There is no single formula for success in an industry as susceptible to booms and dips as financial services. While it helps to have the tried-and-true tools for longevity — proven expertise, insights and robust resources among them — there are only so many ways to engineer durability as advisors and firms navigate macroeconomic forces beyond their control.
Achieving and maintaining success requires deft maneuvering, proper preparation and, ideally, positioning your business, clients and accompanying assets to be in the right place at the right time. For as many variables as there are in building a sustainable practice, the most reliable investment that advisors and firms can make is surrounding themselves with the right people.
Although wealth management is prone to passing trends, technological disruptions and unexpected curveballs, working with a team united by values and invested in securing ambitious outcomes for the client, an individual advisor’s investment practice or the collective firm is the most surefire route to establishing an enduring business.
Here are three tips for how RIAs looking to institute a cooperative culture can best implement a well-structured equity distribution program.
1. Tie employee output to company performance.
Whether amid volatility such as the current market’s state or alongside a bull market, it pays for RIAs to create certainty within their respective organizations. When implemented properly, an effective employee equity model can be more than just a means of compensation.
By creating a structure that ties a team member’s output to a company’s financial well-being and affords a sense of direct ownership, RIAs can leverage an equity model that encourages growth, retention and cultural alignment.
While the specifics may differ based on an RIA’s capacity, history or the strength of its business, arrangements such as a partnership model where advisors have equity in the company not only nurture a shared culture and experience, but also a collective responsibility in tending to the firm’s long-term health.
2. Blend independence with organizational benefits.
A compelling equity strategy can wed a range of strengths seen in RIAs operating at varied scales.
For example, advisors working for a larger RIA firm that empowers them to act autonomously and possess direct ownership in the company can be positioned to enjoy the best of several worlds.
On a practical level, this could include access to the resources that come with operating as part of a grander enterprise, including solutions and products that allow for more complex, thoughtful investing and meaningful results. At the same time, their ownership stake would embolden them to act with the autonomy and self-direction they might enjoy as an independent advisor.
For many RIAs using equity models, this blend of independence with the benefits of working within a larger organization enables advisors to collaborate freely, collectively promoting the firm’s overall well-being in the process.
While advisors working at a wirehouse may be inclined to operate in silos for the sake of protecting their individual practice, RIAs operating with a partnership model can incentivize advisors to pool their talents in service of building something more far-reaching and durable than anything they could establish on their own.
And although talk of instituting employee equity and partnership models has grown among RIAs, the idea has been met with some reticence. To some degree this is understandable: For some, it presents a major structural change in an industry that’s often risk-averse. This is especially true in times of pronounced uncertainty and market volatility.
3. Incentivize stronger relationships with investors.
Like any quality investment, empowering employees with direct ownership creates conditions for RIAs to reap long-term benefits and rewards.
This is true of both the firms that implement these models and the staff working within them: Employee equity setups create a feedback loop of positive reinforcement where staff feel supported by the company they have a direct stake in and, in turn, want to deliver results commensurate with their degree of investment.
Ideally, this unified company culture can carry forth into the client experience, with advisors providing a constructive, engaged experience to investors.
Given the instability of the current market, firms should be prioritizing internal stability and consistency to strengthen their relationships with employees as well as investors.
Implementing employee equity and partnership models connects advisors directly to their efforts as well as a tangible feeling of ownership over their work. In the process, this creates a holistic culture of accountability and discerning decision-making in facilitating ideal outcomes for clients as well as the firm.
Establishing a greater degree of employee equity doesn’t have to mean a dissolution of leadership or hierarchies; every firm operates with its own set of priorities and established internal culture, and it’s critical that these are respectively preserved.
But as wealth management increasingly prioritizes holistic, people-first experiences, companies should be striving to embody these values in their structures as much as their client solutions.
By aligning advisors’ individual performances with their firm’s shared long-term prospects, RIAs can foster a heightened degree of employee loyalty, commitment and collective responsibility that can withstand any market condition.
Jeffrey Gonyo is head of wealth management at Steward Partners, a full-service financial services firm offering wealth management solutions for families, businesses and multigenerational investors.
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