Unlocking Real Value Blog

Cutting Advisor Sales Assistants is Bad Business

Published on June  17, 2010 – FUNDfire – An Information Service of Money-Media, a Financial Times Company- written by Andrew Klausner, Founder and Principal of AK Advisory Partners LLC.

The continuing cuts by wirehouses of sales assistant positions have an amplified effect on how advisors run their practices and how clients perceive these advisors.

What was a trademark downsizing move circa fall 2008 is unfortunately showing no signs of abating. This was most recently witnessed by Morgan Stanley Smith Barney’s decision to cut sales assistants along with other support staff at the brokerage. An industry recruiter summed it up best by telling FundFirelast month that such cuts make it harder for advisors to be happy. “Sales support on the local branch level is very important…You will chip away at morale,” the observer remarked.

When firms eliminate the support sales assistants provide, the advisors must take time away from their most important business duties: client-facing activities and investment management. The cuts force advisors to take on tasks like processing trades, answering requests for account statements and other general administrative inquiries. In addition, these cuts also hurt the advisor’s ability to schedule client appointments that can build future business.

Consider, too, that the sales assistants at wirehouses today may be taking on other important duties, such as office receptionist work, due to previous support staff reductions. That means that it isn’t just the sales assistant’s work that may be piling up on the advisor’s desk.

The impact on client service quality is substantial. Remember that the more time advisors have to proactively call clients on investment issues, the better off their relationships are. If advisors must spend more time on administrative duties, they fall into a perpetual state of catch-up on client service matters. Their frustration increases while productivity decreases.

What makes the situation far more troubling is the fact that many advisors with sales assistants are not spending quality time with clients. Just look at the facts.

Wirehouse advisors reportedly spend only 27% of their time meeting with existing clients, according to a Cerulli Associates advisor time allocation study done in conjunction with the College for Financial Planning, the Financial Planning Association, IMCA and Morningstar. While this is more time than RIAs reported they spend with investors – about 22% – it is still much less time than most advisors would prefer. (Advisors actually say they have even less time to spend on investment management, which takes up 25% of wirehouse advisors’ time and 23% of RIAs’ time.)

Additionally, FA Insight research found that advisors spend just 50% of their time on client servicing, including meetings with existing clients and other revenue-generating events. Smaller practices tend to get hit harder in this regard.

The harsh truth for the wirehouses is clear. Their advisors are at risk of losing clients if they become spread too thin and also have less time to prospect for new business. While other types of firms have cut support levels, wirehouses especially can’t afford to neglect their primary producers while they also weather a large number of defections. And the argument that these brokerages are cutting back because of integration efforts following mergers shouldn’t apply to the sales assistants if we’re not seeing advisors being let go in the same proportions.

I understand that wirehouses must be bottom-line conscious in light of current economic conditions. However, I particularly question the continued cutting of sales assistant support. This may very well be one of the quickest ways to negatively impact an advisor’s business and alienate clients all at once.

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