Saving Your Practice from HR Headaches

Journal of Financial Planning: August 2014


If you are like many successful financial advisers who have moved to either the RIA or independent broker-dealer model, you are starting to wear the human resources (HR) hat. Congratulations on your leap to independence—you are now in charge of human capital for your business! Unless you structure your business upfront to avoid HR headaches, things are about to get messy.

Consider the following best practices to avoid many of the unpleasant HR headaches that can arise when owning and running your own independent firm.

Have a Formal Application for Everyone You Interview

When it comes to building your team, start out on the right foot by creating a formal application for all candidates to complete and submit along with their resumes. This document will be the foundation of your personnel file, because it allows you to gather the information that’s important to you.

A formal application also allows you to easily compare what’s listed on an applicant’s resume, check for inconsistencies, and establish, document, and acquire consent to any additional information you would like to know, as allowable under federal and state employment laws.

It also allows you to more easily compare different applicants, helping you choose the best person for your business, and could limit the number of applicants you get so that only those who are qualified and truly interested in working for you apply. A formal application may seem unnecessary at first, but you’ll be grateful you have one down the road. 

Present a Formal Letter of Understanding to Protect Your Business

This is a critical document that most advisers fail to implement. The formal letter of understanding defines the role and responsibilities of the employee, sets the expectations, protects company confidentiality and the non-solicitation of clients from your business, and establishes the “employee at will” concept. If any problems arise in the future, this letter should be referenced by both you and the employee and be used to clear up any misunderstandings. In essence, it is your offer letter, not an employment contract. It is a simple, customized preamble to your future employee handbook. 

Automate Accountability

Establish a formal task management system to manage workflow and create accountability. A desk covered in Post-it notes, a barrage of intermittent emails or verbal shout outs of to-dos in the office are all recipes for failure. By automating the basic yet essential office processes, you are helping your employees manage and prioritize tasks while establishing a tool for accountability in the event mistakes are made. It is a way to record and log what your employees have accomplished for the day/week/month without micromanaging each minute of their day.
Many different software and web-based programs can serve this purpose, so do your research and find the one that has the right features for your office.

Keep It Personal but Professional

Creating a fun and productive work environment can build loyalty, help with employee retention, and ultimately allow your business to flourish. However, you have certain responsibilities and potential liabilities as an employer. Strive to develop a friendship with your employees while maintaining professional boundaries. You want them to trust you enough to be open and honest with you, but also respect you as their employer and follow your lead. You must remember you are the boss and the employer regardless of how long the employee has been with your firm or how good of friends you may have become before they started working for you. Without establishing this hierarchy, employees may feel as if they can take more liberties when it comes to their time during the workday, as an example, ultimately having a negative impact on the productivity of your firm.

Be Flexible but Consistent with Established Policies

No one likes rules, but they’re important to set when running a business. Established policies will allow you to set the ground rules for everyone. Creating rules as you go will only result in inconsistencies and can be disruptive to your business.
To avoid the HR headaches involving company computer usage, personal phone calls, dress code, holidays, jury duty, bereavement, and similar situations, determine the rules and procedures upfront. These established policies can help keep balance and fairness in your company and take the guesswork out of how to appropriately address each situation.

By having a basic written foundation of rules in the dreaded employee handbook, you will save a lot of time and frustration by addressing the many topics your employees will want and need to know while employed with your firm. However, through the course of running your business, additional situations may arise that you may not have planned for. This could be things like paternity leave or reimbursing expenses for furthering education. When faced with a new situation, take a few moments to consider how you would like to address it. Don’t react, but rather respond after thoughtful consideration and let the employee know how the situation is going to be handled. Then, update your employee manual to include the new policy and distribute it to each of your employees, having them acknowledge that they’ve received the most recent version of the document.

Confront Problems in the Present

Confrontation is uncomfortable and awkward at best, especially if a friendship with your employee has developed. As the employer, don’t allow things that are unacceptable to metastasize, eventually leading to bigger problems that become more difficult to deal with in the future. Address your concerns professionally and immediately, usually giving yourself a day to think about it, but not longer. Document your conversation and the action steps the employee must take to correct the problem.

Although a hassle and formality, having such issues documented helps you to create a timeline if the problem continues or if changes don’t occur as requested. It will be helpful to have this documentation to reference in the event a termination becomes necessary.

Provide Formal, Documented Reviews and Feedback

The role of employer requires extra work on your part, but don’t procrastinate or treat your HR responsibilities haphazardly. Communication is the key to all great relationships. It is human nature to want to know how one is doing, and your employees have a right to know. Perception is one’s reality, however sometimes the employer and employee can be on two different pages when it comes to job performance.

Recognize, reward, and praise for a job well done, while offering input, development, or reprimand when improvements are required, depending on the circumstances. Documentation is a must, and a signed employee acceptance of the review is a necessity. Without it, there is no paper trail to reference if changes need to be made.

It is a good idea to hold a follow-up review in 60 or 90 days if changes were requested. This would give you an opportunity to praise the corrective behavior or readdress any concerns. Formal reviews also allow you the opportunity to share long-term goals for the employee and responsibilities to master for pay increases and promotions.

Many advisers who have taken the leap to independence find themselves successful as advisers but inexperienced when it comes to HR issues. With the rise of independent practices, there are also more choices for how best to manage HR responsibilities, including outsourcing to a third-party company or working with an established branch that offers an administrative infrastructure. Regardless of how you choose to set up your independent practice, be sure your HR responsibilities are addressed up front and consistently. Doing so will help you run your business smoothly and avoid these and other HR headaches.

Richard G. Dragotta, ChFC®, CRPC®, is a registered principal and branch manager for one of the largest LPL Financial (member FINRA/SIPC) branches in the country. He is founder of INC Advisors and AdvisorSourceSM, providing unified independence, advocacy, HR resources, and support to advisers in transition.

This information is purposely general in nature and should not be construed as legal advice regarding employment law; consult both the federal and your state’s and locality’s specific employment laws and/or contact an employment attorney for information and advice regarding your specific situation.