TD Ameritrade Institutional brought in Kelli Cruz from InvestmentNews Custom Research group to share information gained from their 2010 InvestmentNews/Moss Adams Financial Performance Study of Advisory Firms.

In addition, she moderated a panel with Jonathan Krasney, President & Founder of Krasney Financial, LLC, David McKinley, President & Managing Director of McKinley Carter Wealth Services, Inc. and Anthony Schembri, Partner & Managing Director of Clarfeld Financial Advisors, Inc.

Cruz highlighted research about top performers, defined by higher firm revenue, fewer clients lost, more new clients, higher asset acquisition, and higher productivity per staff.  Three traits stood out:  they leverage human capital to maximize productivity; they have a focused approach to service delivery and client acquisition; and they have a wider distribution of ownership.

Here is some more insight into other ownership best practices that were shared by Cruz, with additional quotes from the other panelists.

1. Enterprise value.  Disciplined management is needed to provide a strong foundation for growing revenue, sustaining profitability and reducing risk.

Schembri spoke about the importance of the mission, saying, “It has to emanate throughout the firm.”

2. Suitable role.  Owners should identify where personal skills and talents can best be utilized, creating the most value for the firm.

McKinley said, “Business owners have the responsibly to determine what are we trying to do and how are we going to do it.  They need to know what the vision is.” 

He had transitioned out of the role of managing clients and has moved on to the role of being an owner.

3. Delegation.  Owners need to step back from some of the day-to-day responsibilities, allowing supporting specialists help move the firm forward.

When delegating, know the handful of top priorities you will keep.  As you pass down other responsibilities, define the assignment, requirements, parameters, authority level, check points and expectations. 

“Delegation doesn’t just happen by accident.  As the owner of the firm, you are still responsible," said McKinley.  “I meet with the managers on a monthly basis and have meaningful conversations, to learn where they are having challenge and where I can help them.”

Schembri agreed “Owners need to realize that there is too much that needs to be done," he said.  They need to bring in the right people and let them go.  We call them managing directors.  The owner needs to be able to give up some of that responsibility and delegate.”

He added, “In January we would bring in our new initiates.  We were killing ourselves, so we opened up from eight partners to 15 managing directors, by giving them an incentive through providing equity.”  If there is a problem, now they are empowered to fix it.

Krasney said, “Owners really need to draw out what people think.  Sit and listen to the other people and what they have to say about the running of the business.”  He shared an example of how his team talked him out of bringing in another business, as his key associates didn’t think was a fit.”

4. Proper recruitment.  A firm needs to fill the needs with the right talent and always be ready to adapt as growth can change the optimal structure.

Take the time to pick the person that is the best fit for the assignment.  When that person is found, let the staff member know the importance of the task to the firm.

5. Staff investment.  By having an effective and efficient support cast, the staffing expenses can be kept down.  On the other hand, instilling an ownership mindset can help these individuals be accountable for their work and assist the firm increase future success.

Two key factors in getting the most out of staff are to provide direction and recognize and reward individual and team contributions.

“While the owners are charged with leading, there is another level of the firm that is in charge of doing," McKinley said.  He brought up their annual retreats, noting, “They bring about healthy conversations.  We make sure people’s ideas are acted upon.”  The owners should be from all facets, not just the top producers.

6. Succession.  The transition of ownership is a project that often takes longer than most think.  Thus, start early, creating a strategy.

The study showed that 28.7% of owners were prepared, 26.7% had a less-than-ideal plan, and a whopping 44.6% had no plan at all.

If you are looking to develop internal successors, make sure you have a development plan in place to provide the experience needed to be the future of the organization.  This approach allows for time for clients to feel comfortable with the new owners creating an eventual seamless transition.

Krasney was asked about the how to know the difference between a good employee and a good owner.  He said, “You spend the majority of time with the people at work.  You start to understand who is the most like you and who you can count on.  Those that want to move the firm forward and grow the business – those are the people you want to tie to the firm.  We build a family relationship the people with the firm.”

For those that have no plan in place, it is important that they start now.  For others that do have a plan, make sure to keep it current.

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