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December 01, 2006 at 02:00 AM
Does your firm’s structure tend to isolate skilled, entrepreneurial talent near the top, so that only a few key individuals are capable of managing the needs of your high-net-worth clients? If the answer is yes, you face the risk of limiting your firm’s capacity to grow beyond a certain point. There’s another way in which your firm’s structure will affect your eventual transition from the business: If there is a great divide separating that structure and your long-term goal to retire from a self-sufficient advisory firm on your own timetable, leaving a legacy for your family, and ensuring a smooth transition for your valued clients, it might be appropriate to reexamine your firm’s culture.
After all, that culture did not evolve without your participation. Working with more than 100 RIA firms at BAM Advisor Services, we’re convinced that the opposite applies. Unfortunately, that might lead you to be reluctant to encourage the transition of your more junior partners from assistant to peer.
To accurately assess whether your firm’s structure matches your goal, first imagine a thriving advisory firm with $500 million in assets under management, numerous long-time multigenerational clients, and more than 15 investment advisors supported by a qualified, dedicated administrative staff. This firm’s structure resembles a rectangle.
Compare this model to your firm’s configuration. Does your staff have the skills and motivation necessary to become a world-class team in the very near future–or are you confident that they are already there? To begin, ask yourself these questions:
- Have you and your team committed to a well-developed plan to effect change?
- Do longstanding procedures and traditions still apply to or benefit your firm? If not, have you considered how to shift away from them?
- Should your hiring processes–both search and interview methods–be redesigned to attract suitable candidates?
- As individuals begin to assume new roles, can the firm maintain continuity throughout, based on a carefully designed strategic business plan?
If the answers to the previous questions and the firm-wide changes they may lead to seem overwhelming, you are not alone. In his July 2006 Investment Advisor column, Mark Tibergien wrote that “There is nothing particularly surprising about the angst that both owners and employees have in their relationships with each other. Tension in business is always heightened when communication is poor, career path is unclear, and expectations are unspoken.”
Do You Need an HR Department?
In many ways, empowering individuals firm-wide is essentially a human resources (HR) issue. We’ve seen both CPA and RIA firms without a human resources department, or smaller practices that lack an individual to manage personnel issues, wonder how to address the issue. Our experience at BAM leads me to make the following suggestions:
- Introduce annual/semi-annual evaluations. Reviews would allow associates and team leaders and managers to discuss how each perceives the associate’s progress. Evaluations provide a forum for associates to share their thoughts, for team leaders to recognize an associate’s valuable contributions, and for discussions to take place regarding potential improvements.
