For Growth, Firm Founders Must Become Real CEOs
If founders of financial-advice practices want to grow their firms, they have to transition from being full-time advisors to being full-time CEOs, Hoon Kang writes in Advisor Perspectives.
Some advice firm founders are happy practicing financial planning and don’t want to oversee a business, and are therefore content keeping their firms small, according to Kang, a practice management consultant with Elliott Bay Advisors.
Those who do decide to grow, meanwhile, often do so haphazardly, ending up with a mishmash of compensation models, strategies and philosophies that don’t deliver end results, he writes. The reason behind such stagnation is often the founder-owner who hasn’t become a true leader to take the firm to the next stage, according to Kang.
To become real CEOs of their firms, founder-owners will need study, coaching and practice, he writes. They will also need to transition their client responsibilities to other advisors so they can dedicate all of their time to running the firm, according to Kang.
Firms that reach $1 billion in assets or $7 million in annual revenue are at a prime point to add a full-time CEO, according to a Pershing whitepaper cited by Kang. And founder-owners shouldn’t be afraid that advisors who take on their clients could leave the firm, he writes. They should worry about advisors leaving because they see no future in the company, according to Kang.
Finally, determining whether they’re becoming effective CEOs requires that founder-owners take a critical look at their performance as leaders, he writes. This includes assessing whether they’re reaching their goals, how they’re spending their time and whether their firm offers unique value, according to Kang.
The leadership position also requires assessing how the firm is dealing with the competition, whether the company’s employees understand its strategic direction and are motivated to stay on course, and whether the profit growth correlates with revenue growth, he writes.