Virtual Office Tools for a High-Margin Practice David Drucker, MBA, CFP
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PROCEEDINGS2005 Virtual Office Tools for a High-Margin Practice David Drucker, MBA, CFP hy do insurance consultants, financial advi- sors and other professionals need to stay Wabreast of new technology, keep an eye on practice management developments, and consider using virtual office tools and techniques? Perhaps Craig Barrett, the CEO of Intel, answers this question when he says “Never be content with the rules of the game as they are today. It is better if you change the game rather than having someone else change it for you.” The financial services industry has never been as competitive as it is today; professionals need to do everything within their power to stay on top. It’s up to them whether DavidNAME J. Drucker, AND TITLE MBA, CFP, bio info. president of Sunset they decide to make the rules, or follow the rules their Financial Management Inc., has been a fee-only competitors make. financial advisor since 1981. He is co-author of How can virtual office tools and techniques help “Virtual Office Tools for a High Margin Practice” professionals make their own rules and, correspondingly, and wrote the National Underwriter article “The what is a virtual office? There exists a formal definition, Tools and Techniques of Practice Management.” but it might be more illustrative to first provide examples He also is the editor of a monthly newsletter called of virtual office processes. We will use a financial advisory Virtual Office News and writes on practice manage- firm as the example, since this is the author’s work envi- ment issues for various financial planning trade ronment. Most of these examples carry over to the world publications. of the insurance professional, as well. Sunset Financial Management Inc. Consider, for example, the everyday occurrence of 8800 Northridge Ave. N.E., Albuquerque, NM 87111 responding to client questions which shows how virtual Phone: 505.332.8846 processes can create great efficiency. In many cases, the E-mail: [email protected] questions posed by clients require the advisor to refer to documents in the client’s file in order to formulate an answer. Most advisors keep client files in paper form, and files are to be found either in file cabinets or on the desks of staff persons working with them. In fact, when advisors need to refer to client files to obtain a docu- ment containing the answer to a client question, they don’t know where those files will be and, therefore, will usually need to make a follow-up call to the client with the answer. A virtual office is, among other things, a paperless office. When a single document among the thousands I/RI/R Code: CODES: 2000.00 2750.0 every firm maintains is needed, it can be found instantly Cassette: A0547 through the indexing and search capabilities of a capable CD: C0547 AUDIO CASSETTE: document management system. Quick retrieval allows the advisor to remain on the call with his client and answer 354 3354-363_drucker_david.indd54-363_drucker_david.indd 335454 88/18/05/18/05 33:47:51:47:51 PPMM PROCEEDINGS2005 Virtual Office Tools for a High-Margin Practice (continued) the client’s questions immediately. Hence, no follow-up Virtual firms, by comparison to traditional firms, grow calls or the phone tag that usually accompanies them is by using technology wisely and adding VWPs as needed necessary. This is one source of greater efficiency. rather than employees. The virtual firm’s profit margins Another example is the opening of a new client are typically 60 percent and up. This level of profitability account. In a virtual firm, the adviser emails a request to has been experienced by the author and most of the virtual his Virtual Assistant or Virtual Account Administrator to offices he has studied over the last three years. open the new account. The Virtual Work Partner (VWP) What is the professional’s motivation to pursue virtual completes the form for the client, either online if the office tools and techniques besides greater profitability? form is made available there by the custodian, or using The bottom line isn’t profits, per se, but the greater options form-filling software that coordinates with the advisor’s profits give the professional for creating the lifestyle he Client Relationship Management (CRM) software in wants. Most professionals enjoy their work but don’t such a way that form fields are completed automatically. necessarily want to devote their lives to it to the exclusion The VWP emails the form to the client who prints it out, of family, friends, community and other pursuits. signs it, and returns it by U.S. Mail to the VWP. She or To embark on the transition to the virtual office, one he then emails to the advisor for his archive a copy of must be aware of the technologies that facilitate this the signed document in the form of an Adobe Acrobat business model. As outlined in our definition, they are PDF (Portable Document Format) file, while mailing the paperless office systems, outsourcing of administrative or original to the custodian. professional tasks, and using ASPs. Let’s take a detailed Finally, consider the process of bill-paying. The virtual look at each of these components. professional scans and emails copies of his payables to his virtual bookkeeper who pays the bills using the online The Paperless Office banking system of the professional’s banking institution, Implementing a paperless office requires a selection of and then enters the transactions into the professional’s scanners, scanning software and indexing/filing systems. accounting software. She or he finally emails to the Before describing one’s options in these areas, we must professional the updated accounting file which he imports answer the question: “Why be paperless?” to his master copy of the accounting software so he has The initial reaction to this question is the realization current information at his fingertips. that going paperless means eliminating file cabinets and The formal definition of the Virtual Financial Services saving on rental costs associated with the storage of paper. Firm, then, is a firm that relies heavily on virtual processes; These obviously represent cost savings but aren’t, in and of i.e., paperless office systems, outsourcing, mobile tech- themselves, the primary reason to effect a paperless office. nology, and Application Service Providers (ASPs), giving That reason is to put information at one’s fingertips. it a profit margin (before owner’s compensation and As described in our first example above, your ability to benefits) of 60 percent or higher. This definition does not find the documents necessary to respond to client questions differ significantly for other types of professional service and requests during a client’s phone call means avoiding firms. How does this differ from a more traditional firm? the need to return the client’s call and risk not finding The traditional firm grows by acquiring more people and him at his phone. It also means better client service and, more paper. Its profit margin, including all compensation hence, greater client satisfaction and retention. and personal benefits to owners, tends to be around 40 What, then, should one look for in the tools required to 50 percent according to studies done over the last few to “go paperless?” Scanners are the first item. These years by the Seattle CPA firm of Moss Adams LP for the devices can be purchased at a local computer store for Financial Planning Association. $300 or less, but the quality of scanner implied by this low 355 3354-363_drucker_david.indd54-363_drucker_david.indd 335555 88/18/05/18/05 33:47:53:47:53 PPMM PROCEEDINGS2005 Virtual Office Tools for a High-Margin Practice (continued) price is not recommended. The small office needs, at a outsourcing an option for their own in-house administra- minimum, a scanner that will move paper rapidly through tive, and even technical, functions. a straight paper path (minimizing paper jams), scan both The concept of outsourcing is one we learn in Business sides of a document in one pass, allow for automatic docu- Administration 101 when we are taught that we shouldn’t ment feeding of 25 or more pages at a time, and scan both try to produce a good that someone else can provide in a color and black and white images at high resolution. An better and/or less expensive form. Auto manufacturers example of such a scanner is the Fujitsu fi-4120c, available routinely do this by importing from Japan or buying from for $600-$700 as of this writing. domestic manufacturers specialized parts to be used in the A larger office may need a similar scanner, but with production of their motor vehicles. greater capabilities in each of these areas (i.e., faster, In the financial advisor community, a task often higher resolution, etc.), such as a Fujitsu fi-4530c. Each improved upon by outsourcing is that of investment advisor running a larger office must decide whether to portfolio reporting to clients. Most independent advisors employ one, centralized, high-capacity scanner, or many employ portfolio accounting software to produce quarterly simpler scanners -- one per employee. One’s choice will position reports and year-end tax reports for their own be a function of personal preference, office-wide computer management purposes and those of their clients. The literacy and work style. maintenance of the accounting system with daily data Scanning software is simply software that will read updates and the production of these reports often require and store the image of a document fed into the scanner. a full-time staff position. Unless these “portfolio accoun- Examples of such software are PaperPort (www.scansoft.