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What does the CEO of an advisory firm do? Would you know what to do if you were to step into a true leadership role?
In my previous article about an advisory firm with $3+ billion in assets under management that pulled off a successful internal succession, I mentioned three things that contributed to its success. One was that the founders transitioned from client advisory roles to executive roles as soon as they were able, and gradually – but decisively – assigned their client responsibilities to non-owner advisors (many of whom eventually became owners). The primary reason for this was so that client “stickiness” would be to the firm, not the founders, thereby mitigating the risk of client attrition upon the founders’ exit from the business.
While it’s obviously naïve to conclude that this decision single-handedly contributed to the firm’s outsized success in transforming from a practice to an enduring generational business, it was one of several decisions that paid huge dividends. In fact, many advisory firms that were founded around the same time are managing $300+ million today, a respectable asset size to be sure, but merely 10% the size of $3+ billion. That’s a big enough gap that you cannot simply attribute its success to luck, or being at the right place at the right time.
Thus, the decision to add professional management at some point is a critical one for an advisory firm to continue to grow meaningfully, provided that it is what the founder-owner desires.
An executive job requires a unique skillset and experience to perform well. To think that it’s a job that anyone can do only if he or she had extra time is a grave fallacy. It can be learned, but like other skills, it takes diligent education and practice to be effective – and bring about tangible results.
It takes far more than extra time to run and grow a business. Said differently, one can't wake up one morning and suddenly expect to possess the skills needed to be an effective executive because he or she has plenty of free time.
I listed below some duties at which an executive of an advisory business who aspires to a leadership role should learn to excel, along with some he or she can clearly delegate.
Full involvement – 80% or more of the executive’s time
- Clarifying and articulating your firm’s strategic direction – core purpose, mission, vision and core values, as well as clearly defining an ideal client and strategies to reach and service them. (Keep it short. One or two pages will do.)
- Setting measurable goals and timelines, monitoring them and holding people accountable.
- Communicating your strategic direction repeatedly and clearly. Everyone in your organization should know it by heart.
- Making sure that every activity by every employee (including you) is aligned with your strategic direction, and boldly purging those activities that aren’t in alignment.
- Making decisions decisively and rationally, and in full alignment with your strategic direction.
- Recruiting, mentoring, motivating, grooming and empowering the next-generation advisors and potential successors who align with your core values.
- Acquiring new clients who are in full alignment with your strategic direction, and saying “no” to those who aren’t.
- Setting the tone for the firm and inspiring your people by communicating where your firm is headed, and how and when it will get there.
- Making sure you are managing for profitability.
- Creating and maintaining processes and an environment where your people can be empowered and thrive – that is, enabling them to produce output consistently and predictably with the least amount of wasted movements, confusion and friction with absolute clarity on what you expect of them.
High-level involvement – provide direction with some direct supervision
- Researching and analyzing client issues
- Investment policy committee
- Recruiting and human capital management
- Internal financial analysis, budgeting and metrics.
