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The entrepreneurial culture and meritocracy of the wealth management industry is what makes this profession unique. But have you ever wondered what we could learn from other industries?
Here are some ideas:
1. Obsess about your ideal customer
If a big consumer foods company is about to launch a new product, it builds an identity for its ideal customer. Let us say you are launching a new protein bar. Whole departments will spend months creating that ideal identity. “Meet James (yes, they actually name the person) … he holds this job … he lives in this city … this is his marital status … he went to this college … he drives this car … these are the hobbies he does at the weekend … this is where he vacations.” It goes to this trouble because it makes marketing decisions extremely easy. How should it market the protein bar? Should it do TV advertising or sponsor a sports team? Well, what would “James” think is cooler? Where would James see it?
What can we do in wealth management? Go through the same brainstorming process thinking about your ideal client. Build your client experience so that it solves the challenges that ideal client faces. For example, Michelle Smith, CEO of Source Financial Advisors in New York, created a “Wife2CFO” program specifically aimed at women who are managing their own wealth for the first time following divorce. The program begins while the client is negotiating their divorce and then the program charts a client journey with coaching throughout.
2. Professional management
How do you become the CEO of a wealth management firm? Often it is because you were the biggest rainmaker or had the biggest client book. That is quite remarkable when you consider many firms in our profession are run by people who have little professional management experience. That is not necessarily a bad thing. Having a CEO who prefers to spend time on business development is great if somebody is making sure the company runs efficiently.
What can we do in wealth management? Have an honest look in the mirror and ask if you are an “absent CEO”? Do some of the managerial parts of your job make you wince? If so, do strategic planning with your team, delegate out some of these areas and make sure they have the necessary attention.
3. Insource the secret sauce and outsource the rest
Uber contracts with thousands of people across the world. But they do not own any cars. Crack open an iPhone and you will find much of the hardware is manufactured by third parties and not Apple. Those firms spend their time hyper-focused on their secret sauce. For Uber, it is the technology and for Apple it is the design. For everything else, they find the best solutions in the world.
What can we do in wealth management? If I was to ask your clients for the top five reasons they are with your firm, I bet they would say something about the relationship they have with you. Anything not mentioned in that top five should be a candidate for outsourcing. Should you hire somebody in-house to make sure you have an excellent client experience? Probably. Should you hire somebody in-house to manage assets, providing several external managers from which to choose? Maybe not.
4. They see diversity as a competitive advantage
Pick an S&P 500 company and likely you will find a chief diversity officer in its leadership team, reporting directly to the CEO. Numerous firms are pumping serious resources into creating a diverse workforce. Not only is this the right thing to do, it makes economic sense. America’s customer base is becoming more diverse every year and having a diverse workplace makes it easier to attract those customers.
What can we do in wealth management? A 2020 Boston Consulting Group study found that only 1.1% of global AUM is managed by firms owned by women or minorities. For the good of this profession, that has to change. Have a hard look at your hiring practices and how you select your leaders. Heck, making sure that a female employee who wants to start a family does not need to sacrifice her career would be a start! Any firm that is not making a concerted effort to add more women and minorities to their workforce is ignoring a sea change coming down the road. It is your choice whether that is a big danger or a big opportunity.
Although other industries could learn quite a lot from the wealth management profession (e.g., a meritocracy culture that puts the client first), there are plenty of areas where we could learn from them. The RIA firms that have professionalized themselves and become businesses instead of practices have instituted some of the insights above.
Gordon Ross is a director in the enterprise group of Dynasty Financial Partners. Dynasty is a leading provider of wealth management and technology platforms for independent financial advisory firms. We create access to valuable resources and industry-leading capabilities through an open architecture platform, enabling our advisors to have the freedom to address their clients’ needs in an objective manner. The Enterprise Group within Dynasty is the consulting division that caters towards RIAs that want to plug into our range of tools and services.
Read more articles by Gordon Ross
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
