Staff costs in the advisory practice are usually the largest expense by far. Remuneration for sales, base monthly salaries, admin staff, retirement and medical fund contributions all add up. Even for the single adviser practice, the largest expense will normally be “staff” – the money drawn out of the business by the principal and maybe a PA’s salary.
“If you can’t measure it, you can’t manage it” Peter Drucker *
It is easy to be “busy” and to shuffle papers from one side of the desk to the other.
However, no client is going to pay for you to move those papers around, or to read up on the last weekend’s sporting events online or to spend 45 minutes having a coffee to discuss who has been doing what in the office next door. One of the key outcomes for a practice of having an annual fee for service review is the highlighting of how much time needs to be spent on revenue generating activities.
By tallying up who needs to do what, and how long it will take for each service, provides an indication of what resources will be required to service the existing book.
For each service, e.g. Retiree, this breakdown could look something like the table below.
The time required for each staff member per service can be added up. Doing this for all the services shows just how much time is necessary to service the existing book.
When the resource requirement to service the existing book is tallied, it allows for an understanding of what time is available for new business. In the table below, a total of 40% of available staff time is necessary to service the existing book.
If a staff member is occupied between 60% to 70% of the time on income generating activities that could be seen to be reasonable. The balance of the time would be spent replying to internal emails, staff meetings, admin requirements, professional development etc.
So, for the advisers and intern above, and the marketing assistant in particular, there is time available for new business activities…
As for ongoing service offerings, it is possible to allocate staff resources to new business services. For example, when a client has engaged an adviser to withdraw their funds and to invest them based on various needs, the scope of work normally involves a series of steps all of which can be broken down into hours / minutes of time for different staff.
Similarly, time expected to be spent with referral sources, following up on telephone messages from prospects, and having “complimentary” initial meetings with prospects, can be added up.
Once this has been done, massaging the numbers of different new business services, marketing activities and who does what, starts. The activities can be increased/decreased or the marketing assistant can make more telephone calls etcetera until all staff are around 60% to 70% gainfully occupied.
The point of the exercise is to ensure that the most expensive resource in the practice is measured, so that it can be managed.
In the coming articles in this series, examples of pricing different services will be provided.
*Peter Drucker (1909 – 2005) American Management Professor