One of the best things you can do to keep your RIA growing is to teach new talent how to hunt for their food.
The talent crunch facing independent advisors is no great secret. The washout rate, estimated by Cerulli Associates at about 71% within a five-year period, makes it all the more frustrating. Whether RIA principals plan for internal succession or external dealmaking, they need up-and-coming talent to take the reins.
Newcomers to our industry tend to struggle because they were never trained to flex their prospecting muscles in the same way as the old guard. If you think about the RIA incumbents, many got their start at institutions where they had to smile and dial. A regimen of steak dinner seminars and high-pressure cold calling shaped these professionals into fast students of human behavior.
Does that mean we need to return to the “Always Be Closing” days? No. That environment is gone. Even if we wanted it back, society has changed. The average prospect, inundated with spam calls, is not as inclined to answer an unfamiliar number as they were in previous decades.
Earning new business in the modern era takes a deft touch, a convincing case for your services and a bone-deep understanding of what actually matters in a prospect’s life.
The background of the old guard contrasts with the experience of new advisors, particularly those who join big wirehouses. These places have essentially decoupled the advisor from the prospecting process: Other people handle lead generation and qualification.
The firm creates a system that drops new client relationships right into the advisor’s lap. And the system works… especially if the target prospects are in the mass affluent market.
But if you break away, that prospecting ecosystem vanishes. Or, you’re new to the game altogether, you never had the benefit of it in the first place. Either way, there is a practical gap in your professional skill set that needs to be addressed, if we want to bend the curve away from 7 in 10 advisors leaving the industry after five years.
So how do we do it? Here are four key understandings to help next-gen advisors succeed.
Geography Still Matters
RIAs would do well to embed their new talent in the constituencies they serve as soon as possible. COVID-19 forced our industry to modernize, and remote service was a big part of that effort. I don’t think we can — or should — un-ring that bell. Freeing ourselves from the limits of geography opened new avenues of growth for RIAs, but geography still matters. Just ask any advisors or their clients that had to contend with a destructive hurricane season in the U.S. Southeast.
Understand Their Community
The high-net-worth clients that will grow an RIA and nourish the early careers of advisors are tied inextricably to geography. This is true in the literal sense, of the clubs, service groups and regional industry hubs where prospects dwell. It is also true in the digital geography of far-flung groups who connect online over shared interests. In all respects, new advisors need to understand the community they’re trying to serve, or have mentorship from a senior team member who does. High-volume “spray and pray” sales tactics do not impress HNW prospects, nor do they allow advisors to shine on their own merits.
Connect the Dots
RIAs making great use of systems that capture these relationships go far toward bringing rising talent up to speed. If a neophyte advisor or recent breakaway can point to your book of business and trace out lines to centers of influence and common interests, they have a much better chance of identifying the communities in which they will win those all-important referrals.
Take Care in Creating Systems
RIAs are smart to create systematized processes for organic growth. The tools we use are absolutely essential to modern business development. I also think we need to create these systems with the advisor’s entire career in mind. All things being equal, an advisor who knows how to prospect for the right clients will grow an RIA’s success more than one who does not. And, I’m willing to bet that the advisor will last longer in our industry, too.
Adrian Johnstone is CEO of Practifi, a performance optimization platform powering the nation's largest RIAs.
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