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Do it? Or delegate it? Here’s how to decide

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Advisors need to excel in two key areas to create a truly great practice: business development and relationship building.

Of course, finding the time to devote to those tasks can be a major challenge. Back-office problems, staff issues and client opportunities may draw you in many directions, significantly impacting your business’s progress and profitability.

That said, here’s some good news. You can avoid nearly all these distractions by applying the rule of Four Ds to every task, in this order:

1. Drop it: If there is no compelling business reason to spend time on a task, drop it. When it comes to non-revenue activities, you can nearly always drop them.

2. Defer it: If you are unsure whether a task will result in a positive benefit for your clients or your practice, defer it. Schedule a time to re-evaluate it, and decide at that time how to proceed.

3. Delegate it: When a task lies clearly outside of your core competencies, delegate it to a staff person or to an outsourcing partner.

4. Do it: If a task falls under your core competencies and if none of the previous three Ds are appropriate, then — and only then — do it.

Be clear about expectations but don’t micromanage. Allow freelancers to use their own expertise and creativity to achieve high-quality results.

It’s the third D — delegate — that’s particularly important for today’s top advisors. The most effective advisors delegate just about every function that’s outside of their core competencies of rainmaking and helping clients.

To delegate at a high level that gets results, you’ll need to outsource at least some of your business functions. Outsourcing is critical because it allows you to do more of what really matters: build relationships with your existing clients and start relationships with new ones.

After all, spending time with clients can have a real impact on your income. Advisors who focused on client relations grew their AUM by an average of 18% per year, whereas advisors who focused more time on investment research and portfolio rebalancing grew their AUM by only 11%, according to a 2006 to 2016 study by FP Transitions, published by the SEI Advisor Network.

One option is to outsource everything you can to a turnkey asset management program, custodian or other financial institutional partner. However, if they cannot meet all your needs, you can turn to a second option: delegating specific noncore functions to independent providers on an as-needed basis.

In working with freelancers, the first step is to determine what you can call on others to do. Which business processes might be handled more effectively — or profitably — by a third party, as opposed to an in-house staffer? We have found that the most successful advisors frequently delegate duties in advanced planning, business development, back-office functions, compliance, technology, public relations and team building to independent contractors.

Why these areas? These functions aren’t focused directly on client relationship building, and therefore, they don’t add the highest value to your practice.

All of that said, independent contractors can also present a new set of challenges when it comes to finding, hiring and managing them. With that in mind, here are three tips for successful delegation.

1. Identify your needs: Decide exactly which duties you will outsource. Pull together your current costs of doing each function in-house. Be clear on the results you hope to achieve through outsourcing, such as lower costs, improved performance, enhanced service or overall responsiveness.

Next, define the specific skills you’ll require of an independent contractor before you start searching for one. Most individuals specialize, so don’t expect to find a broad range of diverse skills in any one person (and if you do, expect to pay very well for it).

Outsourcing is critical because it allows you to do more of what really matters — build relationships.

Finally, anticipate issues. Take a moment to think through the effect on your business of delegating this particular function. Try to head off any potential issues or problems.

2. Select a contractor: Ask for referrals. More advisors are moving toward a virtual office business model characterized by networks of independent contractors working together. Such advisors can be a great source of referrals for high-quality freelancers with experience in the financial services industry.

Next, identify the most qualified candidates, interview them and check their references. Make sure to ask references if they know whom else the independent contractor is working with — and place a call to those firms as well. Often you can get a more insightful perspective from references that have not been preselected by the freelancer.

Also, make sure to consider how the freelancer will fit in with your existing team. Independent contractors should complement your existing team by bringing in new expertise and talent. They should not displace or alienate your staff. Do not hire a freelancer to oversee an interesting project that your current staff is perfectly capable of doing on their own, for example.

Finally, when choosing among two or three finalists, be sure to weigh the relationship factor in your final selection. Expertise is key, but credibility and chemistry are also very important.

3. Make the hire! Negotiate a written contract and create a clear agreement that defines the project, deliverables, deadlines and benchmarks. It should spell out the billing and payment process and deal with any intellectual property issues and noncompete provisions.

As you begin working with an independent contractor, start with bite-size pieces. Assign a meaningful project (but not one that is mission-critical) to assess the contractor’s performance. Hire the contractor as a consultant to put together a plan for how he or she would complete the project in the assigned time frame. Have the person talk to clients and internal staff as appropriate and then present his or her solution to you.

Be clear about expectations but also don’t micromanage. Allow freelancers to use their own expertise and creativity to achieve high-quality results. Give them access to internal staff and resources as needed. Set up a clear channel of communication, preferably with a single point person in your firm, so that you can be apprised of project progress.

And of course, pay promptly. If independent contractors are diligent about completing their projects in a timely manner, they will be justifiably annoyed if you take too much time to process their invoices. Even worse, you might get a reputation as a slow payer among a network of freelancers, potentially making it more difficult for you to bring on good talent in the future.

In the end, effective delegation can free up an enormous amount of both time and energy — allowing you and your team to focus on what counts most: Providing world-class client service.

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