Growing advisory firms are increasingly finding themselves
“If you decide tomorrow that you need to hire a COO for your RIA, you are not going to find one that has been working at a $1 billion RIA for the past six years and happens to be looking for work,” says Matt Sonnen, CEO of PFI Advisors, an industry consulting firm. “The RIA is a niche industry and COOs are a small niche within a niche.
That reality was on display at the recent MarketCounsel Summit in Las Vegas, where all three speakers at a session on the role of COOs were hired without any industry experience.
Hiring executives with skills in unrelated fields can be a boon to an advisory firm, according to Sonnen, whose firm recently released a
“When trying to rally the troops around a new corporate vision, the last thing employees want to hear is, ‘This is how we did it at my former firm,’ ” Sonnen says. “An outsider will be forced to take into account input from all angles of the company, which typically leads to better employee buy-in.”
Outsiders also brings fresh eyes to old problems.
Industry insiders often have “blind spots,” from being too familiar with a company or business, according to Michael Reed, who spent 30 years in the medical and health management industry before joining Dakota Wealth Management earlier this year.
Reed says it is easier for newcomers to evaluate group dynamics. “You’re coming in without any pre-existing history,” he notes.
A COOs skills and experience generally translate easily to new fields, Reed says. Solving operational problems “are pretty much the same in all industries.”
“I’ve always perceived my industry outsider status as an advantage,” says Coastal Bridge Advisors Jeff Fuhrman.
But a COO entering a new industry can bring solutions gleaned from previous jobs. “If you’ve only been in one industry, you may not be aware that a certain type of problem has already been solved,” he explained.
Jeff Fuhrman, who joined Reed and Gary Bonner from Avalon Advisors on the MarketCounsel COO panel, had a 20-year career in a variety of industries, most recently talent management, before joining Coastal Bridge Advisors as chief operating officer five years ago.
“I’ve always perceived my industry outsider status as an advantage,” says Fuhrman, who is now president of the firm. “I’m not beholden to legacy thinking or relationships.”
Indeed, he argues that his cross-industry experiences provide crucial value to Coastal Bridge.
“In the wealth management space, where we’re witnessing rapid transformation in technology, regulation, and business practices, a more agile approach to leadership can be of fundamental importance to realizing business success,” Fuhrman says.
Dakota's new COO has helped the firm "integrate things more slowly or in smaller bites," says CEO Peter Raimondi. "As a result, there’s less push back.”
Before joining Avalon as COO, Bonner spent nine years at three start-ups, the last being a men’s clothing manufacturer.
While client advisory services and investment management are specific to the RIA business, Bonner notes that he brought “extensive experience” to running technology, finance, human relations and operations for Avalon. Overall, he says, his prior experience “is agnostic to the industry for the most part.”
The CEOs at Avalon, Coastal Bridge and Dakota all gave their outsider COOs high grades.
“Coming from another business, Mike dealt with huge inefficiencies in practice management and processes,” says Dakota CEO Peter Raimondi. “Having had so much experience finding solutions to those problems has led him to be hyper-focused on making sure that Dakota remains efficient and serves its clients effectively. He’s helped us integrate things more slowly or in smaller bites. As a result, there’s less push back.”
Jim Pratt-Heaney, founding partner of Coastal Bridge Advisors, says the need for an experienced COO became apparent as the firm grew.
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“My fellow founding partners and I realized we were spending far too much time managing the business and not as much as we could working with existing and prospective clients,” Pratt-Heaney says. “Identifying a capable leader with the necessary business skills to take over the management of our business was critical.”
A chief operating officer needs “a fundamental understanding of the financial services industry,” says Avalon CEO Chase Robison.
But he adds that “it also is helpful to be able to draw upon experiences or parallels from outside of the industry as they relate to operational execution of firm priorities.”
And what advice would these now experienced COOs give newcomers starting their RIA jobs?
- “Have a natural curiosity and be willing to learn the aspects of the business and be open to being challenged,” says Bonner.
- “Outline a clear set of expectations for the new role,” says Fuhrman.
- “Spend six months listening more than talking,” says Reed.
