns said. It gives advisers real-time information about anything from market moves to potential tax implications “at the snap of a finger,” he added.

Article originally published by The Wall Street Journal Online and has since been removed.

March 4, 2014 9:34 a.m. ET By Matthias Rieker

March 2014