Stagnant Growth? Do This, Not That:

For most advisors and RIAs who own their firms, growth is the ultimate goal, whether through organic strategies, M&A activity, or some combination thereof – and for good reason. Without growth, firms run the risk of losing clients they can’t replace, missing the chance to capitalize on massive opportunities like the great wealth transfer, and falling too far behind competitors to catch up.

We often find RIAs can struggle to manage the dual role of advisor and business owner. Most, if not all, are tremendous in their roles as financial advisor, planner and asset manager for their clients, perhaps to the detriment of their equally-as-important business owner hat. 

But with a few adjustments to right-size common mistakes, advisors can capture growth opportunities and set their firms up for future success, whether that means selling the business or passing it down to the next generation within the firm.

#1 Succession Planning

Stop: Focusing Solely on Who Will Take Over

Many businesses approach succession planning too narrowly, concentrating entirely on identifying a successor and ensuring the necessary legal documents are in place. While these elements are certainly important, the thought of defining a successor can become overwhelming to the point of inaction, particularly if an owner’s exit is still far off. This siloed approach also overlooks the broader aspects that are incredibly important when executing a succession plan, such as roles and responsibilities, skillset, and compensation. 

Start: Training Team Members to Think Like Owners

Done right, succession planning can be a powerful RIA growth strategy as well as a contingency plan. Start now by cultivating an ownership mindset among your team members. Start early—ideally, right now—to train employees to think like owners. This means encouraging them to take initiative, understand the bigger picture, and contribute to the company’s long-term vision.

Fostering this mindset allows you to more effectively delegate day-to-day tasks slowly over time and without overwhelming your top performers. It gives you and other firm leaders time to focus on implementing growth initiatives. The shift in perspective can also help you uncover new, more efficient workflows and the potential for enhancing your service offerings, opening up the door for cross- and up-sell opportunities. As more team members take additional responsibilities and even client-facing roles, your clients will benefit from a streamlined continuity of care as they grow comfortable with several advisors in your firm.

#2 Equity Compensation Strategies

Stop: Talking About Succession and Buy-Ins Without Taking Action

Succession planning often becomes so overwhelming that firm owners simply…don’t do it. Discussions about succession and buy-ins within the firm often remain just that—discussions. This indecision can lead to stagnation, as the lack of a clear plan hinders progress and innovation or quality successors walking out the door due to a lack of action.

Start: Implementing an Equity Sharing Plan

The time to act is now. Implementing an equity sharing plan, even phantom equity, can provide the necessary motivation and commitment among key employees. This approach not only incentivizes team members but also creates a sense of ownership and accountability. Employees who have a stake in the company’s success are more likely to contribute actively to its growth. By moving from discussion to action, you can retain talent, harness the full potential of your workforce, and set your firm on a path of accelerated growth.

#3 Mergers and Acquisitions

Stop: Pursuing M&A Activity Without Strategic Alignment

Mergers and acquisitions can be powerful tools for RIA growth, but a haphazard approach often leads to more problems than benefits. Pursuing acquisitions without a clear strategic alignment in terms of company culture, talent synergies, complementary business goals and service offerings can result in mismatched cultures, redundant operations, and ultimately, failure to achieve desired growth (likely even client attrition).

Start: Seeking Synergistic Mergers

A synergistic merger involves combining two complementary businesses to enhance both firms’ strengths, streamline operations, and lower costs. For example, if you don’t currently offer estate planning, merging with a firm that offers significant estate planning expertise and capabilities can bolster your firm’s ability to meet evolving client expectations and capture the next generation of wealth, exponentially expanding your market reach. Synergistic mergers allow firms to combine their business activities and differentiators, creating a more robust and competitive entity.

Sustainable RIA Growth: The Key to Future-Proofing Your Firm

Firms that prioritize investing strategically in growth are far better positioned to capitalize on opportunities like acquisitions and strategic mergers. They’re also more attractive to top talent – which is critical for firm longevity, considering 37% of financial advisors are expected to retire over the next decade.