Everybody knows that time management is key in running a business. But managing your time may be even more important to an RIA’s profitability than you may have appreciated before, according to a recent report from Moss Adams and Schwab Institutional called, Best-Managed Firms: It’s About Time.
Effective time management allowed the top 15 percent of independent fee-based advisory firms surveyed to generate 50 to 80 percent more revenue per principal and professional, the study found. The principals and staff at these “best managed” firms put in as many hours as their peers, but achieved far more during those hours than their less profitable counterparts. That’s partly because staff compensation is the most significant cost for an advisory firm, averaging about 70 percent of all expenses, according to the survey. Here’s one for your Type A colleagues, who like to be the last to leave the office: The study shows that longer hours don’t add up. The owners who worked longer hours simply generated less income on an hourly basis: a median of $83 per hour, compared to $93 per hour for the others.
“What we have found in talking with advisors is that the most successful firms are tenacious about time management in the face of accelerating growth,” says Deborah Doyle McWhinney, president of Schwab Institutional. “Both principals and staff at the advisory firm included in the report are not necessarily working harder, they’re working smarter.” Sure, you’ve heard that platitude before, but the study shows there is some truth to it—and some money to made in the process.
The first step to better time management may be as simple as hiring professional help to take on some client responsibilities or support functions. Dave Welling, vice president of strategic marketing programs at Schwab Institutional, says the “best managed” firms that participated in the study had a support staff to professional ratio of 2 to 1, while their peers’ ratio stand at just 1.2 to1.
The survey also recommends that advisors be smart about what they can and can’t delegate to new hires. (Use their time wisely too.) Delegating can be a stumbling block for some advisors. John Krambeer, president of Camden Capital Management, an RIA in El Segundo, Calif., says he has a hard time giving up control. “I know things like customer service are the key to the firm’s success. I want to free up my time give higher touch service to my clients. Instead, I’m paying the bills and making sure the [administrative] stuff is done properly,” he says.
Welling says that’s a bad move. “If you’re unwilling to delegate what [your staff] can do, you are limiting the firm’s growth to your own personal capacity.” Moreover, not using a staff to its capacity represents poor management of the firm’s expenses.
Advisors should determine what aspect of the business they enjoy most in order to determine what tasks would be best to delegate. “He has to ask, ‘What do I do best?’ He may want to simply run the business and act as the firm’s CEO, or he might want to spend more time with clients,” Welling says. The remaining tasks, obviously, should be delegated to the hired staff or outsourced.