Registered investment advisors are hiring a new cadre of senior managers to grow more strategically and realize long-term business goals. They are evolving from practices into organizations. Now, for the first time, many are adding chief executive officers, chief operating officers and other professional managers.

“These are value creation roles in an organization and not revenue-generating roles,” says Gabriel Garcia, managing director and head of Pershing’s Relationship Management and Consulting Group. The right key executive hires can enable a firm to boost its assets under management and profitability, as well as to enhance its long-term value.

RIAs have been growing at breakneck speed, with assets increasing 17% from 2017 to about $82 trillion dollars in 2018, according to a recent report from the Investment Advisor Association and National Regulatory Services.

Garcia says it may be time for an RIA to bring in professional management when it hits about $750 million in assets under management, is making $5 million in revenue and has 15 or more employees.

Hiring a key executive hire can help the business grow by freeing up the founding advisors to focus on their core competencies in running money or managing client relationships. A dedicated executive manager also can more reliably implement firm goals and allow for speedier decision-making.

Mike Poitrowicz, a founding partner at Legacy Advisors, hired a CEO last June to take over day-to-day management and implement strategy. The firm, based in Plymouth Meeting, Pennsylvania, has $1.6 billion in AUM and 33 employees and is set to grow substantially more.

The partners realized they needed someone to make that happen. That’s why they hired Ron Albahary. The CEO is formulating and executing the firm’s overall business strategy and working closely with those heading the firm’s operations, technology, compliance, legal, marketing, investment and insurance departments. He also manages a four-person client service team.

“A growth strategy is not only about marketing and finding new clients, it’s about creating the infrastructure and ecosystem required to grow the firm,” says Albahary. Since joining the firm, he has created a group of subject-matter experts — in wealth and estate planning, insurance and investment strategy — that advisors can leverage to better service clients. Piotrowicz says, “It’s a great comfort knowing that Ron is in charge of our strategic growth strategy. Nobody was there to execute it before.”

Albahary writes a weekly blog for the firm’s staff, which builds community and fosters teamwork by highlighting the group’s strategic direction. With a highly competent CEO at the helm, Piotrowicz has more time to focus on his core competency: the client-facing activities that he’s enjoyed over the years.

Identifying the Need One $11 billion RIA with four partners had reached a growth impasse and was considering hiring a new business development officer. Its long-term lease also was ending.

Instead, the firm hired a COO to run its daily activities. The new executive reported to the partners about their options for a new lease and handled these negotiations, as well as those with other vendors. Three years later, the firm has grown its clients, assets and profitability, while implementing a new CRM system.

RIA owners who hire executives to run their firms must be prepared to navigate a difficult rite of passage. They are relinquishing some control of day-to-day operations and shifting the focus of clients and staff away from these tasks and onto the firm. But this transition is mandatory for future growth.

Michael Kitces, publisher of the Nerd’s Eye View blog and a partner at Pinnacle Advisory Group, notes that the size of an RIA and how fast it’s growing determine precisely when a firm will need to hire staff, including a COO.

COOs can handle a broad array of functions. And while each firm is different, the heads of a firm’s investment, sales and marketing, operations, human resources and finance departments all report to this executive.

In addition to freeing up the founders to focus on their core competencies, Kitces notes, RIA executives can help lay the foundation for the firm to grow and scale through staff training and team development.

“Advisory firm founders tend to be entrepreneurs that start businesses and are great at finding and servicing clients, but don’t necessarily have the skill set in human capital development that is ultimately crucial to scaling an advisory firm,” says Kitces.

New executives can establish systems and procedures for training new staff, so that new operations employees are brought on board in a fraction of the time it took earlier and are given the right information to succeed. This is far superior to onboarding new hires and having them trained via informal conversations with peers.

In addition, a skilled COO can help cultivate the leadership qualities of key staff members, so these employees can ascend to more senior roles and manage staff as the firm evolves. RIA executives also can generate an ongoing pipeline of potential talent that firms can tap into as they grow. A select group of large and fast-growing RIAs have formalized these functions under the purview of chief people officers (or CPOs).

Plus, executive managers at RIAs can ensure their firms have the requisite technology to both service current clients and support future growth. An appropriate mix of technology can make RIAs attractive to potential buyers or acquisition candidates, and proper decisions about technology can boost the enterprise value of a firm.

As more RIAs hire dedicated professional talent to run their firms, the evolution of financial advisory practices into financial service organizations likely will become more commonplace throughout the industry.

Mark Elzweig is president of executive search consultant firm Mark Elzweig Company, Ltd.