Together with Moss Adams, Pershing Advisor Solutions–the advisor custody arm of The Bank of New York Mellon–has released a new study called Fast Forward: The Advisor of the Future, which argues that ” the advisor of the future will be evaluated on “ three C’s”–change, capacity, and culture.
Change: The average RIA firm is expected to triple in size over the next five years, and in order to increase revenue and owner income, these firms need to be thoughtful when making hiring decisions, “stretching beyond the tendency to simply add more advisors.” The study also suggests that firm owners need to consider expanding their practices by creating more “sophisticated” organizational structures that include support functions, dedicated management positions, and specialists such as financial planning experts and tax professionals, since developing employees who can drive cultural change and enter leadership roles will help to boost retention, extend the span of control, and ensure succession when an owner decides to make a transition.
Capacity: Firms that have high productivity but no free capacity have struggled to grow, the study reveals. In fact, firms that reported the highest productivity in 2003 had a difficult time capturing the opportunity the market presented in 2004. Also, firms that grew very fast had excess capacity and lower productivity levels. “A firm that has aspirations to grow quickly has to maintain the capacity to do so at all times and be ready to capture opportunity when it presents itself,” the research reads.