In my Jan. 28 blog for ThinkAdvisor.com, “How to Make Owner-Advisors’ Lives Less Lonely at the Top,” I talked about the challenges that many owner-advisors face as their firms grow and they transition from primary revenue generator to CEO. We find that many owners have a hard time coming to grips with the reality that as their businesses get larger, their success increasingly depends on their employees — and decreasingly on their own actions.
To add value in this new role, owners have to shift their focus from being the “star” to supporting the success of their partners and employees. In that blog, I detailed some of the ways that CEOs can succeed in this new job: providing the right tools and training, creating a culture of teamwork, offering motivating compensation packages and really listening to employees, both about the challenges, needs and opportunities of their specific jobs, and about their goals and dreams so they can help them get there.
But to truly add value as a firm CEO, or majority owner, advisors need to become leaders — the person who sets the direction in which the firm is heading and inspires everyone in the firm to work toward that vision. In our experience, we’ve found there are many paths an owner-advisor can take to fill this role. However, CEOs must choose the management style that’s right for them — that truly fits their personality and their nature — and fill other key roles with people who fit into them as well.
Here’s a list of different management styles that we’ve seen work for advisory firm leaders.
In our experience, nine out of 10 advisors who have started their own independent firm consider themselves to be a visionary. I don’t mean to be harsh here, but the simple fact is that most of them aren’t. Launching a business that offers essentially the same services to the same target market as thousands of other existing firms is not a “vision.” Now, I’m not downplaying the courage and determination it takes to start your own business: been there, done that. But that doesn’t make us visionaries, it makes us entrepreneurs.
Real visionaries see opportunities that other people haven’t and create businesses to fill that need. They hate routine and being managed. They are constantly looking for what’s new, better and sometimes just different. They adore discussion and debate. Visionaries are also comfortable with ambiguity and like taking risks. They like to try new things and tend to trust their own judgment. And they aren’t wedded to past decisions: If something isn’t working out, they are usually willing to pull the plug.
While they have to be careful about acting rashly, visionaries are usually passionate about the benefit of the whole, focusing on ideas that will benefit the entire team. Their strength is listening to ideas from everyone in the firm, but they have to be careful not to assume knowledge about areas where they no longer have direct experiences.
Visionaries’ drive to make things better can improve firms of any size, but their aversion to routine can make them feel frustrated in smaller firms. Their ideal position is with large firms that want to grow even bigger.
Here are some examples of notable visionaries: Bill Gates and Paul Allen creating the first desktop computers. (When they pitched t
heir idea to then IBM chairman Tom Watson, he famously replied, “Business executives will never want to have computers on their desks.” A classic example of “lack of vision.”) Other visionaries include Steve Jobs and Steve Wozniak, and their user-friendly computer desktop; and the creation of Facebook by Mark Zuckerberg. In the financial world, we might include Fidelity Investment’s Ned Johnson and the launch of money market funds back in the early 1970s; John Bogle and Vanguard’s low-cost investment funds; the founders of NAPFA, who created “fee-only financial planning” in the early 1980s; and Schwab Advisor Services and the automatic deduction of asset management fees in the late ’80s. Launching an independent advisory firm within the past 20 years? Not so much. (Yes, it’s true that all advisory firms need a “vision” for their future, but that still doesn’t make owner-advisors into Michael Bloombergs.)
With that said, even if you’re not a visionary, there are plenty of other ways to lead a successful advisory firm.