Pacific Ridge Wealth: 20% AUM Growth via Optimized Capacity Planning

Pacific Ridge Wealth: 20% AUM Growth via Optimized Capacity Planning

Executive Summary

Pacific Ridge Wealth, a growing RIA firm, struggled with capacity constraints due to a surge in new clients, leading to service bottlenecks and potential client attrition. Golden Door Asset collaborated with Pacific Ridge to implement a data-driven capacity planning model, identifying key resource limitations and optimizing team workloads. This strategic initiative resulted in a 20% increase in Assets Under Management (AUM) within 18 months and a 15% improvement in client satisfaction scores.

The Challenge

Pacific Ridge Wealth, a boutique RIA firm managing approximately $250 million in AUM, experienced significant growth over the past two years, adding an average of 10-15 new high-net-worth clients per quarter. This rapid expansion, while positive, began to strain the firm's operational capacity. Specifically, Robert Nakamura, the firm's founder and lead advisor, recognized the following challenges:

• Client Onboarding Delays: The onboarding process, involving detailed financial planning and investment strategy development, was taking an average of 6 weeks per client, significantly exceeding the desired timeframe of 4 weeks. This delay led to frustration among new clients, some of whom expressed concerns about the perceived lack of immediate attention.

• Service Responsiveness Issues: Existing clients were experiencing longer response times to inquiries and requests. The average turnaround time for responding to client emails and phone calls had increased from 24 hours to nearly 48 hours. Some clients felt that the personalized service they had initially valued was being compromised.

• Advisor Burnout: The increased workload was impacting the advisors' ability to maintain a healthy work-life balance. Advisors were working longer hours to keep up with client demands, leading to increased stress and potential burnout. The firm risked losing valuable employees if the situation wasn't addressed.

• Missed Opportunities: The internal bottlenecks were preventing the firm from actively pursuing new business development opportunities. Advisors were spending the majority of their time managing existing clients, leaving little time for prospecting and marketing initiatives. Robert estimated that the firm was missing out on the opportunity to acquire at least $10 million in additional AUM per year due to these capacity constraints.

These challenges highlighted the urgent need for a strategic solution to optimize Pacific Ridge Wealth's operational capacity and ensure sustainable growth. The firm recognized that simply adding more staff without addressing the underlying inefficiencies would not be an effective long-term solution.

The Approach

Golden Door Asset worked closely with Robert and his team at Pacific Ridge Wealth to develop and implement a comprehensive capacity planning model. Our approach was structured around the following key steps:

1. Data Collection and Analysis: We began by collecting and analyzing relevant data from Pacific Ridge's existing systems, including their CRM (Redtail) and financial planning software (eMoney). This data included information on client demographics, service requests, advisor workloads, and onboarding timelines.

2. Workflow Mapping: We mapped out the key workflows involved in client onboarding and ongoing service delivery. This involved identifying all the tasks, resources, and time required for each step in the process. This exercise revealed several inefficiencies, such as redundant data entry and manual processes that could be automated.

3. Capacity Modeling: Using the collected data and workflow maps, we developed a capacity model that quantified the firm's existing capacity and identified key resource constraints. The model revealed that the financial planning team was the biggest bottleneck, spending an average of 25 hours per client on financial plan creation and updates.

4. Solution Design: Based on the capacity model, we developed a set of recommendations to optimize the firm's capacity. These recommendations included:

   • Technology Implementation: Implementing a document management system to streamline client onboarding and reduce paperwork.
   • Role Specialization: Creating a dedicated client service team to handle routine inquiries and administrative tasks, freeing up advisors to focus on more complex client needs.
   • Process Automation: Automating key processes, such as account opening and client reporting, using technology integrations.
   • Capacity Monitoring: Establishing key performance indicators (KPIs) to track capacity utilization and identify potential bottlenecks.

5. Implementation and Training: We worked with Pacific Ridge Wealth to implement the recommended changes, providing training and support to ensure a smooth transition. This included setting up new technology systems, defining roles and responsibilities, and developing standard operating procedures.

The overarching strategic thinking was to shift Pacific Ridge from a reactive to a proactive model for capacity management, enabling them to anticipate future growth needs and optimize resource allocation accordingly. This also meant empowering the team to leverage data-driven insights to make informed decisions about staffing and process improvements.

Technical Implementation

The technical implementation of the capacity planning model involved several key components:

• Data Extraction and Integration: We used APIs to extract data from Redtail and eMoney, focusing on client demographics, account holdings, financial plans, and service interactions. The data was cleaned and transformed into a structured format suitable for analysis.

• Capacity Model Development: We built the capacity model using spreadsheet software (Google Sheets) and integrated with data visualization tools (Tableau) to present key findings. The model incorporated various factors, including the number of clients, the complexity of their financial needs, and the time required for different service tasks.

  • Financial Planning Hours Calculation: This was a critical aspect. We analyzed eMoney data to estimate hours spent on financial planning per client based on net worth and complexity. For example, clients with a net worth between $1 million and $3 million typically required 20 hours of initial plan creation and 5 hours annually for updates. Clients above $3 million required 30 initial hours and 8 annual hours.

  • Administrative Task Time Tracking: We used Redtail workflows and tracked the average time spent on common administrative tasks like account opening ($1.5 hours/account), statement reconciliation (0.5 hours/month/client), and compliance reporting (2 hours/quarter/client).

• Technology Implementation and Integration: The implementation of the document management system involved integrating it with Redtail to streamline client onboarding. We also automated the process of generating client reports using data from eMoney and Redtail. This reduced the time required for report preparation from 2 hours per client per quarter to just 30 minutes.

• Project Management: We used Asana to manage the implementation of the capacity planning model, assigning tasks, tracking progress, and ensuring accountability. Regular meetings were held to discuss progress, address challenges, and make necessary adjustments.

• KPI Monitoring: We set up dashboards in Tableau to monitor key performance indicators (KPIs) such as client onboarding time, service response time, advisor workload, and client satisfaction. These dashboards provided real-time visibility into the firm's capacity utilization and helped identify potential bottlenecks. We also used formulas in spreadsheets to compute staff utilization rate based on billable hours divided by total available hours. A target utilization rate of 80% was set for advisors.

Results & ROI

The implementation of the capacity planning model yielded significant results for Pacific Ridge Wealth:

• AUM Growth: Within 18 months, Pacific Ridge Wealth's AUM grew by 20%, from $250 million to $300 million. This growth was attributed to the firm's ability to efficiently onboard new clients and provide excellent service to existing clients. They secured and onboarded 30 new clients with an average AUM of $1.67 million each.

• Client Satisfaction Improvement: Client satisfaction scores, measured through regular surveys, increased by 15%. Clients reported improved service responsiveness and a greater sense of being valued.

• Onboarding Time Reduction: The average client onboarding time decreased from 6 weeks to 4 weeks, resulting in a more positive experience for new clients.

• Service Response Time Improvement: The average turnaround time for responding to client inquiries decreased from 48 hours to 24 hours, improving client communication and satisfaction.

• Advisor Workload Reduction: The implementation of the client service team and process automation reduced the advisors' administrative workload by an estimated 20%, allowing them to focus on more strategic activities, such as client relationship management and business development.

• Increased Efficiency: The team increased the number of clients served per advisor by 15%

• Cost Savings: Automating reporting and onboarding saved an estimated $20,000 per year in administrative costs.

These results demonstrate the significant impact that capacity planning can have on an RIA firm's growth, profitability, and client satisfaction.

Key Takeaways

For other RIAs and wealth managers considering similar initiatives, we recommend the following key takeaways:

1. Data-Driven Decision Making: Leverage data from your existing systems to gain a clear understanding of your firm's capacity and identify potential bottlenecks.
2. Workflow Optimization: Map out your key workflows to identify inefficiencies and opportunities for automation.
3. Technology Adoption: Embrace technology solutions to streamline processes and improve efficiency.
4. Role Specialization: Consider implementing role specialization to optimize resource allocation and improve employee satisfaction.
5. Continuous Monitoring: Continuously monitor your firm's capacity utilization and make adjustments as needed to ensure sustainable growth.

About Golden Door Asset

Golden Door Asset builds AI-powered intelligence tools for RIAs. Our platform helps advisors identify capacity bottlenecks, optimize workflows, and enhance client engagement. Visit our tools to see how we can help your practice.