Principals of RIA firms need to pay closer attention to workflow and operational issues at their firms, especially if they want to stay viable amid rising operational costs, Pershing Advisor Solutions said.
Spending on overhead among RIAs has increased 10%, and overhead expenses on a per-client basis rose 5.2% annually from 2008 through 2010, according to Pershing’s “Mission Possible III: Strategies to Sustain Growth in Challenging Times.”
“The constraints of the financial crisis created a need for RIAs to streamline operations,” said Kim Dellarocca, director and head of segment marketing and practice management at Pershing. “Firms can be better at managing operating costs, especially labor costs, which can be a serious drag on the bottom line.”
Pershing outlined several specific steps that advisors can take to ameliorate the issues, and run their practices more efficiently. First, firms should identify the ideal client profile, so that successful planning can be replicated easily. Advisors in the study who focus on a well-defined market reported 2.4 to 3.5 times greater profitability per client than those who did not, Pershing says.
Also, advisors need to come up with ways to document the business-to-client process smoothly. In 2010, only 41% of RIA respondents said that they document all major CRM processes, and just 32% of firms consistently implement workflow processes.
Third, advisors must identify the needs of their staff members and align responsibilities accordingly. About one in four professionals is over capacity, but hiring new hands might not be the best solution, according to Pershing. Instead, firms might try to deal with an imbalance between professionals and their support staff, ineffective workflow or a lack of clarity.
The new report, is the third in a series of issue-focused research reports.