FROM THE BLOG
“It’s good to be thrifty but bad to be cheap”
Posted by Tarah Carlow on November 14, 2012
Ever heard this one? If you are a business owner, financial advisor, manager, employee or just human being this applies to you- some more than others.
“You get what you pay for”…. sound familiar again? It’s a little bit of a catch-22. Growing up I assumed that if it cost more then it must be better. As I grew up I realized this wasn’t always the case. So then, I went the other way and bought the cheapest I could find of a product. That definitely didn’t work out well because too often I would buy multiples of the same product because nothing lasted and it looked or tasted- well, cheap. These days it is truly a pleasure of mine to find the best value of anything. I like nice things- but what is even better is getting a great quality item that maybe needs a little TLC or maybe it’s something that I had to search a little harder for- that diamond in the rough. Well, this mindset doesn’t just pertain to things. This mindset can also translate to making sure you get the right personnel “on the bus”, the right products in your stable and the best service available. Heck, it even translates to the whole budgeting process- especially at a smaller firm such as ours.
When it comes to personnel, we all know that the wrong hire can be a cancer to a firm no matter how large or small. But, I would say that it is most noticeable in a small firm for obvious reasons. Sometimes stretching a bit for that perfect fit or sacrificing in the short term is the best answer if you are in it for the long haul. Try to look for other avenues of value that someone may add to your firm- do they bring a unique perspective that is missing? Do they offer expertise in an area other than what you are hiring for? In many cases, hiring based on experience and value rather than dollars can help fill many voids in a small firm. On the flip side, there are so many values out there- maybe an intern that has been with you and has learned your business from the ground up- in cases where they love the business and are dedicated and willing to work hard to continue to learn the business, an employee/intern like this can be invaluable to a firm. Just make sure you recognize as they grow and grow with them- or they may grow right out of your firm.
I think many times a smaller firm is perceived to have a “lesser” stable of products or even a lower quality of products. They are also perceived to not be able to offer the same level of service as a firm with many more employees. Personally, I like to think of smaller firms as employing the cream of the crop in associates and advisors. These are typically people in the business because they LOVE the business. I started out at a small firm that grew into a huge firm and what began as my passion, turned into my job. I left to join another smaller firm and my passion blossomed. Typically at a smaller firm, people feel that they have a vested interest and a pride of authorship that isn’t possible at a larger counterpart. For my part, I have seen this translate into 5-star service on the support side and real partnerships between advisors and management. When you only have a select number of advisors to serve, you are able to know them, their family and everything about them and their business. They become part of the family and you certainly don’t want to let down your family. On the product side, it goes back to being thrifty but not cheap. You have to be smart- leverage partnerships with your clearing firm and pick your partner wisely. If you are a boutique firm supporting advisors on the higher end of the spectrum doing a wide variety of business, hooking up with a clearing firm that specializes in those areas is key. If you have expertise in-house- use it. In our case, our principals still have a book of business so they are turning that knowledge into a stable of portfolios based on boutique money managers that are tactical. Just because you are smaller doesn’t mean you can’t offer something your larger counterparts aren’t. Sure, it takes some money spent wisely but as long as you don’t go all cheap on it, it can work. Smart spending.
While we are onto smart spending, let’s take a moment to talk about budgeting. This is probably where the whole thrifty but not cheap resonates the most. All firms should have a systemized budgeting process no matter how big or small. You identify the large rocks that you want to be able to pay for in the coming year and go from there. It’s not about checking boxes and accomplishing as much off of your list as possible. Back to my early 20’s life- what good is it to buy something cheap but have to replace it the very next budget year? What is the point in signing with a vendor that is cheapest but not receiving appropriate servicing or capabilities? Why would you spend money to fill a personnel void only to have to go through it all again a year or two later because they didn’t work out? It’s just throwing money away. In marketing, trust me I could spend and spend but it is a much greater pleasure to do as much as I can of a quality that is necessary with as little as possible. Some things you cannot scrimp on- for example paper quality. You can have the most beautiful logo or leaflet in the world- put it on cheap paper, it becomes cheap- sorry it just does. As a smaller firm, a bigger deal is the money we are having to spend on compliance monitoring- this is definitely not an area to skimp. Pay for expertise and proven reliability. If you can’t, hook up with a firm who holds your same values that can. In short, identify the things that matter and prioritize those. Set up a committee and if the budget has to be broken, make it a vote. A budget without accountability is nothing but a hopeful outline.
On the flip side as advisors and even business owners, we often sell ourselves short and try to compete on price. Have some self-esteem! I would argue rather than going that route, we need to do a better job of educating clients on our worth and what value we provide to them. This isn’t something we can push on them though- that only repels them. It’s something we need to show them. In many cases, the differentiator is the relationships that we have built. If you find there are some relationships that are resistant to building relationships and only want to do business with you based on being a low-cost provider, I would suggest that is not a client you want. Perhaps on-line trading would work for them…
“It’s good to be thrifty but bad to be cheap”- where can you audit your life based on these words?
Until next time,
