Futurist Edge

First 5 steps for building an advisory team

In a nutshell

If you have decided that you want to grow beyond being a single advisor firm, your biggest issue is about maintaining the same quality of advice and service, across clients who you will no longer serve personally. Before actually getting new advisors on board, you need to create the right framework that will address this critical issue, and allow you to grow with confidence. Here are the first 5 steps that you need to take, before you actually take on board more advisors into your firm.

As a financial advisor, you have different models of growth available for you to consider, each with its own advantages and disadvantages. We have discussed two options in previous articles of this series: remaining the sole advisor (Click Here) and opting for a partnership model (Click Here). The third alternative is for you to create a team - not just a support team, but actually a team of advisors who will help you expand your business, and yet serve clients the way you would have done personally.

Will advice quality suffer in your quest for growth?

For many advisors, this is tricky. There is always a fear deep down whether a person you hire will serve your clients just as diligently and passionately as you do. Will quality suffer when you hire advisors? Will loss of personal touch cause your clients to drift away from your firm? In your quest to grow, are you risking an established business?

Some of these fears are absolutely valid. There are of course ways to tackle these fears, as so many successful advisory firms have demonstrated. But, at the core of finding solutions to all these fears lies just one factor - are you willing to let go? Are you willing to make the transition from advisor to leader?

Many advisors are able to easily delegate back office functions to a team, and supervise this team quite effectively. That's partly because for most advisors, client facing roles are what they like the most, and back office jobs don't often score very high in their personal favourites. Giving up what you don't like doing is easy. Giving up what you like is a different matter altogether.

If your business is at a stage where you are becoming a bottle neck to growth, and you have already delegated back office jobs to a team, and importantly, you have a desire for growth and want to retain full control, its time for you to create a team of advisors. You need to first get into a mental framework of "letting go", of transcending from a do-er to a leader.

5 steps to create the right framework for growth

Before you think of hiring an advisor, here are 5 things that you must do, in order to sustain advice quality as you expand:

1. Hire a research analyst: Probably the first person you will hire is not an advisor, but a research analyst who can also double up as a para-planner. When building a sales team, you need to ensure consistency of advice. The only way to do this is to create a separate research and planning unit, which will come up with investment recommendations and create financial plans, using a standard process that you establish and monitor. Advisors who meet clients should not be given the liberty to recommend any investment product that they believe in / like - there just has to be a single view that your firm communicates.

2. Create a research and advisory process: You need to work with your newly hired research analyst to create a formal document that spells out your research methodology, such that individual's whims and fancies don't cloud your research outcomes. Spell out which criteria you will use for fund evaluation, what weightages you will apply to each criteria and let the output of this research process be sacrosanct for everyone in the firm - including you. Likewise, set up a standardized template on how portfolio reviews will be conducted, how financial plans will be reviewed and how often you will review your tactical asset allocation calls, if that's part of your model. Essentially, what this means is to download everything from your own brain into a set of operating procedures that have to be meticulously followed.

3. Focus on cultural fit for advisors you hire: What maintains consistency most is cultural fit - where people you hire share in the beliefs and values of your firm, which you clearly articulate at hiring stage itself. If you have to choose between skill and cultural fit, you might be better off opting for a less skilled person who is a closer cultural fit. You can always upskill an advisor, but you may not be able to materially change his/her attitudes and beliefs. With this in mind, create a check-list of your own attitudes and beliefs - on markets, on client service, on what integrity means to you, on discipline, on punctuality - essentially on all matters that define how you like to present yourself to clients and the values you like to uphold. Putting these down in writing is the first step towards creating a document that defines the culture of your firm. Until you have this document in place, do not conduct a single interview. When you have this document in place, you have absolute clarity in who you are looking for.

4. Create the right revenue model for advisors: Ensure that the revenue model for your advisors is either product agnostic or is aligned with research recommendations. What this means is that you can either share the same revenue for all equity funds for example or you can give higher revenues for funds that are on top of your recommendation list. It will not be a good idea for you to have complete transparency of the firm's revenues with your advisory team, as you then will lose control on ability to influence client portfolios in accordance with research recommendations. You should ideally compensate advisors on an AuM basis rather than on a transaction basis, if you really want to encourage right selling.

5. Retain control, while delegating execution: Create a robust MI system that tracks client engagement at a granular level, and ensure you monitor this regularly. You need to know that your clients are being served exactly the way you envisaged - in terms of frequency of review meetings, execution of requests, resolution of complaints, portfolio action where required and so on. All of this can easily be achieved with an appropriate CRM solution (Click here to know more). While you execute delegation, your team must know that you are closely monitoring all client activity and that you have little tolerance for slipping up on client service. Commitment to clients after all starts from the top.

To conclude

As you will see from these first 5 steps on building an advisory team, its all about creating the right framework for your team. Unless you create a clear framework, you run the risk of each advisor doing his own thing - and then, the risk of clients being served poorly is very real. Invest sufficiently in creating this framework, and then begin scaling up your advisory team, with the confidence that you now have systems in place to ensure that your team will serve your growing client base exactly as you would have served them yourself. Grow confidently, by implementing the crucial first 5 steps towards building an advisory team.

In the next article, we will look at some of the challenges of retaining a good team.

Content is created by Wealth Forum and must not be construed as an opinion by DSP Blackrock MF.

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