If Only every Firms Were Doing Likewise!

To avoid cutting staff, investment advisory firms are reducing expenses from top to bottom.
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Office and equipment leases, as well as travel and health costs, are being scrutinized and trimmed — as are newspaper subscriptions, post-age and even coffee.
"Every discretionary expense now must be justified," said Scott Smith, a senior analyst with Boston-based Cerulli Associates Inc., who said that firms are firing vendors and making hard choices about costs in order to prevent layoffs.
"They're asking themselves whether they need The Wall Street Journal, the Financial Times, The New York Times and the local newspaper," he said. "Every dollar now has to be tied to creating revenue."
Shannon Eusey, president of Beacon Pointe Advisors in Newport Beach, Calif., which manages $3.5 billion, now scrutinizes every invoice that comes across her desk and has phoned every vendor to negotiate new contracts.
While the biggest savings came through a renegotiation of health care coverage for her 18-employee firm, she said her review of subscriptions, postage and cable fees has saved tens of thousands of dollars.
Ms. Eusey cited a 60% reduction in shipping costs through an arrangement that her custodian, The Charles Schwab Corp. of San Francisco, offers through UPS of Atlanta. She also uses other affinity programs offered by Schwab.
Schwab, as well as other large custodians and broker-dealers, say advisers are cutting costs across the board.
At Jersey City, N.J.-based TD Ameritrade Institutional, which serves 4,500 advisers, Brian Stimpfl, managing director of advisory and industry affairs, said his team has consulted 400 advisory firms in the past six months, and some have cut costs by as much as 40%.
"We're seeing them get a lot of savings by redeploying employees into revenue-generating areas," he said.
Advisers at LPL Financial of Boston also are slashing expenses, said Sal Zambito, the company's San Diego-based senior vice president of business development, who works closely with the top 500 advisory branches of LPL's nearly 12,000 advisers.
Legend Financial Advisors Inc. of Pittsburgh has cut its expenses as much as possible and is now focusing on employee perks, said Jim Holtzman, an adviser with the firm, which manages $320 million.
Each month, Legend hosts a special event for its work force, which includes 17 full-time employees. In the past, they've played laser tag and miniature golf, gone to baseball games and bowled. Now they're ordering pizza, playing board games in the office and asking employees to bring in movies for a movie day.
"You don't want to be laying people off one week and then go bowling the following week," Mr. Holtz-man said.
"There's a perception issue," he said. "We haven't had to lay anyone off, and don't want to. We want to make sure we take all of the steps first. If we have to, then we have to."
Homrich & Berg Inc. in Atlanta is saving about $50,000 this year by eliminating its annual golf outing for clients and an annual retreat for employees.
"The reaction by clients has been very positive," president Andy Berg said of the decision to cancel the golf outing. "If we had gone ahead and done it, clients told us they would have been surprised."
The firm also has frozen salaries and reduced contributions to its profit-sharing plan for the firm's 55 employees, turned its weekly happy hour into a monthly event and eliminated free snacks. So far this year, it has cut $100,000 from its budget and is trying to renegotiate its lease — which would be a huge savings, Mr. Berg said.
"Happy hour is a fun thing, and we hated to [make it less frequent]," he said. "But this is all being done to avoid layoffs."
While Homrich & Berg is still gaining clients, assets are down from $2.1 billion a year ago to $1.7 billion.
Bryan Place, a certified financial planner with Place Financial Advisors in Manlius, N.Y., found he could save money by dumping single-service coffee machines and using larger coffee makers. His six-person firm, which manages $100 million in assets, also dropped a $140-a-month interoffice online calendar service in favor of a free online Google calendar.
While advisers are loath to cut their marketing budgets, Mr. Place recently canceled a $1,000-a-month service that was trying to capture greater attention for the firm's website from search engines.
"Maybe it's healthy to do this when times are good," Mr. Place said. "Maybe there were little things we were overpaying for because we were fat, dumb and happy. Now that we're not fat, dumb and happy, we're trying to eliminate the things we can."