As an owner of a small financial planning firm, one of your concerns is how to best grow your business. Before you face them, you want to identify roadblocks that may stall growth. For financial planning firms, an obstacle they rarely anticipate is their first hire. Too often the temptation is to bring on someone with similar skills. Unfortunately, those may not be the skills your small firm needs to produce a steady stream of new clients.
On this episode of the Elementality podcast, Chad and I look at speedbumps to scale. Find out why that first hire is a barrier that causes many small firms to fall short of their growth goals. When the choice comes down to creating more capacity, someone to duplicate your skills; or to creating more volume, someone to bring in more customers, which are you going to choose?
Podcast Transcript
Reese Harper:
It’s hard to build a process. It’s hard to standardize anything because advisors are so skilled and so thoughtful about their clients, but what they end up doing a lot of times is they build a custom process for most clients [crosstalk 00:00:14] which that’s the best outcome-
Chad Jardine:
No two clients are going to be identical, right-
Reese Harper:
No. So, because they don’t want to sacrifice anything when it comes to the customization of each customer, then it’s really hard for them to get something consistent to work across the whole spectrum of client. So that’s where I think our Elements system was born from.
Jordan Haines:
Welcome to Elementality. I’m Jordan Haines, financial planning specialist at Elements. In this episode of Elementality, Reese and Chad talk about some hurdles to scale a financial planning business, including deciding who to hire next and how to create consistency out of a very personalized planning process. As you listen, consider how creating a baseline standard of service for all your clients may unlock the consistency you need to scale and help me also establish a starting point to tailor to the needs of each of your clients. Enjoy the episode.
Reese Harper:
Welcome to Elementality, everybody. I’m your host, Reese Harper here with Chad, the dad Jardine and we’re going to be cutting up another advisor question for you all this week. Chad, what do we have on the docket?
Chad Jardine:
Shazam.
Reese Harper:
Bing.
Chad Jardine:
So this is something I know probably impacts independent financial advisors more so than people attached to bigger firms, but they’re essentially small businesses. So what I was curious about, and all of these questions tie back into conversations that we’re having with adviser, customers and or their clients. In this case, I’m curious about speed bumps to scale. What are things that as I’m out there, I’m in the pit everyday, slogging it out as an independent, I’m making my way in the world, I’m making my dent and I’m trying to grow my small business to accomplish some of my own goals, what are the things that I’m going to run into that make it to where scaling my business is a challenge?
Reese Harper:
Well, I learned this one the hard way. So you guys are going to get four years of fast forwarding compared to where I was, but one of the big choices… I want to hit a few topics, but the one that’s coming to mind first is human capital and it’s who to hire first and when. It’s the sequencing of hiring, and I think a lot of advisors, their first tendency, because we’re technicians at heart, most advisors I meet are really good at like calculations. They’re really good at knowing the tax code. They’re really good at knowing about investments, insurance and estate planning. So they’re very technically capable and when they go to hire that first hire in many cases, their first reaction is someone who can do a lot of this technical stuff. The truth is-
Chad Jardine:
Well, when you’re talking about my first hire, do I hire another advisor? Do I hire an advisor who’s junior? Do I hire a paraplanner? Do I hire a personal assistant?
Reese Harper:
Yes, and do I hire a compliance director? What’s the higher person I would hire? The person that you’re not thinking of most likely or the resource that most people are not thinking about, that’s probably their biggest limitation to scale is their marketing department because what ends up happening is advisors double down on the thing they already know how to do, and they hire another person to double down on that thing because they’re like, “If I hire another person to do that thing, then I won’t have as much… I’ll have more time back and then I can do more of that thing or maybe more of another thing. Maybe I can be a marketer.” They think, “If I could just replace myself with this part, then I could do this other thing.”
Reese Harper:
The truth is you’re not a marketer. The truth is you’re a highly skilled financial advisor, relationship manager. At best, you’re really good at sales, but marketing is not sales. They are different departments in any public company and advisors often, if most of the time they won’t pivot to sales, they’ll stay in operations of planning and client services and then they’ll hire someone else to do that. And the meantime, the gaping hole is we don’t have a steady stream of new customers and we don’t have a steady stream of appointments. We don’t have a steady stream of inbound flow. We’re stuck and we can’t scale, not because we don’t know how to do the work, but because we’re not bringing in enough customers.
Chad Jardine:
So if I understand you correctly, you’re saying that a serious pitfall is if I think that hiring somebody to do the things that I’m actually good at is going to free me up to spend my time doing things that I’m not, or maybe not bad at, but they’re not the highest and best use of my time, what I’ve done is I’ve created an organization where people are deployed in ways where they’re not the most effective.
Reese Harper:
Exactly, yep. That’s exactly it. I think most advisors, their tendency is… Most small business owners, this just isn’t advisers but when you start your own business and you get it off the ground and you’re at least surviving, I think the first tendency is to assume you can do most of the things.
Chad Jardine:
Well, you have to in the beginning-
Reese Harper:
You have to in the beginning-
Chad Jardine:
You’re the only one doing it.
Reese Harper:
Yeah. The truth is, marketing is about consistency over time. That’s what it’s all about. It’s not about bursts of energy when you have downtime that you then call marketing. It’s testing consistent programs over time as you know. You know this better than I do. If I’m a firm owner and I’m a sole proprietor and I’ve got a paraplanner and I’m thinking what’s my next hire? Or if I’m a firm owner, that’s got five advisors and I’m making a choice of an operations director or a financial planning or a senior advisor and I would consistently at least look at my marketing department and I would go, am I investing here properly or not?
Chad Jardine:
Yeah, and I can say when it comes to marketing, I see this error happen a lot, which is in the same spirit of what you’re saying, which is, they’re like, “Oh, I need to be everywhere at once. I need to have an email campaigns going. I need to be on social. I need to be doing some type of ads. Maybe I need…” whatever they might be, as opposed to the marketing teams that win are those that run small tests but they double down on one thing that works first. They’re not concerned with the breadth of channels. They’re concerned with milking a channel that is really working and they build their business on that one channel until by the time that they extend to a second channel, it’s because they’re forced to. They need to reach out and even if the leads or new customers are a little more expensive, they’re forced to because they’ve rung everything they can out of their first channel.
Reese Harper:
You have to have 40 to 50 hours a week to [crosstalk 00:07:24] consistently put into this-
Chad Jardine:
Doing it all the time.
Reese Harper:
There’s just no scenario in which a financial advisor is going to have enough time to consistently focus on marketing. So at some point, you have to say… Let’s say I’m doing 150,000 in sales or 200,000 in sales, I can’t afford very many people. I’m already going to cut my income dramatically-
Chad Jardine:
With that first hire.
Reese Harper:
With that first hire. So as I cut my income, the question is, am I going to cut that income to create capacity? Or am I going to cut that income to create volume? When I cut my income to create capacity, that’s when I’m hiring that operations director or that paraplanner or that financial advisor, but if I don’t have volume, all I’m doing is driving down my profitability and waiting and waiting and waiting for the customers to come in. The truth is, pick your niche, find your brand, start marketing, create scale through increasing your volume. It will force you to start to make adjustments that are healthy but you won’t hurt your growth rate as much-
Chad Jardine:
Yeah, makes sense.
Reese Harper:
I think that’s a really important thing. Do you ever wonder if you do enough for your clients to be worth what they’re paying you for? Do you feel like you’re delivering enough value? Many advisors wrestle with questions like these. I’ve used the Elements Financial Planning system for a couple of years now. With it, I can deliver periodic insight about a client’s financial health and progress by utilizing standardized measurements. They know I’m watching their progress and can actually see how my advice is improving their life. With the Elements Financial Planning system, you can also give your clients consistent planning guidance and the valuable advice they expect. Check it out at, getelements.com/meet.
Reese Harper:
There might be one other item that we could throw out there and it’s a totally different category of roadblocks to scale and that is that you don’t have a repeatable, scalable delivery service to your clients and every client is basically a new experience or close to a new experience because your deliverables are different. Your onboarding process is slightly different, data that you’re collecting is slightly different.
Chad Jardine:
If I haven’t taken the time and effort or deployed a system to standardize the things that can be standardized, then every one of those becomes a Rembrandt, a one-off and as a result, my efficiency just goes down and my ability to scale is-
Reese Harper:
Totally.
Chad Jardine:
Cooked.
Reese Harper:
Yeah, and what ends up happening is all advisers know what they need to process. They know they need a system, they know they’ve got to improve this, they know. But the challenge is it’s really, really hard to build a process around… It’s hard to build a process. It’s hard to standardize anything because advisors are so skilled and so thoughtful about their clients, that what they end up doing a lot of times is they build a custom process for most clients, [crosstalk 00:10:22] which is, that’s the best outcome.
Chad Jardine:
No two clients are going to be identical, right?
Reese Harper:
Yeah, because they don’t want to sacrifice anything when it comes to the customization of each customer, then it’s really hard for them to get something consistent to work across the whole spectrum of clients. So that’s where I think our Elements system was born from, as I had to get to the point where I said, okay, I’m either going to meet and customize and interact with every client in a unique way, which is probably optimal in terms of the results. You might say that that’s the optimal path, because if you could really create something custom for every customer and you’re willing to only work with a very limited number of people and not standardize anything-
Chad Jardine:
You could probably match up the exact rate.
Reese Harper:
Thing for the client and at the right price. You’d optimize the price, to cost, to hours, to services needed, to preferences but it’s so expensive. It’s so expensive to do that.
Chad Jardine:
There is certain scenarios for which [crosstalk 00:11:39] the right advice is going to be the same every time that scenario comes up.
Reese Harper:
Yeah. So at Elements, what we tried to do is say what’s the minimum viable standard that has to occur in order for us to give advice properly at a minimum level? Not the maximum service standard, but what’s the minimal viable service standard?
Chad Jardine:
This is a standard where nothing’s falling through the cracks, people aren’t getting bad advice and you have the ability to keep that consistent across all advisors in the company, all clients that… Essentially, what you’re doing is it’s not that you’re driving towards the bottom, you’re lowering the minimum standard to be adequate and sufficient so that you have a platform from which to deliver better.
Reese Harper:
Yeah, to deliver some more customized solution for. Most advisors, they don’t have a minimum standard that’s even… I don’t know if I like the word minimum standard. I’d probably use that maybe incorrectly, but-
Chad Jardine:
Maybe a baseline. Would that be better-
Reese Harper:
A baseline standard of some kind, because the minimum standard as I’m defining it, is probably still a higher standard than… From a client’s perspective, they’re going to say that this is better. The thing that I’m envisioning, where everyone gets a personal financial statement at a given cadence where everyone’s data’s accurate, where there’s a set number of meetings and interactions and proactive outreach, it’s going to be a cut above where most people are at as what I would consider baseline.
Reese Harper:
When I’m talking about better than baseline, I’m saying once in a while, if you work with Silicon Valley Startup Founders and that’s your niche, I could see you adding something custom to your practice that would allow you to serve their needs above and beyond your minimum standard that might be addressable through a broader technology package, but advisors can’t build this easily internally. As we’ve tried to engineer the baseline service standard, we’re aware that it can’t possibly serve the needs of every human to its nth degree from a customization perspective. Right now, the alternative is, we don’t have a baseline and a lot of clients are not getting their basic needs met and as your volume ticks up-
Chad Jardine:
Just stuff falling through the cracks-
Reese Harper:
Stuff falling-
Chad Jardine:
No system in place.
Reese Harper:
Yeah, you’re not a client that’s loud and squeaky wheel gets the grease, is raising their hand and you’re spending a lot of time with them. In the meantime, another client over here, who’s just quieter and isn’t as assertive, they even have life insurance. You’re missing essential components of holistic advice just because you’re not willing-
Chad Jardine:
Yeah, what I hear you saying and this is informed from my perspective as a team member with Elements but you’re driving that having a reliable system can be a huge impediment to scale.
Reese Harper:
Tons. So human capital, number one. Second, this reliable system is a huge impediment to scale because it just ends up once that advisor gets to their own personal capacity, then the whole business kind of quality starts to decline because they have even less and less and less time to focus on that process, that system.
Chad Jardine:
Right winning every additional client is diluting the existing client base.
Reese Harper:
Yep, exactly. Anyway, this is a great question and hopefully everyone learned a thing or two from this back and forth.
Chad Jardine:
Yeah, I know I did. Thank you so much.
Jordan Haines:
Next time on Elementality.
Daniel Hannoush:
What is a way that I can systematically fight this whole, here’s this complex financial plan with 30, 40 year projections that sits on the shelf? What’s the way we can be in a relationship long-term, provide meaningful advice in bite-sized chunks that leads to effective implementation and oh, by the way, do it in a scalable way?
Jordan Haines:
You can learn more about the Elements Financial Planning system at, getelements.com/meet and schedule a time to meet with me, or one of our friendly financial planning experts. Elementality’s executive creators are Reese Harper and Chad Jardine. Elementality is produced by Abby Morton and directed by Jordan Haines.