Podcast Center
Video Center
Webcasts
Resource Center
Events
October 02, 2017 at 08:00 PM
In my Aug. 10 ThinkAdvisor.com blog, “The Terrible Twos: The Key Decision Point for Advisory Business Growth,” I wrote about owners of independent advisory businesses who want to grow beyond $2 million in annual revenues. At that point in a business-growth curve, there is one key decision to be made, and it’s a personal one for the business owner: Do I want to become the chief executive officer?
You’re probably asking yourself whether this is a trick question, but I can assure you that it isn’t. Being a CEO is a very different job than being a financial advisor — even an owner-advisor. In my experience, many firm-owners-turned-CEOs quickly find that they don’t like their new job.
(Related: The Four People Advisors Need on Their Team Before Trouble Starts)
With that said, if your personal goals include growing your business to $1 billion in client AUM, your options are limited. Yes, you can bring in someone from the outside or elevate one of your partners. But in my experience, it’s very difficult for the owner to completely stay out of day-to-day management decisions. The resulting confusion can seriously damage your business.
If you decide that you’re going to assume the CEO role yourself, you’re still going to find some bumps in the road. Not only are you going to have to stop working directly with clients, you’re going to have to change your attitude toward your business and your role in it — and it’s going to be a very different role. That means that you’re going to have to do some changing, too.
As I wrote in the above-mentioned blog, when you become CEO of a growing advisory business you have to say goodbye to working with clients, being a financial advisor, being a revenue producer and having a flexible lifestyle, and you’re going to have to say “hello” to a much more demanding full-time job.
CEOs don’t actually do anything. Instead, they make decisions about what other people are going to do, or try to do, make sure those people have what they need to do it, and then help them evaluate the results. For many advisors — most of whom tend to be “doers” — this role can be very frustrating.
What’s more, when you’re managing a bigger business and trying to grow it even larger, you’ll need to be accessible almost 24/7; which can put a crimp in that flexible lifestyle that many owners of smaller businesses are used to having.
If you’ve decided that the CEO role is for you or that it’s worth it to grow a $1 billion business, then here are a few suggestions on how to make your new job a success:
Make the mental transition to your new job. To help my clients understand how their role in the business is going to change, I take them through a simple exercise. I ask them to draw two stick figures on a piece of paper, one right next to the other. Then I ask them to write “asset” above one figure and “leader” above the other. The assets in your business are the advisors, who bring in the revenues. The leader is the person who makes the decisions about who does what and when. Then I tell them: “To get to $1 billion, you have to have both. You can be one or the other, but you can’t be both.”
Don’t run away. I know, sounds like I’m kidding. Sadly, I’m not. In my experience, most CEOs in the advisory industry are runaway CEOs: They don’t know what they are doing in their new jobs, so they run away from it. Some go back to working with clients, others play golf or find other reasons to be out of the office most of the time, or they are so overwhelmed that they don’t do anything at all — they won’t manage the business, look at the financials, focus on training or talk to their team members.
I know that CEOs are running away when they push their staff away and make decisions quickly, without any input. They are trying to convince themselves that their decisions are good ones, but are afraid to ask for feedback because someone might disagree. They run away so they don’t have to take responsibility, and they blame other people when the outcomes are bad.
