Let Go and Prosper: Avoiding Three Common Pitfalls in the Path to Breakout Growth

New TD Ameritrade Institutional program shows RIAs how two key hires can take firms to the next level

JERSEY CITY, N.J.–()–For owners of investment advisory firms, the key to achieving more may be doing less.Doing less, that is, of overseeing internal meetings and spending less time on smaller accounts. Principals can potentially accelerate their firm’s growth by adding two key positions that give them more time to go out and bring in new business. Registered investment advisor (“RIA”) firms that employ dedicated management and an associate advisor can significantly increase their rate of growth in assets, revenue and earnings, according to new research from TD Ameritrade Institutional1 and industry consultants FA Insight.
Firms with a dedicated manager produced 36 percent more income per owner and 41 percent more operating profit per client than firms where advisors do double duty as business managers, the research showed. Likewise, firms with an associate advisor earned 44 percent more income per owner and added clients 15 percent faster than firms without.2

Adding talent isn’t enough, though: principals need to carve out clear job roles, create a framework that can support a far bigger enterprise down the road and then have the courage to step aside.

“Putting everyone in the firm, especially the founder, to their highest and best use is the end game. RIAs that effectively deploy these two key roles create opportunities for a productive shift in focus of the lead advisors, which can produce dramatic results,” said Christine Gaze, CIMA, TD Ameritrade Institutional’s director of Practice Management.

RIA firms typically evolve from a small practice, one principal and an assistant, into thriving businesses with, a dozen or so employees and an owner who still manages operations. Principals often are stretched thin and the firm’s growth hits a wall.

To help RIAs vault this hurdle and join the ranks of major league firms, TD Ameritrade Institutional shows firms a path to pursue breakout growth through a new program which explores the benefits of adding a dedicated operations manager or a chief operations officer and a client-facing associate advisor. The program targets firms with at least $100 million in assets, but may be considered by smaller firms.

“Human capital management may not be glamorous but it is important and doing it well may not only make the advisor’s life easier, it can help avoid the usual traps that could stall a firm’s growth. Getting the human capital issues right is essential for advisors who have set their sights on exceeding $1 billion in assets and absolutely critical if they’re at $1 billion already,” said Gaze.

Getting these issues right is the focus of a practice management effort built around a new research-based study, Breakout Growth: Adding Key Positions to Unlock Growth Potential. This comprehensive program, integrated with TD Ameritrade Institutional’s other RIA services, features guidebooks, customized tools, regional workshops and webcasts featuring advisors from elite, high-performing firms.

“We will be sharing insights and lessons learned from advisors that are thriving, but didn’t necessarily get it right the first time. We hope to save other advisors from making the same mistakes,” Gaze said.

Three common missteps, she said, involve having unrealistic expectations for your new associate advisor; hiring a business manager but then not trusting them to manage the firm; and hiring managers who are not capable of building and running the bigger company you envision.


Many principals, themselves the product of Wall Street’s ‘sink or swim’ culture, expect new hires to immediately get up to speed and so they often become frustrated when they instead see a cost center that is not generating revenue. Yet associates can create tremendous value by freeing the lead advisor to spend more seeking new business. Firms that don’t take the time to develop new advisors only ensure they will suffer expensive turnover.

“When the principal has unrealistic expectations, it sows the seeds for a toxic work environment,” Gaze said. “Principals need to regard the associate as an investment for the future, a seed that needs to be watered and cultivated.”

The Colony Group, one of the country’s largest RIA firms at $2.8 billion under management, tripled its assets and doubled accounts during the past seven years in no small part because the firm’s ”Path to Partnership” program recruits graduates as associate advisors and helps them progress through five clearly defined levels of increasing responsibility. Today roughly a third of Colony’s 60 employees are partners, compared with 11 percent for other firms of similar size.2

“We get great people and we retain them because they have a clear, long-term career path,” said Michael Nathanson, Chief Executive, President and Chairman of Colony Group.

SignatureFD of Atlanta similarly created a three-step advisor progression. The firm says it has grown around 20 percent a year over the past five years to more than $2 billion in assets, a record of success that was fueled by the way it develops associates.

“It’s a big leap of faith, but the next generation is really stepping up. There are many examples of where they come in and do just as good a job as we would,” SignatureFD co-founder and CEO Jeff Peller says.

Let Go

Adding an operations manager or chief operating officer isn’t overhead: dedicated managers hold the fort so that the senior advisor can focus on strategy and attracting more assets. Consider that half of U.S. RIA firms generating $1.5 million in annual revenue have one or more dedicated managers, but among firms generating at least $3.5 million, 90 percent have professional management.2

The challenge for principals is moving over and letting their new manager take the wheel. It is not always a comfortable transition for RIA principals, many of whom are entrepreneurs who wanted to be the boss and spent years building their own business. As a result many firms postpone hiring dedicated management until they get “bigger,” but these firms may wait too long and see growth stall as bottlenecks form around the owner.

Human capital management may not be glamorous but it is important and doing it well may not only make the advisor’s life easier, it can help avoid the usual traps that could stall a firm’s growth

The owners of Balasa Dinverno Foltz LLC were pleased to see their Chicago-area RIA more than doubled assets to $2 billion between 2005 and 2012, but running the day-to-day operations while also serving as the public face of the firm left the partners stretched. The partners hired Susan Korin as chief operating officer in 2011 and since then the firm has grown even faster, adding $500 million of assets in the past year.

BDF Principal Heather Locus says she witnessed this division of labor paying off when on her way out to meet prospects she walked by Korin leading an internal meeting, without any the firm’s owners present. “It was such an ‘aha!’ moment because this was exactly what should be happening: they’re sitting in an internal meeting and I’m out getting us new business for the firm,” she said.

Don’t fight yesterday’s war

Firms also can hurt themselves if they hire people who may be capable of running the business that exists today, but don’t have the skills and leadership qualities needed in a bigger, more complex enterprise. Hiring the dedicated manager is instrumental in leading the firm to breakout growth and avoiding frustration.

Armond Dinverno, a cofounder of BDF, noted his firm made several hiring missteps before it found the person they wanted in Korin. “Over the past eight years, we’ve hired three individuals for the same role. But each time we had hired what we thought we needed at the time, rather than for where we were headed in the future,” he said.

Click here to download our new whitepaper, Breakout Growth: Adding Key Positions to Unlock Growth Potential. To learn more about this program, contact your strategic relationship manager or call 800-934-6124.

Advisors have not received remuneration for participation in providing these testimonials. Advisor testimonials may not represent the experience of all advisors using TD Ameritrade brokerage services. The advisors mentioned are independent and not affiliated with TD Ameritrade Institutional. More information about the advisors is available on the SEC website (www.adviserinfo.sec.gov).

TD Ameritrade, Inc., is separate from and not affiliated with Colony Group, SignatureFD, and Balasa Dinverno Foltz LLC, and is not responsible their policies, services or products.


About TD Ameritrade Institutional
TD Ameritrade Institutional is a leading provider of comprehensive brokerage and custody services to over 4,500 fee-based, independent registered investment advisors and their clients. Our advanced technology platform, coupled with personal support from our dedicated service teams, allows investment advisors to run their practices more efficiently and effectively while optimizing time with clients. TD Ameritrade Institutional is a division of TD Ameritrade, Inc., a brokerage subsidiary of TD Ameritrade Holding Corporation.

About TD Ameritrade Holding Corporation
Millions of investors and independent registered investment advisors turn to TD Ameritrade’s (NYSE:AMTD) technology, people and educationto make investing and trading easier to understand and do. Online or over the phone, in a branch or with an independent RIA, first-timer or sophisticated trader, our clients want to take control and we help them decide how: We’ve been bringing Wall Street to Main Street for more than 36 years. An official sponsor of the 2016 U.S. Olympic Team, TD Ameritrade has time and again been recognized as a leader in investment services. Please visit TD Ameritrade’s newsroom or www.amtd.com for more information.

1 TD Ameritrade Institutional is a division of TD Ameritrade, Inc., a brokerage subsidiary of TD Ameritrade Holding Corporation.
2 2011 FA Insight Study of Advisory Firms: People and Pay.