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For a firm to grow, it’s imperative that its leaders understand the direction in which they want to take the business, and that their decisions and behaviors flow consistently from that understanding. In fact, having consulted for advisor firms for nearly 20 years, I can say that consistent leadership behaviors are the single biggest predictor of growth.
But, at times, advisor firm leaders can behave as erratically as the stock market. They continually shift their attention from one project to another in a quest to spur growth or to correct problems that are perceived as threats to growth. In doing so, leaders focus excessively on a single positive event—“We just landed a doctor client, let’s do a marketing push for doctors!”—or on negative event—“We lost a client, let’s figure out why and make sure it doesn’t happen again!” In such cases, the leaders are allowing emotion to drive their actions, rather than making sound business decisions based on broader goals.
This phenomenon, which is called miswanting, translates into distractions and interruptions in the business’s growth cycle. The antidote to miswanting, and the path to meeting your firm’s growth potential, lies in improving the leadership skills of the person running the firm. This means making a mindset shift that may be tricky: Moving your focus from tasks within the business to a focus on your behaviors and actions.
That RIA firm leaders get lost in the little stuff is understandable. The typical leader spends their time putting out one fire after another. A team member may be out because of a family crisis, leaving duties to be handled. A client might be threatening to leave the firm. There’s always something to do.
Contributing to the problem is the fact that most advisory firms are small and have limited resources. Remember, the U.S. Small Business Administration defines small businesses as those with revenues as high as $40 million and employment up to 1,500. The vast majority of RIA firms fit that description, and most lack the luxury of dedicated teams for each business area.
But without the discipline to focus on the big picture, sometimes at the expense of the day-to-day issues, it’s very difficult for firms to lay the groundwork that will take their growth to the next level. I encourage advisory firm leaders to balance their leadership efforts and their finite attention and energy across five core levers of growth:
Client Service. Most RIA firms aren’t in business to sell investments, life insurance or any of the other things we think of as financial products. The product they sell is their client service experience. Client service comprises financial advice, investment management advice, planning advice and general financial advice and guidance. Since client experience is advisors’ product, the consistency of that experience is the single most critical function of creating and sustaining growth.
Operations. The ability to repeat the client experience hinges on a firm’s operational processes. Operations encompasses all the backstage work that underlies the client experience, whether that’s the wealth management process, the financial planning process or other processes. It’s behind everything from client interactions—whether via email, phone, a website or a client portal—to employees’ training and experience of working at the firm.
Human Capital. Human capital is a distinct area from training employees to carrying out the operational processes that underly the client experience. Human capital is concerned with the compensation and incentive structures, benefit programs and partnership incentives that help retain talented employees and give an advisory firm an advantage in hiring new team members.
Sales. Earning consumers’ trust in your organization and their belief in your product is what sales is all about. In the world of physical products, slick product design and packaging can influence customers to buy everything from smart phones to cars. Businesses for which service is the product, on the other hand, earn their trust and influence through the value proposition they present to the client and how they follow through on delivering it.
Marketing. A firm’s marketing supports its sales and client service. It consists of using strategies and tactics such as email campaigns, blogs, social media, communities and podcasts to attract prospective clients. While marketing programs look very different among different firms, sustaining them and being consistent are the keys to adding new clients.
How should an advisory leader divide their time and attention between these five core growth areas? Balance and flexibility are key. Each area will require more or less attention at particular times during the growth cycle. Businesses exist and grow dynamically, so applying an inflexible formula can lead to stagnation and compounding problems across the organization.
Many advisory firm owners strive to achieve and maintain simultaneous excellence in every area of their business, all while serving clients. That’s laudable in theory, but in practice, a balanced and flexible mindset and approach will lead to stronger long-term growth.
Behavior Psychology Isn’t Just for Clients
Today’s financial advisors are well acquainted with the relationship between behavior and outcomes. Indeed, wealth management firms have for many years been hammering home the message to clients that focusing on their behavior, understanding how their actions and attitudes impact their retirement and financial goals, is critical. Firm leaders should apply the same behavioral psychology approach to running their businesses.
Yet their own behavior is typically the last thing RIA leaders consider when analyzing their firm’s growth. More commonly, they’ll focus on the services they deliver, or will analyze or fine-tune their marketing plans. Without behavioral awareness, these actions may not contribute much, if at all, to long-term growth.
To ensure strong, sustainable growth, advisory firm leaders must let go of firefighter mindset and embrace a focus on core factors that drive growth. That will require them to look in the mirror and accept the challenge of strengthening their leadership skills. As RIA firms scale up and begin to dominate local and even national markets, I predict that leaders whose behaviors align with the core fundamentals of business growth will ultimately win the most market share.
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