In the ever-evolving world of wealth management, there's no denying that financial advisors have always had their hands full. From mergers and acquisitions (M&A) to organic growth strategies, advisors juggle numerous responsibilities daily. But what if the secret to sustainable growth lies in an often-overlooked area—capacity?
In a recent episode of Zephyr’s "Adjusted for Risk Podcast," market strategist Ryan Nauman sat down with Angie Herbers, the founder of Herbers & Company, to delve into the intricacies of capacity as one of the biggest growth engines for wealth management practices.
Understanding Capacity: The Backbone of Growth
Capacity, as Angie Herbers explains, is much more than just a number. It's the ability of a firm to absorb additional growth without sacrificing service quality. Unlike productivity, which focuses on what's happening now, capacity emphasizes potential. Herbers suggests that a capacity-led approach is crucial for firms aiming to sustainably expand and thrive long-term.
The Historical Perspective: From Organic Growth to M&A
Reflecting on the transformation of the industry since she began consulting in 2003, Herbers provides insight into how firms’ strategies have shifted. Back then, organic growth was the name of the game, with many advisory firms often handed down through generations. However, as the industry recognized the value of these firms, M&A took center stage. Herbers highlights that regardless of the growth method, whether through acquisition or organic expansion, capacity remains at the forefront.
Breaking Down Capacity Ratios
Capacity isn't a one-size-fits-all metric. With hundreds of thousands of possible ratios, Herbers stresses the importance of developing an understanding tailored to each unique practice. While many focus on the advisor-to-client capacity, most overlook the support ratio—a critical factor that influences both financial efficiency and service quality.
Herbers advises firms to start improving capacity by examining their support ratios, arguing that firms can only expand when there's a sufficient support system—one of the often overlooked yet pivotal components of capacity management.
Client Experience: The Product You’re Selling
Herbers emphasizes that at the heart of any firm’s strategy should be a relentless commitment to enhancing client experience. Surprisingly, she finds that improving client experience is often neglected, overshadowed by symptoms like staffing issues and operational challenges. For Herbers, assuming that your practice can constantly get better is key to achieving sustained growth and excellence.
The Role of AI in Enhancing Capacity
Amid the buzz around AI, Herbers draws a parallel to when the calculator was invented. AI is deemed to transform, rather than eliminate roles, leading to upskilled workforce members. For Herbers, rather than looming as a threat, AI is an opportunity to enhance client relationships by allowing advisors to focus on what they do best: delivering personalized advice and judgment.
Conclusion: Redefining the Growth Narrative
Angie Herbers’ conversation on capacity unveils a fundamental shift in how wealth management practices can fuel their growth journeys. By focusing on capacity, supporting structures, and continuously elevating the client experience, firms can redefine success in today's competitive landscape.