Do You Really Need a Full-Time CFO?

The Value of an Outsourced CFO

Whether you are searching for the right full-time employee but need someone right now, training someone internally, need a person with exceptional experience who can handle the complexity of your business or you just don’t need a fulltime position, outsourcing your Chief Financial Officer (CFO) role makes sense. Oyster’s General Counsel Bob Mooney and Consultant Fred Wagstaff share their thoughts on the value of hiring a fractional CFO. 

Transcript

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Libby Hall:   Hi, and welcome to the Oyster Stew podcast. I’m Libby Hall, Director of Communications for Oyster Consulting. Whether you are searching for the right full-time employee but need someone in the chair right now, training someone internally, need a person with exceptional experience who can handle the complexity of your business, or you just don’t need a full-time position, outsourcing a role can make sense.  Today, Oyster’s general counsel Bob Mooney, and consultant, Fred Wagstaff, share their thoughts on the value of hiring a fractional CFO. Let’s get started.

Bob Mooney:   Hello, my name’s Bob Mooney, and I’m the General Counsel for Oyster Consulting. I’m here today with Fred Wagstaff. Fred is an expert in our finance practice group with over 40 years’ experience in broker dealer and investment advisory financial matters, including mergers and acquisitions, regulatory filings, and net capital and financial statement preparation. To learn more about Fred in the Oyster Finance practice, please visit our website. Fred, what is a fractional CFO and how does it differ from an outsourced CFO, or an interim CFO?

Fred Wagstaff:   Sure, Bob, first let’s take a look at the interim CFO. You know, there are times in an organization when their CFO vacates his, or her, position, and the firm has a need to fill that position and that slot for a period of time.  The vacancy could arise for a variety of reasons, such as, voluntary, or involuntary termination or a rotation into a different position within the company.  In those situations, it’s important to fill the slot quickly.  I think in order to maintain continuity for that role keeping the train on the track, so to speak, until such time the full-time replacement CFO can be hired, then a fractional CFO or an outsourced CFO or even an outsourced controller on the other hand provides a service to an organization where there’s not a need for a full-time equivalent, basically.

In that case, the services that are provided are dependent on the needs of the organization. For example, a fractional CFO could be responsible for specific projects that may need to be completed like account reconciliation review, working with the firm’s external auditors, oversight, leadership of the firm’s accounting staff, items like that.  No two firms are alike.  Therefore, the role of a fractional CFO, is tailored to meet the needs of the organization.

Bob Mooney:   Specifically focusing on broker dealers and registered investment advisors, how can a fractional CFO provide value?

Fred Wagstaff:   Sure, Bob, in a broker dealer or in the RIA space, there are always going to be opportunities both on the buy side and the sell side, for firms to consider.  A fractional CFO can certainly assist firms in developing a strategy to move them forward regardless of which side they’re on. Once the strategy is determined, a fractional CFO can assist in either developing or reviewing due diligence requests and material, and then assisting in the post-closing implementation process.

Bob Mooney:   When a firm is considering bringing in a fractional CFO, what are the types of qualifications and experience they should be looking for?

Fred Wagstaff:   In my opinion, a strong CFO, first and foremost, should have a good number of years’ experience, like 15 or 20 years or more experience and to have worked at several different organizations, in order to have insight to different perspectives, different needs and different solutions. It goes without saying that a strong CFO needs to have a good accounting background and is able to execute the monthly and quarterly and annual close cycles. But a good CFO should also be a good leader and a good communicator that can work, not only with the accounting staff, but with others within the firm, the executives, the department heads, and the staff to help them achieve their strategic goals.

Bob Mooney:   Fred, I know from mergers and acquisitions that I’ve been involved in, it is a learning experience, and I was much better qualified to be successful on the last merger I did, rather than the first. From your perspective and the experience you’ve had in mergers and acquisition, how could a fractional CFO help a company?

Fred Wagstaff:   Yeah, you’re dead, right.  When you say you learn a lot through experience, that’s one of the reasons why I said what I said just a minute ago, you need somebody with a lot of experience, right? And in my past role on the private side, before I was a consultant at Oyster, I’ve gone through multiple mergers and acquisitions.  And I think those experiences, because each of them are unique, you do learn a lot in terms of what it’s all about, how you go through the process, the due diligence that takes place, the implementation post close of the deal, all those kinds of things are extremely important. And then you’ll learn a lot. So a fractional CFO can help in all of those situations.

And they’d go from even pre due diligence phase of where you’re considering either buying or selling a firm.  And then as you go through that due diligence process, there’s a lot that takes place.  There’s a lot of number crunching that goes on, and that can certainly be something that a fractional CFO could do as well. And then on the post close side of it, kind of the same thing. There’s a lot of work to be done after the deal actually closes and implementing and consolidating the firms to together. So fractional CFO could certainly help in that process, a great deal.

Bob Mooney:   Fred, we’ve talked about the type of work a fractional CFO can do, and what types of qualifications a firm should look for. Let’s talk a little bit about the cost of a fractional  CFO.  How can a firm determine whether it makes sense to hire one?

Fred Wagstaff:    This is a pretty easy one to answer in my view.  If a firm does not have a need to hire a full-time CFO, it certainly makes sense to fill that position with an outsourced CFO. That’s pretty simple. The position is obviously needed. So if you can replace it via outsourcing and do away with the full-time salary, benefits, and overhead cost of a full-time person, it just makes sense.

Bob Mooney:   Fred, from your experience, what are the characteristics of a successful fractional CFO engagement and what type of projects have you worked on?

Fred Wagstaff:   Well, there are a couple of examples I can use for projects I’ve worked on while at Oyster. I’ve worked with a startup broker dealer to help them set up an automated process to be able to do their regulatory reporting for their mortgage backed TBA business. I’ve also assisted a CFO of a broker dealer who was being acquired by another larger national firm, in their monthly and quarterly closing cycles as they approached the closing date of the transaction. So, as I’ve stated a little earlier, no two firms are the same and so are their needs.

Bob Mooney:   Fred, thanks so much for your time this afternoon discussing the outsourced CFO role. I’d like to thank everyone who took the time to, to listen to this podcast. If you’d like to learn more about Fred’s practice and the Oyster Finance Practice, please visit our website@oysterllc.com.

Libby Hall:   Thanks everyone for listening. If you’d like to learn more about our experts and how Oyster can help your firm, visit our website@oysterllc.com. And if you’d like what you heard today, follow us on whatever platform you listen to and give us a review, reviews, make it easier for people to find us. Have a great day.