A paraplanner for your practice?

Any advisor in a solo practice with a growing client roster eventually will run out of enough time in the day. They’ll hit the wall and recognize they need help to maintain the level of service and attention that clients demand. If that advisor is ready to delegate client relationships, bringing in a paraplanner might make sense. 

With the advisor’s supervision, a paraplanner typically puts together financial plans, manages financial planning software, enters data from client onboarding forms, creates reports for clients and, in some cases, sits in on client meetings. Such support can free time for an advisor to focus on bringing in new clients. But having a commitment to grow should be a prerequisite for adding a paraplanner, said Michael Kitces, a financial services industry educator, speaker and publisher.

“It’s generally not a good idea to hire (a paraplanner) if you don’t plan to grow,” Kitces writes in his blog, Nerd’s Eye View. “Because in the long run, if the business isn’t going to grow, eventually the aspirational paraplanner is going to leave and go somewhere else where there are better opportunities. Or they’ll go out and launch their own advisory firm instead. Which means if the goal is simply to run a profitable solo practice, the best hire may be administrative.”

Growing up

Too often, advisors perceive hiring anyone will cost more than they can afford. That’s because they fail to see the growth that will come for their business by having more time to get referrals and see more people, said Craig Palfrey, CFP. 

“If you’re a sole practitioner or you’re two advisors doing it all yourselves, you just have to take that plunge. Whether it’s an admin or a paraplanner, I don’t think it matters,” said the 14-year MDRT member from Cardiff, Wales, UK. “Business coaches tell us just give the stuff you’re not good at to someone else and just do what you’re good at. And if you’re in this job, you should be good at just finding new clients and solving their problems. Let someone else do the admin, the email follow-ups, the chasing insurance companies. The sooner you can get to that, you’ll find yourself able to write more business, help more families and see more people.”

Every time I took on another person, my business went up because I was getting rid of tasks that I wasn’t a genius at and wasn’t the best use of my time.
—Craig Palfrey

When Palfrey started in financial services during his early 20s, his firm recognized that their advisors could see more clients if they had support staff. So, the company insisted he and another advisor hire and share an assistant and partially paid the salary. Palfrey and the other advisor hired his sister, Lisa, who worked as a hybrid paraplanner/administrator and is still with him today. A couple months later, he hired another person to handle his appointments and calendar. Today, Palfrey’s practice has 21 support staff — four are paraplanners – for six advisors. Attention to detail is one attribute Palfrey wants from paraplanners.

“We have a series of tests just to check attention to detail,” he said. “You can train on the skills, teach them to take the journey and learn all the technical stuff with exams and our own internal training, but you’ve got to have attention to detail and that drive to want to be here. You want to want to deliver customer service.”

 Two advisors started by working in the administrator and technical paraplanner seats, and another who followed that trek in the financial group’s academy is starting as an advisor trainee. Palfrey’s vision for all his advisors is that they spend 90% of their time with clients, solving their problems.

“Every time I took on another person, my business went up because I was getting rid of tasks that I wasn’t a genius at and wasn’t the best use of my time. Why do a job that pays £20 an hour when you can do something else that brings in £100. You might as well pay that £20 to someone else,” Palfrey said. 

Pay as you go

Not having enough money is a common excuse for not hiring. But maybe those advisors did not set up their practice properly, said Peter Hill, ChFC, a 27-year MDRT member from Des Moines, Iowa, USA. Being able to afford help could be a matter of paying yourself a salary first. 

“Figure out what is the income that you as the advisor need to live the way you want to live, and then the rest goes into a kind of capital pot that you’re willing to pay out to either bonus yourself quarterly or annually, or to keep it in the till until you bring on new people,” Hill said. “If you’re not setting yourself up as a business and paying yourself a salary, then you’ll probably always find it difficult to bring in any kind of support staff. If you’re operating as a business, then it should be relatively painless to bring in people in the different roles that you need.”

Paying yourself a salary does not have to translate into taking a pay cut, but Hill adds that sometimes one must be willing to take a step backward before being able to move two steps forward.

“I’ve never looked at myself as taking a pay cut as far as my salary goes, but when it comes to my profitability, absolutely,” Hill said. “I know I haven’t been as profitable during the startup years of bringing on a new person. It goes back to most advisors do not set themselves up to run a business and draw a salary with the expectation of being profitable.”

Hill’s first hire was an independent contractor who set his appointments. Eventually he added a financial planning associate, a title that would be called a paraplanner today, to help create financial plans behind the scenes. His financial services group continued evolving to include seven advisors, each supported by teams comprising a co-advisor, paraplanner and an administrative assistant, among other support role players. 

Rather than licensed professionals, his paraplanners are new to financial services or are recent college graduates with degrees in business administration, finance and even liberal arts majors. All employees take a Kolbe test, which measures their cognitive strengths and instinctive way of doing things, and Hill finds that good paraplanners score higher for fact-finding and follow-through. He also looks for candidates who are personable and can talk to clients. The paraplanners go through several months of on-the-job training and learn a wide range of financial services specialties such as investment management, risk management, trusts and estate taxes, and business ownership issues. “They have to know most of the different areas we operate in, and everything that’s going on in financial planning,” he said. 

One big benefit from having paraplanners is they get him ready for client meetings. The paraplanner anticipates anything that could come up during the session and flags those items in an agenda planner, so Hill can review notes and “feel confident walking into that meeting that I don’t need anything else.”

Some paraplanners are on track to become future advisors, and others will be content with a paraplanning career but want to grow in the complexity of cases and subject areas they handle. Whatever their path, the paraplanner’s legwork gives Hill the capacity to service more clients. Their work and the efforts of other support staff also are another set of eyes on the business. 

“I’ll say to the client, ‘I think that I’m decent at what I do, but if we can have some additional set of eyes on what we’re doing on your behalf, that makes us better,’” Hill said. “The wider and deeper we can go I think is what brings value to our firm. Our clients have an opportunity to have relationships with quite a few of us rather than just one of us.”