Building Today's Wealth Management Firm

The new role of a firm leader…and how to get there

by Mark Sullivan

For generations, the role of a managing partner, or general agent for those who started their careers on the insurance side of the financial services industry, has been thought of as the pinnacle of career growth for managers and advisors that wish to have a firm of their own. For those who have a passion for this industry and want to be a part of its evolution, a managing partner can truly set the tone for leadership and growth of the advisors within the firm.

As time has gone on, particularly over the last decade, we have seen dramatic changes in our industry from companies going public, to advisors moving towards independent distribution channels, an aging population of advisors and managers, the competitive landscape and increased regulatory oversight. These changes have also led to the evolution of the traditional managing partner role and it’s important to understand how those that embrace these changes and find new ways to bring significant value to their advisors are not only surviving, but thriving. If you recognize the opportunity these changes bring, and understand how to navigate them, that will be your key to building a successful and lasting business.

Consolidation

Consolidation is one of the most prominent factors affecting the industry right now. Because of the low margin business, shrinking population of advisors, and increasing population of clients needing advice, the industry is again experiencing change. The term “Super OSJ” has become main-stream with many companies consolidating their registered branches to provide the scale needed to run a local firm. The rise of firm mergers and acquisitions, both voluntary and involuntary, is a direct result of firms lacking economies of scale and ability to provide real value and transparency in compensation to the underlying advisors.

While margins in the field continue to be squeezed, home offices are also looking to reduce cost through gaining efficiencies with use of technology. Local firms, as well as the advisors, have become independent businesses who need to provide their own succession planning in exchange for equity on those well-built practices. It is exciting, as this truly is the entrepreneurial model at its best; but, it takes a particular skill level to run the business-side of the operation with such autonomy.

Understand that this is a business

For advisors and managers that strive to assume the role of a modern day managing partner, the sooner you understand that your firm is a business, the responsibilities and development path becomes much clearer. A managing partner looking to build equity in their firm needs to attract advisors who value the services provided to help that advisor grow their business: such as, developing a team, finding a successor, generating additional revenue sources or maybe just providing supervisory infrastructure.

This is a shift from the commission world of selling proprietary products and places more emphasis on the skills within the team a managing partner assembles around them. To get there, a managing partner must use their skills in leadership more so than ever. Managing partners need to set the vision of where their firm is going in the future, how they are going to get there and how to create distinction in the marketplace. The need to develop the next line of leaders becomes more paramount so that the vision and direction is shared, communicated and executed by everyone across the organization.

As firms move towards a true entrepreneurial model, staying on top of your business and consistently meeting the needs of advisors and clients becomes critical. While this may seem obvious, making sure that the resources you are investing in are valued by advisors becomes a differentiator. One would argue that the reason for consolidations today is not just an economy of scale issue; but a lack of leadership and development of the next generation of leaders to help managing partners and advisors grow their business. With no successor in place for growing the business, the business likely becomes a victim of a merger. For the new managing partner, one of the primary skill sets required, which hasn’t changed, is the ability to attract, retain and service your advisors and their clients; while at the same time, focusing on your business skills, management acumen, operational staffing and compliance oversight.

As regulatory and compliance oversight has increased across the industry, it’s important to position compliance and supervisory support as a service that can help protect advisors that do the right thing for their clients. In today’s world, it must be combined with stronger leadership, profitability and fiduciary responsibilities due to the changing products and services that are being offered on our platforms.

With the population of advisors and sales managers aging, the strategies you employ to recruit and retain financial professionals needs to become more laser focused. Today’s recruiting strategy is evolving to building teams as part of an equity and succession model – ultimately helping professionals build more profitable businesses with equity value – and passing those businesses on to the next generation.

As an advisor or sales manager who wishes to become a managing partner, you need to develop skills beyond selling. The focus can no longer be just on bringing people into the business or product sales.  You must be more in tune with the regulatory side of the business. As such, you need to align your team appropriately and have a strong focus on managing the supervisory process, managing the firm’s books and records and managing your people.  It is still about sales power development, but in the context of being an architect of your infrastructure. You are an architect that helps transition your firm from an agency to a marketing firm, to an OSJ, to a super OSJ that provides valuable services to your advisors, staff and professionals.

As always, you need to be empathetic to the world that an independent advisor or professional lives in, meaning you need to lead from within and not from above.  Understand what advisors need to deliver to clients in this changing world and align your team around them to support service, marketing and fiduciary responsibilities.

Compensation changes

In the traditional career model, compensation was tied to product lines, sales, recruiting and retention. That is still the model for a few companies today, but as the evolution to a more hybrid and entrepreneurial management model continues, compensation is truly tied to profitability and your ability to invest wisely and attract advisors to your firm. You need to invest in a staff that is accountable, responsible and creative, delivers value to your advisors and builds relationships within your infrastructure. There needs to be a common thread among all of your associates from technical staff and directors, to advisors’ assistants and second line mangers.  They need to be organized to deliver on promises as well as operational and compliance procedures.

In the past, you may have relied heavily on a primary company for benefits, training, marketing and selling systems. However, if you are operating in the independent space, the exciting part is that the business operation is truly in your hands, but it takes a level of business acumen to be able to grow and sustain the operation. While many resources are made available within the independent space, you have to choose which ones are cost effective and bring the most value to your advisors and clients.

What should be the roles and responsibilities of managing partners and directors entail?

• Transparency with advisors who are part of the firm;
• Setting the compliance policies and organizing your entire team around implementation of those policies;
•  Long-range vision, market positioning and execution planning, including succession and equity valuation planning for your representatives’ practices;
• Practice management, expense management, profitability and quality control;
• Organizing your team around recruiting, development and service models for your representatives;
• Confronting underachievers;
• Hiring people underneath you that are better at the things you are not;
• Offering a competitive and fair payout for the infrastructure and services you provide;
• Creating a goal-oriented culture.

Demonstrate ways to add value as a leader

If your goal is to be one of the next generations of Managing Partners and you want to run a successful financial services organization, it starts with leading by example. If you are an advisor, demonstrate that you are not only an advocate for your clients, but also understand and contribute to the growth of your firm’s goals by referring candidates and taking newer representatives under your wing as a mentor.

Show that you have leadership skills that result in improving the performance of others and helping people find their purpose. You need to understand the marketplace you are in, both from a sales and recruiting perspective, so that you can contribute ideas and value to your leadership team for growth. If you have ideas, offer to do a presentation to your management team about ways the firm can expand its sales force and how you would be willing to help.

As for involvement in the industry and your community, you should be participating on committees and contributing to marketing activities. You want to build relationships within your industry associations so that you are seen as a leader and that you are partnership material. You should be a trusted advisor. Know the compliance regulations and industry trends affecting your firm, your clients and the competition.

The best of the best are those who can share a passionate vision with others about the future of the industry and their place in it.
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