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Building the Business 101: More on Building Our Staff

Colleagues weigh in on the problem of finding the best employees for a small firm.

Veena A. Kutler and Annette F. Simon, 05/22/2008

This monthly series of articles describes the many steps and occasional missteps we have taken in building our financial advisory business, Garnet Group LLC. Currently, Garnet has eight staff members, more than 90 clients, more than $300 million in client net worth under advisement, and offices in Bethesda, Md., and Boston. Veena Kutler, CFA, and Annette Simon, CFP, are the managing principals in the Garnet office in Bethesda.

Last month we discussed our efforts to add to our staff and the challenges of hiring, training and motivating employees. Like other owners of small advisory businesses, we wear multiple hats: serving as financial advisors to our clients, managing and building our business, and tackling the task of a human resources management. Our article struck a chord with readers who are facing similar challenges; we received several e-mails from fellow planners that we're sharing with you this month, along with some expert advice we picked up at a recent NAPFA conference.

Reader Comments
One planner wrote:
"I recently read your article "Building the Business 101: Building Our Team" on Morningstar. For one, I must say that it is very refreshing to know that other firms our size have the same issues to deal with! The principal of our firm and I were talking early last week about many of these same issues. We have recently had our client service manager resign, giving us two weeks notice. Ideally we would have had this person be in on the training of the new client service manager. We talked about whether it was better to hire someone young, passionate, and eager to learn. Or maybe it would be better to hire someone a little more mature with more experience dealing with clients.

Anyway, I wanted to say thanks for writing the piece. Please share any additional resources you may use in making your decision as.we will be meeting over the next several weeks to make some of the same decisions that it sounds like you are going through. We also would like to include skills-testing in our hiring process this time around, do you have any idea of the types of testing that you will be doing? If you have any materials on this I would be particularly interested in learning more about them."

A local NAPFA study group member benefited from the disruption created by a merger at a larger firm and told his story: "Enjoyed your recent article, as always, and find myself with many of the same issues, though my practice is even smaller. Still, the time had come for me to consider getting help for the current workload as well as succession planning.

Beginning last summer I started advertising for an employee, including a posting in the Career Corner of the NAPFA Web site. I interviewed a few candidates but encountered some of the problems you mentioned. Your list of desirable characteristics was very close to mine, and fortunately an excellent candidate applied for the position, and after all the rituals, was hired and started last October.

J was employed by a much larger financial planning firm with more than 40 employees, and that firm was recently acquired by a large multinational corporation. When such mergers occur, reorganization soon follows, which sometimes makes for a "bad fit." In this case the new company was asking some employees to specialize in certain roles; J, however, preferred to remain a generalist, which led him to seek employment elsewhere.

While I had to stretch to meet his salary requirements, and couldn't match all the benefits provided by a large company, we were able to reach an accommodation. What I could offer was a chance to remain a generalist (J now wears more hats than he knew existed!) and an opportunity to move toward eventual partnership much faster than would have been possible in his previous situation.

While I am hurtling toward retirement age with a practice that grew more rapidly than I envisioned, J has brought fresh energy and ideas into the office. Being 20 years younger, he is more technologically adept, a great benefit to me. His experiences working at a larger firm also add a measure of depth to this small practice.

With a lifetime of business experience and having started a planning practice from scratch, I have much to offer as well, of course. So, I think we have turned a potential "bad fit" into net positive. I'm not recommending "raiding" big firms, and wouldn't do that anyway. Nevertheless, sometimes well-qualified employees are just in the wrong environment.'

Partners at a Midwest planning firm wrote: 'We read your column regularly and found today's topic especially relevant. We are a two-planner firm in the Chicago area. We are going to be interviewing three candidates for a paraplanner/client service associate position next week. We would love to include a writing skills "test" in the interview. Have you found a good resource to use that you would recommend for that?

Thanks so much, and thank you for your insights!"

An Expert Opinion
We both recently attended the NAPFA National conference in Long Beach, Calif., where we heard Rebecca Pomering of the Moss Adams consulting firm speak about employee retention and compensation. Rebecca foresees a dramatic shortage of young planners and advisors in the years to come. There are simply not enough programs and graduates to meet the needs of our growing industry. She recommended that firms look to unconventional sources to recruit new employees. One example is a client of Moss Adams that had always found new young recruits coming out of wire houses; exhausted and slightly disillusioned young people who were ready to leave the pressure-cooker environment to join a more client-centric organization. Recently, though, this client firm is having more trouble luring prospective employees from the wirehouses and is now looking to recruit young social workers from government agencies. Their counseling skills allow these new employees to fit right into the holistic client work advisors perform, and the planning skills can be learned over time.

Our Status
Craigslist was another unconventional source of new employees Rebecca suggested. We can vouch for the effectiveness of Craigslist--it's where we found our client service manager, Andrea, a few years ago, and where we've started our most recent employee search. Within two hours of placing our ad we had received close to 40 resumes, and by the end of a week we had more than 100 applicants!PAGEBREAK

Winnowing down the e-mails has been quite a task, but we've found several respondents with strong potential. Since we've been away at the NAPFA conference and busy with client work before leaving town we have yet to schedule any interviews. Now that we are both back in the office, we hope to focus our attention on the hiring process in the weeks to come.
Skills Testing
A local friend and colleague sent us the test she uses to screen potential paraplanners. Her test is quite technical and requires the prospective employee to calculate cost basis, understand concepts like LIFO and FIFO and to explain bond market responses to changes in interest rates.

For our purposes, we're most interested in finding an employee with strong basic math and writing skills, and less concerned about hiring someone who already has detailed technical knowledge. We have not yet finalized our test, but plan to ask some planning-related math questions dealing with percentages and fractions. An example of a math problem might be: if a client had a $100,000 and received a 50% return--how much money would they have? Or--if the client started with a $100,000 and had a negative 10% return, how much money would they have? We want to use round numbers and easy calculations so that we can see if the prospective employee can respond quickly to us without resorting to a calculator and so we can see right away if they have a good grasp of basic math concepts we all need to work with in our profession. Too basic, you ask? Well, we think you'd be surprised!

We'll also incorporate a short writing test--perhaps creating a client relationship situation and asking the prospective employee to respond to it by writing a short (one to two paragraphs) reply. An example might be an e-mail from a client complaining that their statement was late this month. Obviously, the prospective employee wouldn't need to know the "right" answer to this--we would look for an answer that reflects concern and consideration for the client and the ability to communicate clearly and effectively using basic grammar and spelling skills.

In a small office environment every person makes a big difference. Hiring someone who fits well with your existing team and is ready to pitch in and help in many ways is essential--and an enormous challenge. We have our fingers crossed that we are just a few interviews away from bringing in a new staff member who is that perfect fit: someone we'll come to wonder how we ever managed with without.

Next month we'll talk about our services--what we do best, what we outsource, and projects we should have said no to.

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