Why do some firms grow into behemoths, while others remain small?
While my firm’s AUM is below the industry median, our growth rate has been above average. We have successfully doubled our AUM each of the past three years and are now at the $174 million mark. The majority of that growth has been organic; we started in 2012 as a single-advisor shop with just $26 million under management.
As the founder of an independent RIA, my first year was mostly spent alone. I was the sole presence, responsible for everything from investment strategy to technology to sales to completing account applications.
We have learned the cost of a bad hire is time, money and productivity. However, nothing is worse than a hire who is bad for company culture and morale.
Many RIA firms never grow beyond a single advisor. Sometimes finding the right teammate is too hard. Other times a solo advisor finds it hard to give up equity or control.
At my firm, growth did not really blossom until I started adding more advisors.
The first major addition was a college classmate. Not only had we known each other for nearly half of our lives, but she had a wealth of experience in an area where I had very little — institutional clients and retirement plans. When she joined, I was optimistic that institutional clients would soon follow. In reality, it took over two years before we landed our first substantial retirement plan client. Those two years of what I’d call “whale hunting” were very challenging because we were a relatively new firm with no institutional clients.
The second major addition was an advisor I met at a two-day wholesalers’ conference when we sat next to each other. He and I struck up a conversation and learned that we saw the world similarly. A few years apart in age, we were both raising young families. After a few lunch dates over a year, we decided to share office space to determine if we could get along. After a year, we merged our practices under my firm’s umbrella. This was the first time we grew by acquisition, essentially doubling our AUM.
The next important hire was a young man who was initially tasked with administrative tasks but who was being groomed to become a full-fledged advisor. He was the younger brother of a guy I grew up with and had been working in periphery roles in the wealth management industry for a few years. His raw talent needed some polishing and mentoring.
My new admin introduced me to another key hire who soon joined my team. I liked that she came from the entertainment industry, bringing a unique set of experiences and contacts to bear.
At this point, my one-man shop had ballooned to a core team of five advisors, plus a few more hires primarily focused on business development and support. Growth really started to happen.
Be open-minded about adding people who are different from you. Those differences can lead to growth.
In quick succession, one of my new advisors leveraged one of my old and forgotten relationships to get us in front of a nine-figure institutional client that we ultimately landed. My admin blossomed into a successful advisor and networked his way into a major center of influence that has referred over $10 million in new business. And a third helped land a major opportunity on the radio that led to a steady stream of new wealth management clients.
What was my contribution? I assembled a dynamic team. I supported their ideas and gave them advice. I showed them how I do business and I also learned from them. We encouraged one another during the rough times and constantly held each other accountable to our goals.
We have also had our share of challenges. We made a few bad hires — which included friends, family members and strangers — who are no longer with the firm. We have learned that the cost of a bad hire is time, money and productivity. However, nothing is worse than a hire who is bad for company culture and morale.
Other challenges to growing a team revolve around logistics, coordination, and compliance. Logistics — we have had to move offices a few times. Coordination — It is important to assign tasks to the right teammate, create operational efficiency and ensure a consistent client experience. Compliance — the more people you have, the more they must be monitored; an action by one person can impact the entire firm.
Our group, which seems to have been assembled by happenstance, now recruits with intention. We are laying the groundwork to double our assets yet again while improving the quality of the experience of our clients. I could not be prouder.
If I were giving advice to RIA owners, here’s what I’d offer:
- Be open-minded about adding people who are different from you. Those differences can lead to growth.
- Network with other advisors. They may be competition, or they could be your future business partners.
- Mentor young planners. You feel the joy of giving back, but you also get to know a potential hire very well. Mentoring is an investment that pays dividends down the road.
- Share your equity. You can continue to own 100% of what you have today or a smaller percentage of something far more valuable.
- Lose control. Allow your team to help guide the direction of your firm. If you find the right people, they will take you places you might not have found on your own.
- Recognize that you do not have all the answers. A team can create mutual accountability — and make you better if you are willing to change.
- Focus on culture. Culture can be a competitive advantage for your firm — attracting the right talent and repelling bad seeds.
