Garcia says it may be time for an RIA to bring in professional management when it hits about $750 million in assets
under management, is making $5 million in revenue and has
15 or more employees.
Hiring a key executive hire can help the business grow by
freeing up the founding advisors to focus on their core competencies in running money or managing client relationships.
A dedicated executive manager also can more reliably implement firm goals and allow for speedier decision-making.
Mike Poitrowicz, a founding partner at Legacy Advisors,
hired a CEO last June to take over day-to-day management and implement strategy. The firm, based in Plymouth
Meeting, Pennsylvania, has $1.6 billion in AUM and 33
employees and is set to grow substantially more.
The partners realized they needed someone to make that
happen. That’s why they hired Ron Albahary. The CEO is formulating and executing the firm’s overall business strategy
and working closely with those heading the firm’s operations,
technology, compliance, legal, marketing, investment and
insurance departments. He also manages a four-person client
“A growth strategy is not only about marketing and finding new clients, it’s about creating the infrastructure and
ecosystem required to grow the firm,” says Albahary. Since
joining the firm, he has created a group of subject-matter
experts — in wealth and estate planning, insurance and
investment strategy — that advisors can leverage to better
Piotrowicz says, “It’s a great comfort knowing that Ron is in
charge of our strategic growth strategy. Nobody was there to
execute it before.”
Albahary writes a weekly blog for the firm’s staff, which
builds community and fosters teamwork by highlighting the
group’s strategic direction. With a highly competent CEO
at the helm, Piotrowicz has more time to focus on his core
competency: the client-facing activities that he’s enjoyed
over the years.
Identifying the Need
One $11 billion RIA with four partners had reached a growth
impasse and was considering hiring a new business development officer. Its long-term lease also was ending.
Instead, the firm hired a COO to run its daily activities. The
new executive reported to the partners about their options for
a new lease and handled these negotiations, as well as those
with other vendors. Three years later, the firm has grown its
clients, assets and profitability, while implementing a new
RIA owners who hire executives to run their firms must be
prepared to navigate a difficult rite of passage. They are relinquishing some control of day-to-day operations and shifting
the focus of clients and staff away from these tasks and onto
the firm. But this transition is mandatory for future growth.
Michael Kitces, publisher of the Nerd’s Eye View blog and
a partner at Pinnacle Advisory Group, notes that the size of
an RIA and how fast it’s growing determine precisely when a
firm will need to hire staff, including a COO.
COOs can handle a broad array of functions. And while
each firm is different, the heads of a firm’s investment, sales
and marketing, operations, human resources and finance
departments all report to this executive.
In addition to freeing up the founders to focus on their core
competencies, Kitces notes, RIA executives can help lay the
foundation for the firm to grow and scale through staff training and team development.
“Advisory firm founders tend to be entrepreneurs that start
businesses and are great at finding and servicing clients, but
don’t necessarily have the skill set in human capital development that is ultimately crucial to scaling an advisory firm,”
New executives can establish systems and procedures for
training new staff, so that new operations employees are
brought on board in a fraction of the time it took earlier and
are given the right information to succeed. This is far superior
to onboarding new hires and having them trained via informal
conversations with peers.
In addition, a skilled COO can help cultivate the leadership
qualities of key staff members, so these employees can ascend
to more senior roles and manage staff as the firm evolves. RIA
executives also can generate an ongoing pipeline of potential
talent that firms can tap into as they grow. A select group of
large and fast-growing RIAs have formalized these functions
under the purview of chief people officers (or CPOs).
Plus, executive managers at RIAs can ensure their firms
have the requisite technology to both service current clients
and support future growth. An appropriate mix of technology
can make RIAs attractive to potential buyers or acquisition
candidates, and proper decisions about technology can boost
the enterprise value of a firm.
As more RIAs hire dedicated professional talent to run
their firms, the evolution of financial advisory practices into
financial service organizations likely will become more commonplace throughout the industry.
Mark Elzweig is president of executive search consultant firm Mark
Elzweig Company, Ltd.