By definition, the effectiveness of a personal service organization depends on the effectiveness of its service team. In turn, the team depends on the ability of the business to attract, retain and optimize the best possible talent. Because wealth management companies are personal service organizations, they must focus on a human capital strategy to maximize their effectiveness.

It's really that simple. An effective human capital strategy is key to running a successful wealth management company. At the Colony Group, where I'm CEO, our strategy is built around the following elements:

Organizational structure: Have a clear structure that can be illustrated in a single org chart. Avoid having people report to multiple supervisors. Simple is better: Employees deserve clarity in their roles, responsibilities and accountability.

Recruiting: Spend time to recruit the right people - the best the business can afford.

Goals: Set clear expectations for employees.

Career path: Provide all employees with a written guide to help them understand what they need to do to advance and achieve their goals.

Compensation: Offer clarity, transparency, predictability and incentives aligned with company goals. If possible, minimize management discretion in awarding bonuses, and let employees have some control over their compensation through the achievement of clear goals.

Development: Prioritize training, education and professional development. Make one or more employees accountable for this function, allocate funds to maximize its effectiveness and use third parties to ensure the firm's collective expertise does not become insular or stale.

Empowerment: Boost effectiveness by empowering employees to do their jobs. Avoid the natural tendency to overmanage, instead letting employees grow, gain confidence and reach their fullest potential.

Leverage: Consider hiring support personnel to enable senior employees to perform more valuable functions.

Specialization: Promote the concepts of specialization and division of labor, which allow an organization to offer the highest levels of service, expertise and experience.

Communication: Say it, and then say it again. Communicate expectations and goals clearly and repeatedly so that they are understood.

Diversification: Wealth managers tell clients to diversify their assets but often forget to diversify their own teams. Whenever possible, avoid overdependence on any single employee.

Disciplined employment practices: Be consistent about removing underperforming or otherwise problematic employees in a respectful, but timely, manner. The best firms learn from hiring mistakes and are disciplined about correcting them.

Michael J. Nathanson is CEO and president of the Colony Group, a national RIA firm based in Boston.

Read more:

To submit a My Word commentary, email fpeditor@sourcemedia.com. And share your opinion at financial-planning.com/forums.