By Joni Youngwirth
There may be times as an adviser when you find using a consultant helpful. Such times may include when you are looking for ways to evolve from an investment management firm into a true wealth management firm, when you are hoping to permanently improve the ways your employees work together, or when you are trying to enhance the value of your practice.
Since many people adopt the title of consultant, it can be difficult to find one that is legitimate and one that is best for you and your business.
Here are some factors to keep in mind.
Know Your Need
"Begin with the end in mind." This is one of the tenets outlined in Stephen Covey's bestseller, The Seven Habits of Highly Effective People. Write down your specific expectations. This will streamline your decision process, help you remain objective, and ensure that you don't get distracted from the qualities you truly want when interviewing prospective consultants.
On the other hand, don't be overly rigid. During the process, you will likely acquire information that you didn't know when you created your original set of expectations. It is often a good idea to refine your original list.
If you find you do not know what you want or need, you may want to wait before jumping into a consulting arrangement. Consider going to conferences or reading industry publications and literature to enhance your knowledge as a first step in changing your business. Both you and the consultant will benefit from waiting until specific needs are identified.
Consultants can be divided into two major categories: expert consultants and process consultants.
Expert consultants are rare and costly. Experts are typically so revered that what they say goes.
Process consultants are more common and less costly. Process consultants help clients solve their own problems by making them aware of organizational processes, typical consequences and techniques for stimulating change. Instead of passing on technical knowledge, process consultants ask questions and employ active listening, collect and compare data, and provide feedback. By going through this process, clients begin to diagnose and solve their own problems. Clients often experience "aha" moments when responding to consultants' questions.
This iterative process of questioning the adviser, collecting data and then refining questions and re-questioning the adviser helps ensure that the consultant and the client arrive at similar conclusions. The process consultant may require more time to create a set of recommendations, but the client usually perceives the recommendations as valuable and viable toward creating positive change.
Characteristics and Style
The best-case scenario is one where your style of learning and applying change matches that of the consultant. For example, many consultants will use an educational orientation when presenting the pros and cons of different approaches and will then allow clients to choose which approach is best for them. This method is especially effective when backed up by real-life examples of how the consultant worked with other clients on similar issues.
In all cases, you should be able to assume that your interaction with the consultant will be confidential. However, you still may want to obtain your consultant's written confidentiality policy.
Most consultants will create some type of consulting engagement or description that defines what services will be provided and when and where the services will be delivered. Data collection, data analysis and presentation of findings/recommendations are three common components of a proposal. Read this document thoroughly and make sure it outlines the array of avenues the consultant will use. For example, you may be surprised to learn that all work is done over the phone or Internet when you had expected on-site visits.
Both the consultant and client should watch for design creep. Much like building a house, the little changes made here and there add up. Don't be surprised if a consultant reminds you of the terms of the engagement if you ask for something outside the scope of the original agreement. Most consultants want to meet the needs of their clients, but they do have to charge for extra time, expenses and manpower that come outside of the original scope of work.
Finally, as the client, don't expect someone else to do all the work. Improving your business involves significant effort on your part. You will need to put in your own time to address, build upon and implement the ideas you and your consultant come up with together.
Timing a consulting engagement can be challenging. It is hard to find a good time for making changes, but there are times that are better than others. In general, it is not wise to seek out a consultant when you or your business is already undergoing major changes. That's like trying to fix the washing machine while removing the wash. For example, an adviser should not attempt further overhaul when already changing his or her broker-dealer. Revamping all your processes while transitioning clients may be overwhelming.
The cost of consulting services varies dramatically. At a minimum find out:
- Does the consultant charge by the hour, half day or full day?
- How often are bills sent?
- Is there a down payment on the engagement?
- Is there any type of guarantee?
Check your own pricing assumptions. If consultants are charging premium prices, make sure they are providing premium services, and that you are not paying simply for an illusion of greater value. To make this more poignant, try this analogy. Is every financial adviser who charges a fee two times higher than average worth it? You get the point.
What if you don't get what you expected? Typically, it is to the consultant's and client's advantage to have a process for checking in at every step along the way. This helps to ensure that the alignment of adviser and consultant expectations is not left to chance at the end of the engagement. No one is perfect and the legitimate consultant will make alignment checking and mid-course corrections a routine part of any engagement. In fact, one litmus test of legitimate consulting is no surprises.
Good consultants love to problem-solve. They are committed to the client's goals and to addressing the issues that get in the way. This focus on the client first and foremost creates a working relationship that can yield powerful results.
Joni Youngwirth is the managing principal of practice management at Commonwealth Financial Network in Waltham, Mass. and also serves on the editorial advisory board of Practice Management Solutions. She can be reached at email@example.com.
Due Diligence: Questions to Ask a Potential Consultant
Due to the wide range of consultants and services available, you should practice due diligence when making your choice. Here are a few questions to ask a potential consultant:
- Which consultant or consultants will you be working with?
- How did they become consultants?
- How does their education relate to the areas on which they consult?
- How does their work experience relate to the areas on which they consult?
- How many years do they have working in the financial services industry?
- Is their experience relevant to your needs?
- What are their favorite issues/problems with which to help clients?
- How many years have they supported themselves solely through consulting work?
- Are they multi-disciplined?
- What percentage of their annual revenue comes from consulting?
- How many client engagements do they take on in a year?
- What percentage of their business is repeat business?
- What is an example of a repeat engagement with a client?
- Does the consultant know your industry's terminology?
- While a consultant may have specific expertise, do they understand how different parts of your business fit together?
- Does the consultant have the capacity (time and energy) to do the job?
In addition to asking questions, you should also check references. Of course, most references provided by the consultants themselves will be glowing. It is a good idea to seek out additional opinions by finding people who have used their services on your own.
Most consultants will have books, publications, Web sites, brochures, seminars and webinars for you to learn about what they do. Do these materials help you truly understand their services? Good consultants make complex information simple, not more difficult.
Lastly, it is important that you are open to the advice a consultant provides, even if it is feedback that you don't want to hear.