Forward-thinking, goal-oriented RIAs never allow their attention to stray far from what is needed to grow their careers to the next level. In the early years, strategies may center around attracting and retaining the HNW clients you need to create a sustainable solo-practitioner business. But as you progress to the stage of growing your firm beyond “sustainability” mode and into “legacy” territory, you begin to encounter a different set of needs that demands different skillsets and resources.

And make no mistake: having a well-considered strategy for growth really does matter. In Proven in the Trenches: 11 Principles to Maximize Advisor Value and Transform Your Firm’s Future, Ron Carson draws a striking analogy between the current RIA landscape and American agriculture industry. 1 In the 1980s, the cost of operating a farm soared, due to a combination of high interest rates and skyrocketing prices for equipment and supplies. As a result, many small and medium-sized family farms were forced into bankruptcy or emergency sale. Presently, thousands fewer operators are farming vastly larger acreage. Similarly, Carson notes, more and more assets are being managed by fewer and fewer RIAs. He cites an RIA Marketplace report stating that the roughly 500 RIAs with $1 billion or more in AUM — representing only about 3% of the RIAs in existence — manage almost 60% of the assets. In other words, for RIAs, as in agriculture, economies of scale have become indispensable for those who wish to remain in business. But there’s another way. Unlike farming, RIAs have the ability to use technology across many geographies to scale by using shared resources without a full consolidation. This is why so many advisors have historically used TAMPs to help with managing their businesses.

What Are High-Performing Teams Doing?

A study by Cerulli Associates referenced in Investments & Wealth Research (Issue 4, 2017) reveals some interesting similarities among high-performing RIAs. First, and probably not surprisingly, top-quartile RIAs manage 4.2 times more AUM per advisor than teams in lower quartiles. The average advisor in a top-quartile team manages $280.4 million, compared with an average of $67.3 million for other quartiles. This also translates to greater productivity per total firm headcount, including all advisors and staff: the average top-quartile team manages $120.8 million per firm employee, compared with $34.1 million for other quartiles. This has obvious implications for top-line revenue generation and profitability.

Further, high-performing RIAs are more likely to operate in teams. In fact, teams with shared decision-making process tend to have higher AUM per advisor. According to the survey, independent RIAs with multiple leaders averaged nearly 30% more AUM per senior advisor than firms with a single decision-maker, and almost 32% more than solo practitioners. Clearly, efficient collaboration creates opportunities for both scaled growth and enhanced efficiency. So, what if you were able to get similar lift by having the luxury of a shared team with a collaborative approach to financial advice?

The Evolution of Your Focus and Power of Collaboration

As your practice evolves, where you focus your energy must evolve, also. For early-stage solo-advisors, they are the practice. Their personalities and individual efforts constitute the totality of the enterprise. Over time and with growth, however, an advisor’s focus must move from a focus on sustaining the practice to a strategy of growing a business. This means a refocus of their time and energy to the direction of managing the efforts of other people, or of seeking dedicated management to oversee the business operations. And eventually, if the aim is to create a legacy enterprise, the advisor’s focus will again shift toward building and empowering executive management and creating shared ownership among associates. One of the keys for successfully managing this transition, in fact, is the ability to let go of old responsibilities and to learn new skills and modes of thinking. Overall, a solo-advisor needs to decide to scale on their own and in turn, shift their time to everything outside of client relationships or determine the best method of collaboration to grow.

RIAs have multiple opportunities and paths to choose – stay a solo-advisor with the support of a TAMP, become more growth-focused and build a team that is client-centric, or team with an organization that offers both the resources and team to collaborate and grow. At WAA, we have an intimate understanding of the needs of entrepreneurial advisors who are seeking to take their firms to the next level. We offer tiered support that enable you to focus your energy where it needs to be in order to achieve your professional and personal goals. To learn more, click here to read our article, “3 Questions to Ask Yourself When Deciding to Scale Your Advisory Practice.


We help advisors establish and grow successful wealth management practices. To learn more about how we can help you amplify your life’s work, contact us at team@waalliance.com. You can follow us on Twitter@theWAAlliance and on LinkedIn.

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Source
  1. Ron Carson, Proven in the Trenches: 11 Principles to Maximize Advisor Value and Transform Your Firm’s Future (Petersfield, UK: Harriman House, 2020), 9.