7 traits of CEOs running billion-dollar RIAs

RIA CEOs

“You know, kid, I don’t think you’re going to last six months.”

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That’s what one of the co-founders of a then $600 million RIA said to Jeff Dekko when he arrived at the firm in 2003.

Today, Mr. Dekko is CEO of that firm and presides over the fast-growing RIA, Wealth Enhancement Group, with about $6 billion in assets under management (AUM). (See my podcast with Jeff Dekko.)

How do you build and manage a fast-growing billion-dollar RIA like that? What is the role of the CEO in this type of company?

As the financial advice industry continues to evolve at a rapidly increasing pace, the role of the CEO becomes even more critical. Yet, as a business coach, I often see advisory firms struggle with making the shift from being an advisor-led firm to one run by professional management.

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Over the past few years, I’ve worked with and had dozens of conversations with leading advisors and CEOs of some of the industry’s fastest-growing and best run companies. While the group is diverse, I discovered seven common threads in terms of how they built and run their businesses.

Managing the 10-Figure RIA

Steve Sanduski
Steve Sanduski: Ask yourself on a frequent basis, “Is this what a CEO would do?”

For my coaching clients who want to grow to a billion or more in AUM, I often remind them that they need to stop working like a financial advisor and start acting like a CEO. And the simplest way to do that is to ask yourself on a frequent basis, “Is this what a CEO would do?”

Most financial advisors entered the business because they enjoy meeting with clients and helping them reach their financial goals. But if you want to reach a billion and beyond, you’ll need to dramatically reduce the time you spend working on the “plumbing” of the business and ramp up the time you spend on the “poetry” of the business, as James March wrote in his book, On Leadership.

In other words, you’ll need to act “CEOial.”

Okay, I made up that word but just like the president of the United States has to act “presidential,” a CEO has to act “CEOial.” The moment our president gets sworn in, they have to switch from being a senator, or governor, or a reality TV clown to being presidential. This means they have to think, act, and perform the duties that are specific and unique to the person who occupies that position.

As an advisor, if you ever hope to make the jump from several hundred million in AUM to a billion or more, either you or a hired CEO have to step in and become—in title and in practice—the CEO.

If it’s you as the advisor, then you’re no longer an advisor. You need to become a professional manager.

7 Characteristics of CEOs

In my experience and research, here are 7 characteristics shared by leading CEOs of RIA firms.

1. They allocate their time on CEO-level activities.

This one seems obvious but many advisors who want to build a billion-dollar RIA find their days still filled doing review meetings with clients. Generally speaking, CEOs don’t have prime responsibility for meeting with clients and making planning recommendations. They do, however, meet with key clients frequently as part of their relationship-building role—more on that in a moment.

So how do CEOs allocate their time? On my podcast, United Capital CEO Joe Duran said, “I allocate a third on communication, a third in idea creation, and a third in just allocating resources.” Interestingly, he said as the company has gotten bigger, “The work that I do is more and more fun because I have people around me doing the stuff I really dislike.”

As your company grows, you have to be willing to let go of much of the plumbing. “If a business hasn’t grown beyond a certain level, it is always because the guy or gal at the top simply will not expand the base of decision making,” said Mr. Duran.

Bring in sharp people that you trust, separate the functions of business development, advising clients, and investment management, insert key functional leaders, then you as the CEO can be the orchestra leader, visionary, and poet.

Marty Bicknell, CEO of Mariner Holdings, said on my podcast that he relishes the time he spends on the leadership aspects of being a CEO. For example, he said his unique ability is, “helping people understand what their unique ability is and helping people understand how to get from point A to point B.” This is part of the “poetry” of leadership and Mr. Bicknell said, “I really enjoy doing and get a lot of satisfaction out of helping people accomplish things that they’re not sure they can accomplish.”

Action Step: On a regular basis, start asking yourself, “Is this what a CEO would do?” If it’s not, then stop it!

2. They’re talent attractors.

The success of your business is positively correlated to the quality of people in it. As a CEO, if I was forced to spend all of my time on just one activity, I would spend it on hiring and developing my team.

I can’t stress enough how important it is to get the absolutely best people possible on your team. Looking back on past companies, I can clearly see how the right people made a huge impact on the success of those businesses. They made my job easier by allowing me to spend more time focusing on my highest and best use instead of watching over the work of weak performers.

Top CEOs keep a running list of people they’d like to hire and they network constantly to keep the list fresh. Then when the time arises for a new hire, they have an immediate list of potential candidates.

In addition to being a talent attractor, CEOs have to make the tough decisions to let people go who are no longer a fit. The old saying, “What got you here won’t get you there” is often true when it comes to the people in your company. The operations manager you hired when your firm was at $100 million likely won’t be your COO when you’re at $2 billion in AUM.

Action Step: Review your key team members and make the necessary changes to ensure you have no weak links.

3. They’re strategy builders.

As Lewis Carrol wrote in Alice in Wonderland, “If you don’t know where you are going any road can take you there.” CEOs are responsible for figuring out the direction and working with the team to determine the road.

CEOs are uniquely positioned to develop and shape the strategy of the firm. This includes “seeing around the corner” and making preemptive strategy shifts as market conditions change. It involves making “small bets” to test new ideas before committing major resources. And it includes defining what business you are in—and not in.

Elliot Weissbluth, CEO of HighTower, engages in a yearly ritual that helps him stay flexible in his strategic thinking. On my podcast, he said, “Every December I fire myself. I really go through the process of terminating myself and then I rehire myself. I write into my journal what are the things that I did that lead to my termination and then what are the things that I, as the new CEO, are going to do differently?”

This “firing” process frees Mr. Weissbluth from the baggage of past decisions that no longer make sense and he can start a new strategy with a clean slate. He does this exercise with his executive team, too, during an annual retreat.

Action Step: Fire yourself and with this newfound freedom, what would you do differently in your business now that you’re free from past decisions?

4. They’re designers and exemplars of the culture.

You’re probably sick of hearing people talk about the importance of culture. How often have you heard somebody say, “Culture eats strategy for breakfast, or lunch, or dinner, or dessert?” Yet, people keep talking about it because few companies have a culture that is truly a difference maker.

As CEO, you have to live and breathe the culture. You have to set a high standard and be clear on what you will—and will not—tolerate. Remember, you get what you tolerate.

The most successful companies often have a “big idea,” some overarching ideal that drives the company and the employees within it. You have to inspire and rally your team around that idea. You have to put on a brave face and keep the team moving when we hit a rough patch like 2008-2009. The team takes its cues from you so you can’t slip.

Frankly, this is a skill that most people do not have.

Action Step: Take a hard look at your culture. If it’s developed by default, proactively change it to one by design.

5. They’re rainmakers.

Sometimes to close the big deal, the CEO needs to step in and show the prospect you want their business. And this also applies to your biggest clients. CEOs spend a meaningful amount of time traveling around the country deepening the relationship with their very best clients.

And we can’t forget media relations. As the CEO, you don’t have to hog the spotlight, but spending some time with the media is important.

Action Step: Take a look at your calendar for the past six months. Have you been spending an appropriate amount of time on rainmaking?

6. They’re monitors and allocators of financial resources.

Billion dollar firms have financial specialists on board but CEOs have to take a keen interest in the numbers. You should have a recurring weekly meeting with your executive team and reviewing your key metrics should always be on the agenda.

Large firms have processes in place to review capital expenditures and standards for appropriate ROI. They also have effective compensation systems in place and the CEOs don’t pay themselves “whatever’s left over after all the bills are paid.”

As A.G. Lafley, the retired Chairman and CEO of Proctor and Gamble, wrote in a Harvard Business Review (HBR) article, “We deliver in the short term, we invest in and plan for the midterm, and we place experimental bets for the long term.” That’s a good way to frame how advisory firm CEOs should look at their role in allocating resources.

Action Step: Make sure you have a good “cadence” of regular meetings and that the agenda covers your key metrics.

7. They’re integrators of the inside and the outside.

Management theorist Peter Drucker said, “The CEO is the link between the Inside that is ‘the organization,’ and the Outside of society, economy, technology, markets, and customers. Inside there are only costsResults are only on the outside.”

Mr. Drucker’s comment gets to the heart of the idea that there are certain things that only the CEO can do. Mr. Lafley, in that same HBR article said, “The CEO alone experiences the meaningful outside at an enterprise level and is responsible for understanding it, interpreting it, advocating for it, and presenting it so that the company can respond in a way that enables sustainable sales, profit, and total shareholder return (TSR) growth.”

With the rapid pace of change in the financial services industry, this idea of “integrating the inside and the outside” is a key part of a CEO’s role. And one way you can do that is to step outside of the industry bubble. Attend conferences in other industries. Make a point to meet with a variety of experts in diverse fields. Listen to podcasts such as mine where I interview leaders from outside our industry and discuss outsiders’ perspectives on issues facing businesses today.

Action Step: Broaden your horizon by having regular meetings with other successful people from a variety of industries and backgrounds.

Shouldn’t Be Overwhelmed

This may sound like I’m blowing smoke here but if you’re a CEO and you’re feeling overwhelmed, something’s wrong. Yes, it’s a tremendous responsibility and many people rely on you—that can be stressful. But if you’re working 12-14 hour days, week after week, the problem lies with you and your team—you because you’re not letting go and your team because they’re not pulling their weight.

Schwab’s 2015 RIA Benchmarking Study showed that firms with more than $1 billion in AUM invested heavily in their team.

  • 45% had a chief operating officer
  • 71% had an operations director
  • 62% had a chief investment officer
  • 69% had a CPA on staff
  • 52% had a JD on staff

When you put the right people in place, empower them, and trust them to get the job done, you can function as a CEO and live the 7 characteristics I outlined above. Do so and you’ll be well on your way to billions and billions of AUM.

(Originally published on FA-Mag.com)

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Steve is the founder of Belay Advisor and a NYT bestselling author, podcast host, speaker, and financial advisor coach.

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