5 Tasks RIAs Must Balance for Growth

Advisory firm owners come to work each day ready to do the feat of excelling in every area of their business while at the same time serving clients. While it’s a noble goal to be great in all that one does, the realities faced by today’s RIA firms tend to make it difficult for firms to master their businesses alone.

And it won’t get easier as RIA competition and consolidation increase. The future of the space will be determined by how well leaders are able to balance multiple areas to grow their firms.

Focus on What’s Important

For the average RIA firm owner, days are spent moving from one fire to the next. If it’s not a client unhappy with aspects of their service, then it may be a team member who is out sick and whose workload needs to be covered. Or it may be a marketing strategy that needs to be developed and deployed.

The problem — and reason — behind this constant shifting of focus is that most firms have limited resources. Even some of the largest RIA firms in the country still are considered “small” businesses in the larger American lexicon of what constitutes a large business.

And while an enterprise operation with hundreds or thousands of employees has the luxury of dedicating entire teams to each business area, most advisory firms do not get to experience this perk of big business. Instead, RIAs must find efficiency and focus in their businesses to grow. In fact, it is focus that enables these firms to grow with consistency, regardless of the competition and how the industry changes and consolidates overtime.

To do this, though, owners must first understand how to change their behaviors to build stronger leadership skills and balance the work that needs done.

Growth Begins with Behavior

While behavioral finance isn’t new, today there’s a major push to study investor behavior and shed light on how their actions and attitudes affect retirement and financial goals.

Yet focusing on behavior is often the last place RIA leaders think to look when analyzing their own firm. Typically, owners want to focus on the services the firm provides to clients or look inward and spend time analyzing or massaging marketing plans. While these are necessary pursuits, the result of all this effort will be wasted time and work if the firm’s leaders don’t look at their actions and behaviors.

Through many years of consulting, I’ve seen that the biggest predictor of growth is leadership behavior, which often results in inconsistency of decisions. In other words, leaders do not know where they want to take their firm, and they do not know what their business really needs.

This “mis-wanting” often leads businesses to pursue many projects, distractions and interruptions in the growth cycle, shifting their focus from one solution to another without any real results.

From a business perspective, one reason for “mis-wanting” is that some leaders tend to give too much weight to a single positive or negative event, allowing their guts to drive the decisions rather than sound business thinking.

Many advisors adjust their business planning because of this mindset. For example, if a client leaves their firm because of a minor issue, it’s tempting for the owner advisor to overreact and focus all their energy, attention and company resources on improving client service, when in fact there may be no real challenge with service. This shift, when it occurs, becomes a major detriment to business growth.

Balancing the Course

Many business leaders, coaches and consultants talk about “staying the course.” But leadership of any business is more about balance than anything else, especially in small businesses such as RIAs.

For RIA leaders to change their behaviors and thus lead their businesses to better growth, they must begin to balance leadership efforts across five core growth levers: client service, operations, human capital, sales and marketing.

• Client Service. Most RIA firms do not sell a product, like mutual funds or life insurance, but they do sell a product, nevertheless. In the advisor’s case, it is their service experience.

Client service may encompass financial advice, investment management advice, financial plan advice or other areas that touch on a client’s financial lifestyle. The client experience is your most valuable product, and consistency of experience is the most important function of building and sustaining advisory firm growth.

• Operations. A firm’s operational procedures define how it gains the ability to produce and repeat what they sell — its process. This process is the behind-the-scenes work that is done to carry out the client experience, wealth management process, financial plans, or another area entirely.

For RIAs, this category includes both the operations and technology — meetings with clients, email and phone conversations, digital interactions through a website or client portal — and the experience of working at a firm, such as the training process for new employees.

• Human Capital. Investing in the growth and training of a firm’s employees is categorized under operations, because those actions are tied to repeatable processes that must be carried out in the client experience.

Human capital, on the other hand, is concerned with the compensation and incentive structures, benefit programs and partnership incentives that help retain talented employees and give an advisory firm an advantage in hiring new team members.

• Sales. Sales is all about influencing people to believe in what you provide and building a culture of trust. In a product-based business, that influence may be done through physical packaging, such as box design, but in a service-based RIA firm the trust is generated through what you say that you will do and how you do it for a client.

This also includes how you talk about your client experience, share it with others and what employees and clients say about your firm.

• Marketing. A firm’s marketing is associated with aspects that support its sales and client service. It is the ability to use tactics and strategies, such as email campaigns, blogs, social media, podcasts and more to attract people to your services.

Marketing tactics vary widely from firm to firm, but the ability to sustain them and continue doing them repeatedly will be what determines the growth of new clients.

When a leader doesn’t know where to focus time and attention among each of these five areas at particular times in the growth cycle, the result is a stagnant business and compounding problems across their firm.

The goal of future RIA growth is becoming more focused on balanced growth than on stay-the-course growth. As RIAs continue to expand, grow and dominate local and national markets, we will see firms with leaders whose behaviors focus back on the core fundamentals of business growth winning market share.

Angie Herbers is an independent consultant to the advisory industry. She can be reached at angie@angieherbers.com.