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Practice Management > Building Your Business > Leadership

What Type of Advisory Firm Do You Lead?

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What You Need to Know

  • Advisors need to understand which type of firm they're leading, so they can best prepare it for future success.
  • There are three types of future-ready advisory firms, and each type serves a different type of client in distinct ways.
  • They all grow by offering the best client experience possible.

The rate of change in the financial advisory profession is increasing. The pandemic played a large role in forcing a digital shift, of course, but rapid change was happening even before then.

As the industry adapts to a new way of interacting with clients, advisory firms are at a crossroads. Each firm has to decide if it wants to be part of the future or stick with the way things have always been in the past.

Firms that are determined to be relevant for years to come can be grouped into three business types. Each competes with a set of unique characteristics.

It’s useful to know the differences so you can understand how to categorize yourself and position your firm best in the changing advice market.

There are three types of future-ready advisory firms, and each type serves a different type of client and serves their clients in different ways:

1. Emerging Firms

Emerging firms are small, with less than $1 million in annual revenue. These firms have embraced their size and reject the narrative that small teams will be consolidated into large firms.

They believe that they can set themselves apart by providing financial advice that focuses on one problem that consumers need to solve.

Whether they decide to provide retirement planning to employees of a certain company or go as narrow as to focus solely on stock options advice, their differentiator is that they identify with one area of specialization and stick with it.

They win by delivering a custom client experience for a very particular type of client.

2. Progressive Firms

Progressive firms can be any size, but most tend to be multi-billion-AUM firms. In contrast to emerging firms, progressive firms radically expand their services instead of limiting themselves to serving only financial planning or investment management clients.

They believe that as long as they give people what they want and need, there is no limit to the type or number of clients they can serve. As a result, they welcome all clients, and they build their client experience around the idea that they can provide service to anyone’s needs and situation.

3. Next-Year Firms

These types of firms live with a future mindset. They are continually looking at how financial advice is currently being delivered so they can come up with ideas for how it might change in the future. Then, they implement those anticipated changes right now.

Their goal is to get ahead of where other firms are today. Their innovation can be found through new technology, usually built within their firms, by offering different types of advice, or even coming up with a new way to create financial plans.

In most cases, these firms want to maximize their value for a future equity event. Like the other two, they win on the client experience they create.

Only One Way to Win Clients

As different as these firms are, they all grow by offering the best client experience possible.

Advisors across the country are looking at a rapidly changing marketplace and asking themselves the same question: “How do I win clients in an environment that looks so different than it did five years ago?”

The answer is simple … client experience.

Importantly, a winning client experience is not one that’s taken from another industry or copied from another successful RIA firm. A firm’s client experience is found within it’s own walls, if you dig deep enough.

Firms who want to maximize their growth create a client experience that exists only for their firm. It requires taking responsibility for your own growth, a spark of creativity, and a focus on your firm’s clients so you can build your service around the needs and wants that matter most to them.

The work to create a unique client experience is difficult, but the dividends it pays can be transformative for any firm that takes the initiative to commit to it.