Over most of the long arc of the financial profession, advisors and brokers have focused on
“building their book” of clients. The last
decade has fostered a different model in
which lead advisors are supported by a
team of service advisors, paraplanners
and administrative staff who ultimately
develop into fellow partners.
Many professionals left larger brokerage firms, banks and insurance companies to create their own practices as RIA
firms or affiliates of independent contractor broker-dealers. Business ownership created a new set of challenges that
many advisors were not prepared to
address. Not only did they need to focus
on serving clients, owners also hired
and retained staff, implemented new
technology, complied with new regulation and managed to profitability. Many
firm owners shifted their priorities from
serving clients directly to building transferable value.
While some traditionalists begrudge
the evolution from practice to business,
those who have built more enduring
enterprises believe this structure has
resulted in a greater depth of talent, a
richer client experience and valuable
continuity for clients.
Many such firms are still operating
with a small business mindset, however. While entrepreneurship has its
appeal, once a firm develops too many
moving parts, professional management
becomes an urgent need.
Typically this means naming a chief
executive officer to set the direction and
be the public face of the business, and
a chief operating officer to implement
the strategy and manage the day-to-
day activities of the enterprise. Some
firms have grown to include heads of
business development, technology and
Advisory firm founders must assume
these top roles themselves or hire others
with the requisite management skills.
Along with this change in structure, advisors need to recognize the cost and benefit of professional management unrelated
to acquiring clients and providing advice.
These new roles enable the financial
professionals to serve their clients more
efficiently and effectively without the
distraction of managing a business.
EXPECTATIONS OF THE ROLE
When contemplating the addition of
professional management, advisors
must be clear on expectations for the
role. Many firms making a first foray
into a highly-paid, non-revenue-gener-ating position give up early. Resentment
from the other partners or their own
unclear measure of success tend to contribute to their disillusionment.
How will decisions be made with
the addition of a professional CEO? Is
the CEO a facilitator of group think
and group action, or someone who is
accountable for making key decisions
while keeping the partners apprised of
her activity? Either works, but the candidate profile will be defined by the
process in many ways.
Advisors must clarify the reporting structure as well. This issue can be
difficult, as long-time employees will be
tempted to skirt around the new executive if they have a special relationship
with the founder. Leaders must balance mentoring and coaching of those
employees with respect for the new
The Cost & Benefit of Professional Management
As advisory firms evolve from practices to businesses, executive roles
become more critical.
FORMULAS FOR SUCCESS
By Mark Tibergien
Those who have
built more enduring
structure has resulted
in a greater depth
of talent, a richer
client experience and