For a firm to grow, it is essential that its leaders understand the direction in which they want to take business, and that their decisions and behaviors flow consistently from that understanding. In fact, after consulting for advisory firms for nearly 20 years, I can say that consistent leadership is the biggest predictor of behavioral development.
But, at times, the leaders of the advisory firm may behave unfairly as the stock market. They continually shift their focus from one project to another in order to promote development or to correct problems perceived as threats to development. In doing so, leaders focus excessively on one positive event—“We’ve just had a doctor client, let’s do a marketing push for doctors!”-or on negative event-“We have lost a customer, let’s find out why and make sure it doesn’t happen again!” In such cases, leaders are allowing emotions to drive their actions rather than making sound business decisions based on broad goals.
This phenomenon, called misunderstanding, translates into distractions and interruptions in the business growth cycle. Countering misunderstandings, and the path to fulfilling your firm’s growth potential, lies in improving the leadership skills of the person running the firm. This means it can be difficult to shift the mindset: shifting your focus from within the business to your own behavior and actions.
It’s understandable that RIA firm leaders get lost in small talk. Typical leaders spend their time putting out one fire after another. A team member may be out due to family crisis, duties are yet to be handled. A client may threaten to leave the firm. There’s always something to be done.
Contributing to the problem is the fact that most advisory firms are small and have limited resources. Remember, the US Small Business Administration defines small businesses as businesses with up to $40 million in revenue and up to 1,500 jobs. 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 day-to-day issues, it is very difficult for firms to lay the groundwork that will take their growth to the next level. I encourage consulting firm leaders to balance their leadership efforts and their limited focus and energy into five key growth levers:
customer service. Most RIA firms are not in business to sell investments, life insurance or any of the other things we consider to be financial products. The product they sell is their customer service experience. Customer service including financial advice, investment management advice, planning advice and general financial advice and guidance. Since customer experience is the product of consultants, the continuity of that experience is the most important function of creating and sustaining growth.
Operation. the ability to Repeat Customer experience hinges on a firm operating procedures. Operations includes all the backstage work that underlies the customer experience, whether it is the money management process, the financial planning process or other processes. It is behind everything from client interactions through email, phone, website or client portal to employee training and working experience in the firm.
human capital. Human capital is a separate area from training employees to operating Processes that come under Customer Experience. Human capital deals with compensation and incentive structures, benefits programs and partnership incentives that help retain talented employees and give a consulting firm an advantage in hiring new team members.
Dirty. Earning the trust of consumers in your organization and their trust in your product is selling. In the world of physical products, sleek product design and packaging can influence customers to purchase everything from smart phones to cars. On the other hand, businesses that have a service product earn their trust and influence through the value proposition they present to the customer and the way they deliver it.
Marketing. Marketing of a firm supports its sales and customer service. This includes using strategies and tactics such as email campaigns, blogs, social media, communities and podcasts to attract potential customers. While marketing programs look very different between different firms, maintaining them and being consistent is the key to adding new customers.
How should a consultant leader divide his or her time and attention among these five key growth areas? Balance and flexibility are key. Each area will require more or less attention at a specific time during the development cycle. Businesses exist and grow dynamically, so applying an inflexible formula can lead to stagnation and complicate problems in the organization.
Many advisory firm owners strive to simultaneously achieve and maintain excellence in every area of their business while serving clients. This is laudable in theory, but in practice, a balanced and flexible mindset and approach will lead to stronger long-term growth.
Behavioral psychology isn’t just for clients
Today’s financial advisors are well aware of the relationship between behavior and outcomes. In fact, wealth management firms have been conveying the message to clients for many years that focusing on their behavior, understanding how their actions and attitudes affect their retirement and financial goals, is important. Firm leaders must apply a similar behavioral psychology approach to running their businesses.
Yet their own behavior is usually the last thing RIA leaders consider when analyzing their firm’s growth. More generally, they will focus on the services they provide, or analyze or fine-tune their marketing plans. Without behavioral awareness, these actions may not contribute much to long-term development.
To ensure strong, sustainable growth, advisory firm leaders must abandon the firefighting mindset and focus on the main factors driving growth. This will require them to accept the challenge of looking in the mirror and hone their leadership skills. As RIA firms grow and begin to dominate local and even national markets, I predict that leaders whose behavior aligns with the fundamentals of business development will eventually make the most of the market. share will win.