| 16 July 2009
Recently, while in Seattle, I had the opportunity to meet with Mark Tibergien (formally of Moss Adams, Mr. Tibergien had just accepted the position of CEO for Pershing Advisor Solutions LLC) and two of his associates, Philip Palaveev & Ken Evans. Among other issues, we discussed one very difficult hurdle that all advisors, really all entrepreneurs, face at one point or another…“The Fork in the Road”.
What do I mean by this? Okay, so you start your business, you’re more than likely by yourself, you have your desk, your new computer, your bright shiny face and off you go…acquiring clients and taking very good care of them. So what happens when you’re good at something? You get more of course! So now, you’re still acquiring clients and you’re servicing more and more clients and we all know that in order to retain them, you must (and want to) provide the best service and more services and on and on and on…Whew! Now this one person business is a living, breathing organism that is consuming more and more of your time and where are you now? The Fork in the Road…that moment of truth when you must decide if you’re going to grow by staying small and outsourcing or if you’re going to grow with additional employees.
How do you know you’ve reached the fork in the road?
- Are you working more and more each week and feeling like less and less is being accomplished?
- Do you feel like customer service might be slipping or could be better?
- Do you want to provide more services to your clients to maintain pace with the competition but can’t find the time?
- Are you spending more and more time on back office and less and less on marketing and servicing your existing clients?
- Have you had any clients complain about service?
- Is there an increase in errors?
- Are you beginning to feel the crunch in your personal life because your business is consuming most of your time?
If you can answer “yes” to a majority of these questions, you’ve reached the Fork in the Road. However, the Fork in the Road is not the REAL problem…it’s great to get to the point when you have to make this decision. The problem comes because most advisors don’t want to make this decision. They just hope the problem will correct itself. Mark likes to say that “all advisors want to get to heaven they just don’t want to die”. I interpret this to mean that we all want the rewards without having to really address the Fork in the Road, to make this decision. For instance, we want the best operating person, but we don’t want to pay them a fair salary for their skills. We want the best compliance program, but we don’t want to pay for the appropriate software. In my opinion, this is very short sighted and in most cases, the opposite of what we ask our clients to do which is to have long term vision. However, if you are to continue to grow in a manageable way and continue to provide the best, consistent service for your clients, you must make this decision and then do what it takes to see it through.
What are some questions to ask yourself when making this decision?
- Are you comfortable outsourcing or would you prefer to maintain more control over the process by keeping it all in-house?
- Can you maintain the discipline to work by yourself or do you work better feeding off the energy of others?
- Are you ready to manage employees (or at least a Chief Operating Officer who can then manage the rest)?
- Are you ready for the responsibility that comes with employees?
- Do you feel comfortable purchasing the necessary hardware and software for your employees so your business can grow?
- Will you really delegate the work to someone in-house or will paying an outsource partner force you to delegate it?
- Can you manage various outsourcing partners or would you prefer to keep it in-house and have a COO manage these functions for you?
I believe that either decision is fine. Many advisors have decided to remain one person shops and outsource the functions they don’t do well or aren’t in their best interest to perform. There are more companies than ever providing services to advisors who want to outsource. You can outsource compliance, plan preparation, back office functions, portfolio management…really just about anything you can think of. If you delegate well, this might be the path for you.
However, many advisors prefer to maintain these functions in- house and hire employees to perform them. This is also a good choice and has benefits as well. You can set the guidelines as to how to perform each task and monitor it more closely when it’s performed in-house. Also, having others around is a good way to gain new insight and new ideas for your business. Just be sure to hire the right folks (pay them well, actually, price them out of the market!), create a position contract and career path for each of them and then actually delegate the work to them.
Advisors have never had more opportunities to create a successful firm, both from a financial side and a personal satisfaction side. However, when you come to the Fork in the Road, make the decision or better yet, hire someone to help you make the decision. Get a third party to take a look at your business and help you talk through the decision process so you make the right decision for you the first time. Then, put together a plan for creating that business!
The Fork in the Road can be scary but is doesn’t have to be if you know it’s coming and know what questions to ask yourself and then make the decision and stick to it.
Keep on “truckin” and call me or email me with any questions.
