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How to Best Lead Your Advisory Firm Today

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As the COVID-19 crisis continues, it is crucial for those running advisory firms to communicate transparently with their teams, weigh economic decisions for the short, medium and long term, and also think about succession plans, according to David DeVoe, founder and managing director of financial services consulting firm DeVoe & Co.

The crisis “continues to be a roller coaster,” he said during a recent webinar “Navigating Your Business Through the Storm,” pointing to two straight days of good news with the stock market “going up and regaining some of the ground,” inspiring one to be “optimistic” — but then you read that “the New York death count is at an all-time high.”

The coronavirus is “affecting the health and well-being of individuals and families and everyone across the country and across the world,” as well as is “clearly affecting the market, and I expect the virus is affecting the very underpinnings of the economy, too,” he said, predicting it “will reverberate for months, quarters and perhaps even years to come.”

We are in “uncharted waters,” and “this is a new beast that we are dealing with,” he said, noting its “magnitude is levels above” the 2008 global financial crisis.

RIAs Are ‘Ninjas’

Right now, advisors can underscore to their clients just how invaluable they are. DeVoe explained: “You’re working with clients. You are holding their hands. You are rebalancing their portfolios quite actively. You’re probably starting to recalibrate their financial plans.

“You’re doing what advisors, what independent advisors, what RIAs do best in this environment,” he explained. “This is where RIAs differentiate themselves from robo-advisors or wirehouses, even IBD models. This is truly where you shine.”

DeVoe conceded “you guys are ninjas at this [and] there’s not a lot of advice or guidance I can give” on what advisors should be doing right now when it comes to dealing with their clients.

But he urged advisors to “apply the same concept to your staff,” because that staff is “really the success driver for any RIA.” You “should hold their hands” also because “this is a shock to their system” and they face a lot of uncertainty, just like a firm’s clients, he noted.

When planning for the future, it is best to consider the short term the next quarter, the midterm the following two quarters, and the long term the next year or two, DeVoe said.

The question mark in all of this, however, is uncertainty about the virus itself and when concern over it will significantly decline, the consultant noted. The strategic plans for your business, including how you expect it to perform, should factor in four key factors:

  1. The number of COVID cases
  2. Government rules and society behaviors
  3. Stock market performance
  4. Impact on the economy

The market dropped 22% from Dec. 31 through April 7, and that decline has translated into a 13% decline in revenues for an RIA on average, he added. That revenue decline stands to have a “profound impact on the profitability of the firm” — potentially about 46% for the first quarter, he warned.

Advisors really need to figure out at what point, if the situation continues to be negative or worse than expected, they will have to implement staff-wide reductions at the firm, he pointed out.

“You don’t want to think about this on the fly,” DeVoe warned, adding: “This is the right time to start thinking through” how much “friction” your company can sustain in any given scenario.

Silver Linings?

During the Q&A, DeVoe was asked if there was any good news amid the gloom and doom. “There are some silver linings out there,” he said.

“The bad news can itself be a silver lining. Bad news can drive behavior. As human beings, we’ve seen that when there’s suffering or we lose a loved one, we start to reflect on life — our priorities. So this shock to the system can help us calibrate what’s most important to us,” according to the consultant.

This could lead to more advisors thinking through their succession plans and putting them in place, he said, stressing just how important that is for an advisory firm, the consultant explained.

Jeff Berman is a staff reporter at ThinkAdvisor. Reach him at [email protected].


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