Advisory firm owners come to work each day ready to do the feat of excelling in every areaof their business while at the same timeserving clients. While it’s a noble goalto be great in all that one does, the real-ities faced by today’s RIA firms tendto make it difficult for firms to mastertheir businesses alone.
And it won’t get easier as RIA competition and consolidation increase. Thefuture of the space will be determinedby how well leaders are able to balancemultiple areas to grow their firms.
FOCUS ON WHAT’S IMPORTANT
For the average RIA firm owner, daysare spent moving from one fire to thenext. If it’s not a client unhappy withaspects of their service, then it may be ateam member who is out sick and whoseworkload needs to be covered. Or it maybe a marketing strategy that needs to bedeveloped and deployed.
The problem — and reason — behindthis constant shifting of focus is thatmost firms have limited resources. Evensome of the largest RIA firms in thecountry still are considered “small”businesses in the larger American lexicon of what constitutes a large business.
And while an enterprise operationwith hundreds or thousands of employees has the luxury of dedicating entireteams to each business area, most advisory firms do not get to experience thisperk of big business. Instead, RIAs mustfind efficiency and focus in their businesses to grow. In fact, it is focus thatenables these firms to grow with consistency, regardless of the competition andhow the industry changes and consolidates overtime.
To do this, though, owners must first
GROWTH BEGINS WITH BEHAVIOR
understand how to change their behav-
iors to build stronger leadership skills
and balance the work that needs done.
While behavioral finance isn’t new,today there’s a major push to studyinvestor behavior and shed light on howtheir actions and attitudes affect retirement and financial goals.
Yet focusing on behavior is oftenthe last place RIA leaders think tolook when analyzing their own firm.Typically, owners want to focus on theservices the firm provides to clients orlook inward and spend time analyzing ormassaging marketing plans. While theseare necessary pursuits, the result of allthis effort will be wasted time and workif the firm’s leaders don’t look at theiractions and behaviors.
Through many years of consulting,I’ve seen that the biggest predictor ofgrowth is leadership behavior, whichoften results in inconsistency of decisions. In other words, leaders do notknow where they want to take theirfirm, and they do not know what theirbusiness really needs.
This “miswanting” often leads businesses to pursue many projects, distractions and interruptions in the growthcycle, shifting their focus from one solution to another without any real results.From a business perspective, one reasonfor “miswanting” is that some leaderstend to give too much weight to a singlepositive or negative event, allowing theirguts to drive the decisions rather thansound business thinking.
Many advisors adjust their businessplanning because of this mindset. Forexample, if a client leaves their firmbecause of a minor issue, it’s tempting
Growth of RIA Firms Hinges on Behavior
Leading firms of the future must master these five core areas.
Today there’s a majorpush to study investorbehavior and shedlight on how theiractions and attitudesaffect retirement andfinancial goals. Yetfocusing on behavioris often the last placeRIA leaders think tolook when analyzingtheir own firm.
THE FAST TRACK
By Angie Herbers