SAN FRANCISCO, Jan. 18 /PRNewswire-FirstCall/ -- Independent investment
advisory firms are growing at triple the rate of other financial firms, but
many continue to be constrained by ineffective organizational structures
and imprecise business development efforts, according to two new reports
published by Schwab Institutional. The industry report, "Achieving Growth
with the Right Business Development Structure," highlights three common
business development models and helps advisors evaluate and implement the
most appropriate one for their firm. The white paper, "Building an
Effective Organizational Structure," offers advisors insights on how to
determine the best operational structure for getting work done. Both
reports were developed by Schwab Institutional in conjunction with Moss
Adams LLP.
"It's a great time to be an independent advisor - but many firms are
looking for guidance on how to manage their rapid growth, overcome barriers
to growth, and maintain a superior level of client service," said Deborah
Doyle McWhinney, president of Schwab Institutional. "Schwab Institutional
is committed to helping advisors set a course for future growth by
providing key insights as well as the tools and resources that help
advisors grow, compete and succeed in a highly competitive environment."
According to Schwab Institutional's own RIA Benchmarking: Growth Trends
Study published in November 2006, despite median growth of 24 percent in
assets under management from 2002 to 2005 and a huge (nearly 80 percent)
appetite for growth, close to two-thirds of advisors surveyed reported at
least one significant barrier to growth. Many of the most common barriers
were centered on inefficient organizational structure or lack of clarity
around business development. Staff time, insufficient growth planning, lack
of prospecting success and accountability were the most frequently
mentioned barriers.
"Organizational structure and business development structure are
dynamic processes for a growing organization," said Dave Welling, Schwab
Institutional vice president of strategic marketing programs. "If you want
to be a growth firm over a sustained period of time, you need to take the
time to pause, plan and think about how you are structured so you can
continue to grow profitably."
Achieving Growth with the Right Business Development Structure
The report, "Achieving Growth with the Right Business Development
Structure," focuses on what successful firms are doing to grow their
businesses, why they employ certain tactics, and how advisors can determine
the most appropriate business development structure for their firm.
The report gives advisors practical steps for evaluating, selecting and
implementing an appropriate business development model. The strengths and
weaknesses of the following three business development structures are
discussed:
* Principal-Centric - Firm principals are responsible for business
development, which is the traditional approach used by most firms.
* Dedicated Model - Specialists inside the firm are charged with business
development, giving clear accountability for client acquisition.
* Fully Shared Model - With business development responsibilities shared
across the entire firm, this model encourages collaboration between
principals and professionals, and reduces risk by spreading efforts
across a number of individuals.
"As firms grow in size, the majority undergo a shift from principal-
centric to dedicated business development or fully shared models," said
Welling. He noted that while more than 80% of firms with less than $100MM
in assets under management rely on a principal centered model, only 40% of
firms over $250MM use this model for new business development. The other
60% have adapted to either a fully shared or dedicated model.
Studies showed that a successful business development structure needs
to be aligned with a firm's strategic goals, culture, values, and ideal
client profile. It should also be an outgrowth of the firm's overall
business model, stage in development and desire to centralize the growth
function. Moreover, it is critical that the firm institute measures to
motivate the right individuals and ensure accountability for their business
development responsibilities and efforts.
The report cites a principal at Salient Financial as saying, "We hit a
certain level of assets under management and asked ourselves, 'Is this all
there is?' So we made the decision to keep on going, restructure the
business and form a strategy so the business would continue into
perpetuity."
Building an Effective Organizational Structure
In industry studies conducted for the white paper, "Building an
Effective Organizational Structure," researchers found that
better-performing firms make deliberate choices about how they will be
organized and do not let convenience or old habits determine how the firm
operates. For example, firms should be structured so that goals are
supported, and roles and responsibilities clearly defined. Firm owners who
make organizational structure a priority will enjoy more satisfied clients,
business growth, increased profitability, and better work-life balance.
The white paper notes that the best organizational structures promote a
client service culture, exhibit clear accountability for decisions, have
the flexibility to evolve as the firm grows, and balance control with
cross- functional teams to run the business. The three main organizational
structures for firms are:
* Solo groups, which have little or no structure
* Emerging ensemble groups, which refers to the point where individual and
department specialization are viable options and structures begin to
emerge
* Mature ensemble groups, which can have diverse structures, including
departments and service teams
Many advisors find the need to adapt their organizational structure as
they grow and to help them more efficiently manage their growth. According
to the report, this often means limiting the amount of time owners spend on
day to day firm management, giving them more time to think big picture. In
the report, Neil Hokanson of Hokanson Capital Management underscores this
point. "As you get larger, you don't want to talk about paper clips. As you
get bigger, you want to formalize what you are doing," he says.
The white paper also walks advisors through the five considerations for
determining which of the three structures is most appropriate for their
firm: stage of development; strategic plan; strategy or strategic
differentiation; employee development and retention needs; and changes in
organizational characteristics.
These two reports are the latest in a series of Schwab Market Knowledge
Tools(TM) (MKT) reports, an ongoing program of industry research reports,
white papers and how-to guides from Schwab Institutional designed to keep
investment advisors on the forefront of trends and competitive challenges
facing the industry. Offered exclusively to Schwab Institutional clients,
the MKT program delivers relevant and timely information for future
business planning. The MKT reports are part of Schwab Institutional's
GrowthPoint(TM), a new program that builds on Schwab's existing practice
management solutions and takes a uniquely tailored, strategic approach to
helping advisors build their businesses. GrowthPoint consists of three
distinct service offerings: Marketing/Business Development, Business
Strategy/Planning and Transition Services.
About Schwab Institutional
Schwab Institutional is a leading provider of custodial, operational
and trading support for independent fee-based investment advisors. This
year marks Schwab Institutional's 20th anniversary serving the independent
investment advisor industry. Since 1987, Schwab Institutional has supported
independent investment advisors by offering support and services to help
grow their businesses and help their clients reach their financial goals.
As of December 31, 2006, client assets custodied with Schwab Institutional
stood at $502 billion. These assets, managed by the approximately 5,000
independent advisor firms Schwab Institutional currently serves, represent
approximately one-third of total client assets custodied with The Charles
Schwab Corporation.
About Moss Adams
Moss Adams LLP provides accounting and management consulting services
to advisory firms throughout the US, Canada and Australia. With a
particular expertise in the financial services industry, Moss Adams has
provided consulting services to more than 1,200 investment management
firms, broker- dealers and financial advisors on matters related to
compensation, organizational design, valuation, mergers and acquisitions,
financial management, strategic planning and leadership development. Moss
Adams is the twelfth largest accounting and consulting firm in the U.S.,
with a staff of over 1,800, including more than 225 partners. For more
information on Moss Adams, visit
http://www.mossadams.com/industries/financialservices.
About Charles Schwab
The Charles Schwab Corporation (Nasdaq: SCHW) is a leading provider of
financial services, with more than 300 offices and 6.7 million client
brokerage accounts, 542,000 corporate retirement plan participants, 147,000
banking accounts, and $1.2 trillion in client assets. Through its operating
subsidiaries, the company provides a full range of securities brokerage,
banking, money management and financial advisory services to individual
investors and independent investment advisors. Its broker-dealer
subsidiary, Charles Schwab & Co., Inc. (member SIPC, http://www.sipc.org),
and affiliates offer a complete range of investment services and products
including an extensive selection of mutual funds; financial planning and
investment advice; retirement plan and equity compensation plan services;
referrals to independent fee-based investment advisors; and custodial,
operational and trading support for independent, fee-based investment
advisors through its Schwab Institutional division. The Charles Schwab
Bank, N.A. (member FDIC) provides banking and mortgage services and
products. CyberTrader(R), Inc. (member SIPC, http://www.sipc.org) is an
electronic trading technology and brokerage firm providing services to
highly active, online traders. More information is available at
http://www.schwab.com. (0107-049)
SOURCE Charles Schwab
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Related links:
http://www.schwab.com
CONTACT:
Michael Cianfrocca of Charles Schwab,
+1-415-667-3252, or michael.cianfrocca@schwab.com
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