Advisors: To Grow Business, Standardize and Automate

This analyst blog is part of our coverage of the 2017 Morningstar Investment Conference.

By Rhiannon Miller

How does an advisor grow business while maintaining quality client service and a personal life? Sheryl Rowling, principal for Rowling & Associates, addressed this question Thursday at the Morningstar Investment Conference. The solution is to scale, which Rowling defines as a combination of standardization and automation.

Many advisors worry that standardization will take away a client's personalized experience. Rowling says the client experience will always be custom.

"Even if you have the same model for each client, it will be individualized because they will have different goals,” she said.

Having standardized workflows enables the head of the firm to focus on clients and less on employee management.

"If there are standardized workflows in your CRM, then that service model can be duplicated by any number of employees in your company and gives clients a consistent experience," she said.

Rowling identified four building blocks to standardize and automate a practice: client process, investment strategy, portfolio management, and billing and reporting.

Rowling recommends starting the client experience with an intake questionnaire. Understanding a client's expectations enables an advisor to weed out those that will require more time than can be afforded.

"You want to screen out people who will be high work, but low fees. You don't want a client coming in saying they're hoping to get a 12% return each year," she said.

An investment strategy with a limited number of simple models and no exceptions will save an advisor time. Models should have broad categories, and each should produce a significant difference from the other. It's not efficient to have many, similar, complicated models.

Rowling chooses to work with five distinct models that are never modified despite a client's preference.

"I'll have clients that will say they don't want real estate, and I'll say to them your real estate isn't diversified."

Advisors shouldn't exclude an asset class "just because a client isn’t comfortable with it. You need to educate them."

Furthermore, Rowling focuses her time on what she knows. She focuses on fund managers, not individual stocks. She's not trying to add value by beating the market. She believes value comes from return that is risk-free.

Automation is key for portfolio management, specifically rebalancing portfolios and tax reporting. Rowling argues that using spreadsheets is too timely and error-prone. Automated rebalancing software saves advisors time.

"Most [advisors] are rebalancing four or five times a year. Why that schedule? It's a lot of work. If you have automated rebalancing, you will see when clients are out of balance and you can modify it in a couple minutes and it will be right and accurate and you're not going to have trade errors."

When it comes to billing, Rowling encourages advisors to limit their number of fee schedules. Too many schedules leads to time-consuming and complicated billing. She chooses not to work with any client that claims her fees are too expensive.

"When I started out I had a lot of different deals with a lot of people. I had so many fee schedules. Billing was very difficult. Now I have two schedules. That's it. No other negotiation," she said.

Scaling a business without sacrificing client service and a personal life is possible. Standardizing and automating practices will ensure consistency and offer peace of mind. There will be less room for error, increased SEC compliance, and opportunity for continued growth.