Many advisory firm owners remember the lean, early days when we worked entirely by ourselves or with a skeleton crew. In those days, we operated from a small office (possibly out of a room in our home) with one or two desks, a few computers and the all-important printer-fax-scanner combo machine.
Truth is, many firms will never evolve past this point. As of 2018, there were 13,000 RIA firms in the United States, according to the Investment Adviser Association. Of these, 56.8% were so-called lifestyle practices, or firms that employ fewer than 10 people.
But other firms aim to grow. Some want to expand for personal financial gain. Others, like mine, want to increase our impact and to create a business legacy for our families. Regardless of their rationale for growing, they must tackle this critical question: Which role should I fill with my next hire?
For most growing firms, the next hire is often predictably an assistant, paraplanner or even another full-fledged advisor. I won’t debate the importance of these roles, but I would like to offer an alternative for your consideration — a chief operating officer.
A COO serves on your management team and is responsible for all of the non-investment functions of your firm.
But why do you need one?
Let’s face it, most of us are excellent planners and advisors but horrible managers. Justifiably, we focus on our clients first, but often it’s to the detriment of developing our staffs and improving the efficiency of our business processes.
How many Fortune 500 companies have CEOs who spend 80% of their time covering clients and doing business development? I’m going to go out on a limb and say none.
If our firms are to grow from lifestyle practices to dynamic, multigenerational businesses, we must do a better job of managing them. The most valuable assets are not those under management; rather, they are our human capital.
Who is ensuring these assets are happy, feeling recognized and are getting better at their jobs?
We recently promoted one of our high-performing team members to the role of COO. Her duties are broken down into four areas: leadership and management, efficiency, growth and administration.
Leadership and Management
Our COO is responsible for most of our human resource functions from recruiting, to retention, to training and development of our staff.
Specifically, she manages the day-to-day duties of our support staff, keeping track of their workloads and deliverables. She leads the semiannual employee evaluation process and regularly meets with staff to take their temperatures on matters like general job satisfaction, workload, level of focus, and then seeks feedback. She has helped us to create greater accountability and has designed processes to ensure client and advisor requests are not falling through the cracks.
Our COO has also taken it upon herself to define and promote our company standards, known internally as “The Momentum Standard.” This standard touches on everything, from how quickly we respond to client emails, to the fonts we use in presentations, to the look and feel of our website and marketing materials.
At our firm, like yours, we aim to be the best at everything we do. Our philosophy is that if we are the best, we can’t help but grow. It’s easy for a one- or two-person firm to maintain high standards around things like client service, but how do you institute the same standard on a larger team of 10-plus people working in multiple cities? Goals like “be the best” are simply too ethereal and must be defined and broken down with identifiable benchmarks.
To that end, our COO has implemented a digital to-do list for our entire firm through an inexpensive software tool provided by Monday.com. This system allows us to do things like track where new clients are in the account opening process and generally manage the workloads of our support staff. Anytime anyone on the team emails our support staff a request, it shows up on their electronic dashboard with a deadline and a record of how long it took to fulfill the request. Not only does this system ensure things don’t fall through the cracks, it also helps us monitor our adherence to “The Momentum Standard.”
Efficiency
Sometimes we do things a certain way because we have always done them that way. We trust our old processes and are skeptical of new ideas. An outsider can often look at how we are spending our time and, almost immediately, find ways to make our processes more efficient.
A chief operating officer can be a firms' secret weapon for growth.
One great example is how we now handle fee billing. While I love that time of the quarter when we process fees (in other words, get paid!), my partners and I were spending a combined week a month running fees and handling advisor payouts. Our COO took meetings with several vendors, found the best solution and forced us to sign up for a free trial of a new billing software. My partners have never been happier! We are saving time, reducing errors and ensuring our advisors get paid in a more timely fashion.
Growth
We require everyone at our firm to have a growth mindset. Our COO is no exception. She is tasked with helping us plan out strategic initiatives that help provide opportunities to showcase our advisors. This would include publicity, client events, speaking engagements, and volunteer opportunities.
Administration
This is the area that I was most excited about delegating to another person. Mundane tasks like responding to various government mailings give me a great deal of personal anxiety — yet if they don’t get handled properly, we don’t have a firm! Dealing with financial industry regulators, federal and state tax authorities and the Department of Labor take up valuable time that could be spent helping clients or developing new ones.
Personally, my biggest challenge in adjusting to having a COO has been listening to her — and then getting out of her way! One day in particular, we had a difference of opinion on whether a staffer should attend a certain meeting. I thought he should attend the meeting, but had not taken the time to understand his workload for the day or the impact the time spent would have had on deliverables for other advisors.
In the end, she won that argument, but in reality our entire firm won because it was the right call.
