CFOI’ve often written about outsourcing senior management talent instead of buying it.  I believe the most important person to oursource for your wealth management firm should be a CFO (Chief Financial Officer.)  This person can help you learn the language of finance and then help with strategic activities to move your company forward.

The question you should answer is what type of CFO do I need?  There are two major skill sets that you will eventually need as you move towards a company that has more sophistication and value. 

The first type of CFO is a tactical CFO.  This person will help you put a basic bookkeeping system together that provides timely and accurate reports.  They often will work developing a chart of accounts to help you account for financial activities in your company in methods that will give you good basic historical information.

The tactical CFO will work with your staff to train them on making sure you have great systems where your numbers are tied down on a monthly basis.  When I had my vending company I insisted on tied down statements by the fifteenth of the following month.  This means that if the month ended on January 31st, I would have a complete set of accurate financial statements by February 15th.

In the wealth management world, there is absolutely and I mean absolutely no reason you shouldn’t have fully tied down reports by the 10th of the following month.  Let’s face it, your business isn’t that complicated.

A tactical CFO should help you learn how to read your statements. 

Unfortunately too many private business owners don’t know how to read financial statements.  Your tactical CFO can help you understand not only your profit & loss and balance sheets, but your cash flow statement as well.  (In case you didn’t know, the cash flow statement is much more important than any other statement.)

You need to know that private businesses run on cash.  Understanding where your cash comes from as well as where your cash goes is crucial.  Without understanding this part of your reporting system you can be profitable, but run out of cash and then go out of business.

Once you reach tactical excellence, it’s time rent a strategic CFO.

A strategic CFO will help you take numbers that are not part of your normal reporting system and put together key performance indicators as well as drivers for your company.  This strategic CFO can also help you look at the capital structure in your company and help you understand how to fund operations as well as growth.

Strategic finance should always come after your regular reporting is under control.  The challenge for you as an RIA wealth management owner is to understand when to have tactical help and when to have strategic help.  You also will want to know when it’s time to make the move from tactical to strategic. 

You might find that you’ll need a different person for this help and this is the beauty of renting a CFO.  You get to use the proper person for the proper uses.  Not having a full time person on your staff allows you to match the right skills for the right situation.


Topics: Creating Value, For business owners, strategic measurements, cfo, financial analysis

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