Striking a Balance: Working In and On Your Business

Boost efficiency and effectiveness in your advisory-practice by devoting the right amount of time as a technician, entrepreneur and manager.

By David I. Leo
David Leo
David Leo

Did you accomplish what you set out to do today? Or this week? How many days have you gone home exhausted and said, “I have no idea what I did today”? Are you always getting sucked down rabbit holes and having difficulties juggling multiple hats in your advisory practice?

William Penn said, “Time is what we want most, but what we use worst.” Is that true for you? To be in control of your business and your life, you must plan your time and have discipline about time because it’s your most precious and only irreplaceable asset. Planning and structuring your time will help you use it efficiently and effectively.

It’s difficult to tell advisors exactly how they should divvy up their time. Firm sizes and structures vary and so do personalities. If you’re the sole practitioner running your firm, your responsibilities are different than if you’re with a large RIA, independent broker-dealer firm or wirehouse that has 1,000s of advisors and serves millions of clients. But even individual practices within large organizations need their own vision, order and systems within the context of the larger firm.

Chances are you’ve read Michael Gerber’s “The E-Myth Revisited,” the source of the concept of “working in the business vs. on the business.” Gerber speaks of the technician, the entrepreneur and the manager.

You may have started your business because you are a technician, which Gerber says is most common. While the business demands the technician to do the day-to-day work of working with clients and staff, to be successful, it also must have the manager and the entrepreneur. The manager plans the work, and supplies order and predictability for the business. The entrepreneur continues to supply the vision, imagination, innovation and creativity, and the dreams for the future.

All Firms Have Common Needs

Every advisory practice must build its own vision; provide its own imagination, innovation and creativity; and fulfill its mission of acquiring and servicing clients. But how it gets done and who does this can vary a lot based on the size of the organization.

In large firms, the C-suite plays much of the entrepreneurial role and context is a given to advisors ( i.e., this is our overall vision, this is our technology, these are our values, and this is our operating guidance). So, advisors can focus more on managing their teams and their client relationships. In solo or small firms, advisors are responsible for their own context and must do all the entrepreneurial, and management functions as well as the same technician functions that practitioners in large firms must also perform, e.g., financial planning, risk and investment management, client servicing, etc.

Here are some suggestions for breaking down the work that needs to be done:

Working ‘On’ the Business

The leadership of individual advisory practices must take a “what” step — deciding the kind of practice they want to be (e.g., a generalist group or a niche practice). They also need to establish a growth plan that spells out another “what” – the goals they wish to achieve. Smaller firms might envision becoming a large enterprise or a lifestyle practice.

Management of each successful practice must develop business and marketing plans and establish detailed business goals and resource plans. Management also needs to establish metrics so they can review their progress, their business development plans, their strategies to achieve their goals, and their action plans or tactics to implement those strategies. These “how” steps are “on the business” steps. Together with leadership, management will develop their “why”: why do business with us.

With a vision in place, management will put together the set of roles and responsibilities needed to execute the plans which includes the systems, processes and technologies needed to implement the vision and plans. This “how” step is an “on the business” step. This includes the “when,” “where,” and “who” components.

Working ‘In’ the Business

The next step is an “in the business” step: getting it done, or the execution of the plan. This is where the rub comes in solo advisor practices because time is a fixed quantity and client relationships and desires for growth drive the business. In modern wealth management practices, “in the business” includes:

  1. Client relationship managemen This includes meetings and calls with clients, financial life planning and the day-to-day elements important to relationships that are in your service model. Though it’s an experiential estimate, a mature practice will consume about 50% of its time in these activities. We can estimate or budget time more closely based on a financial advisor’s particular book of business.
  2. Asset/investment management. This typically consumes about 10% to 15% of advisor time, although parts can be outsourced.
  3. Business development. This includes prospecting and working with centers of influence. For a serious growth-focused practice, this should consume 20% to 25% of advisor time. New financial advisors would spend more time in this area and less in client relationship management.
  4. Unplanned activities. Cleaning up messes, for example, must be minimized and delegated if possible.

A Few ‘On the Business’ Details for Small Practices

As larger firms know, a key part of the entrepreneurial function is to conduct annual business-planning reviews and strategy development sessions for the coming year. Every practice should also review and update its longer-term plan, such as three or five years, with less detail but in context of its vision.

Additional Reading: Managing Challenging Clients and Prospects: 3 Examples

Even solo practices should conduct quarterly review and planning sessions. The advisor could work on these measures with a service associate and/or a non-competing advisor with a similar practice. Another possibility is to work with an outside coach or consultant.

As part of your entrepreneurial and management functions for your practice, I suggest committing to a full-day planning session, a quarterly half-day plan review, and update meetings. If you have a service associate, you should also have weekly 45-minute planning meetings and daily 15-minute “huddles.” This is a total annual commitment of about two full working weeks over the course of the year, or up to 5% of your time.

Professional development, also part of the entrepreneurial and management function, is another must-do in all practices. This will perhaps also take another 5% of the advisor’s time.  Meetings with wholesalers and other business contacts are practice management functions executed by the manager role. These activities must be held to a minimum, say 5% or less of an advisor’s time.

Practice management for the business includes oversight with an assistant, management, and communications with external personnel. Practice management also includes updating systems and processes (manual and automated). It can be kept to 5% of the advisor’s time and done on a quarterly basis, scheduled as a time block. Practice management functions can be partially outsourced.

Time Summary

These estimates are experiential and offer pragmatic objectives for individual growth-oriented advisory practices. They are not consistent with the timeframes suggested in “The E Myth Revisited,” which indicates a very good business builder would spend about one-third of their time in each of the three roles. Instead, the task timeframes I suggest for advisors are more consistent with a typical business builder.

In practices with multiple advisors, one or more advisors can spend a higher percentage of their time on entrepreneurial and management functions. The team of advisors would have to agree on the relative value of having one or more of the team perform the entrepreneurial and manager functions instead of the technician functions.

In March of 2019, Michael Kitces reported on a study in his article “How Do Financial Advisors Actually Spend Their Time and the Limits of Productivity?“ The study included over 1,000 advisors showing a breakdown of the tasks advisors do. On average, the breakdown of an average 53-hour week was:

  • Direct client related: 50% (in the business).
  • Business development: 17% (in the business).
  • Investment-managed-related tasks: 10% (In the business).
  • Administrative tasks: 8%. (in/on the business).
  • Professional development: 6% (on the business)
  • Management and other responsibilities: 9% (on the business)

The Kitces study and our experiential estimates are close to what we see happening in today’s individual advisory practices. Our experience also suggests that business development and formal planning and review processes often receive short shrift.

Parting Message

In “The E Myth Revisited,” Gerber offers excellent lessons on the importance of structure and order.  One of the things he says is that our business need “relatively fixed points of reference that an orderly business provides its customers and its employees in an otherwise disorderly world.”

I encourage you to think about how your use of time, effort, intelligence and wisdom enhance the orderliness of your business. The discipline to stick to the use of time is possible, though not easy. In another article we will outline approaches to instill discipline.

David Leo is Founder of Street Smart Research Group LLC. He is an author, speaker, coach, consultant and trainer to financial professionals. David is an experienced business manager who works solely with Financial Advisors, Planners and firms who want to organize, structure & grow their businesses by attracting, servicing, and retaining affluent clients. He can be reached at David@CoachDavidLeo.com, 212-598-4229 (office) or 917-379-1249 (cell).

 

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