Dynasty President and CEO Shirl Penney

Attracting more clients to grow the business is a  constant challenge for RIA firms, and it was the subject of a lively discussion at Schwab Impact 2018.

“Being a fiduciary and independent won’t be enough” for firms to differentiate themselves in an increasingly competitive market, according to Salim Ramji, head of BlackRock’s U.S. Wealth Advisory business, who introduced the panel of three successful entrepreneurial CEOs who work with RIA firms: Eric Clarke of Orion Advisor Services, Joe Duran of United Capital Financial Partners and Shirl Penney of Dynasty Financial Partners.

All three offered their analysis and prescriptions for how RIA firms can grow organically and from mergers and acquisitions, often piggybacking on the suggestions of each other.

Here are some of their recommendations and the key factors they said advisors should keep in mind.

1. Enhance the Client Experience

“There’s nothing more important for the survivability of your business than client experience,” Duran said.

A client’s digital experience is key, according to Penney. “If you’re not on your client’s phone — and they are on their phones six or seven hours a day — you run risk of becoming irrelevant for high-net-worth clients.”

A favorable client experience can also translate into referrals, which is the No. 1 way advisors grow their business, said Clarke, who favors an open architecture. “Your brand depends on what your clients think.”

“Consumers want to feel important. Make they feel important. That way you retain your fee,” said Duran.

“There are two things clients care about,” said Penney, “experience and the competency of your advice.”

2. Embrace Technology

Technology is the great equalizer,” said Clarke. The right technology can help advisory firms not only differentiate the client experience but also increase return on investment.

With the right technology put in place and staff managed appropriately, technology can free up time for advisors to focus on the services that their clients care about and help the firm to grow, said Penney.

But technology must must integrate seamlessly with service delivery, like the way Amazon and Netflix operate, so consumers know what they’re getting, said Duran. “The consumer has to be at the center.” He suggested that firms check the growth of revenue per employee. To check if they’re investing enough in technology.

3. Take Advantage of Huge Demographic Shifts

Consult on business succession and transition of your clients, said Clarke. Baby boomers who own a family businesses could have a “liquidation event” to fund their retirement, which is a “huge demographic opportunity. Boomers have all the money.”

But don’t forget the Gen Xers, Duran said. They are “the most influential and underrated generation” and they will eventually get the money.

4. Check Staffing Levels

Staffing costs are the biggest item on advisor P&Ls, and 90% “of the RIAs we meet are overstaffed,” said Penney. Also, “make sure to have right staff,” said Clarke.

Penney suggested that firms consider adding a chief of staff to help develop talent for their firm and deal with administrative operations.

He also recommended that firms adopt a business model that’s tied to revenue. Then, as the firm grows, it will a have sense of whether to add staff or tech, or open another office. “This can help move you from a world-class advisor to world-class CEO.”

5. Grow Organically and Inorganically

There are 700 RIA firms with $1 billion or more in assets under management, and they’re winning disproportionately more business, said Penney.  “Have people dedicated to both means of growth. The best firms do.”

When considering an M&A deal, “Incorporate integration costs into the costs,” said Duran.  noting that the failure to do so will likely mean the deal is much more expensive than you think.

Also, “If you think you’re getting an interesting deal, I promise you it’s expensive. Be realistic about actual economics.”

6. Disrupt Your Own Business and Ask the Hard Questions

Firms that are willing to disrupt their own models by leveraging technologies and tools will improve their margins and drive profitability, said Clarke. “If you’re not willing to change, you’re at risk.”

“Ask yourself what if I’m wrong? What could you do differently?” said Duran, noting that sacred cows could be holding you back from being all you can be. He noted that every 18 months his firm asks “how can we beat United Capital?”

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