Talent And Growth Are Inseparable For RIAs

Janeesa Hollingshead, Executive Editor, Wealth Solutions Report

DeVoe And Mercer Explore The Connections Between Growth And Talent, Keys To Retaining Talent, Organic Growth And Next Gen’s Impact On Internal Succession

Two themes that constantly occupy C-suites and ranks of top management are talent and organic growth. Human capital is a key element – perhaps the key element – in any industry.  And the importance of growth is summarized in the conventional wisdom phrase, “If you’re not growing, you’re dying.”

Talent and growth are so important to RIAs that DeVoe & Company produces an annual conference – DeVoe Elevate – to address these themes. The conference, which occurs this week in Nashville, will bring together dozens of experts and hundreds of organizational leaders to discuss these subjects, including the experts we talked to below to get a better understanding of how growth and talent interact for RIAs.

Struggling With Organic Growth

Organic growth is an issue for most RIAs, according to David DeVoe, Founder and CEO of DeVoe & Company, a speaker at DeVoe Elevate. DeVoe sees the primary challenge for organic growth arising from the lack of training advisors have on how to grow.

David DeVoe
David DeVoe, Founder & CEO, DeVoe & Company

DeVoe points out, “Most founders were trained to sell early in their careers. This helped them bring in new clients when they went independent as an RIA. But the founders were never trained to be a ‘trainer,’ to teach their employees to sell. Few have general marketing expertise.”

“Advisors need a comprehensive and integrated, multifaceted strategy to fully achieve their growth potential,” he adds, “and in most cases will need to hire marketing professionals to create and execute this plan.”

Dave Welling, CEO, Mercer Advisors

Dave Welling, CEO of Mercer Advisors, and an attendee at Elevate, notes that growth is driven by only a few RIAs, as “many established RIA firms have taken the foot off the gas as the principals have aged and are less interested in building and growing the business.”

Even for those firms aimed at growth, Welling points out other hurdles: “Those focused on growth and pursuing it aggressively typically do well but still struggle with consumers who don’t yet understand the meaningful difference between a fiduciary, full-service firm and the other options available.”

Internal Succession And Next Gen Talent

Ready for the handoff?

On top of organic growth obstacles, internal succession and preparing the next generation of leadership provides additional challenges to RIA leadership.

According to DeVoe, the lack of succession planning is one of the industry’s greatest challenges. His firm’s recent survey discovered that only 41% of respondents have a fully implemented succession plan, and under 40% believe their second or third generations are prepared to take the helm.

“The next generation of leaders in a firm is quite literally ‘the future of the company.’ So, founders and management should start investing in the second generation’s management skills today,” says DeVoe. “In addition to coaching them and exposing them to an expanding set of responsibilities, RIA leaders should be ensuring the second and third generations can afford to buy the firm, and craft career and partner paths for the future leaders.”

Welling compares succession planning to a three-legged stool, with two of the legs involving Next Gen talent. “First, the second generation needs to be able to take over serving clients. That leg is usually the strongest and the first in place. Second, there needs to be one or more of the second generation ready, willing and able to step into a leadership role to lead the firm’s evolution, not just manage the day-to-day. That’s hard and takes time. Many firms fail.”

The financial transition between owners is Welling’s third and final leg, and even in that arena, the second generation is not prepared, according to Welling: “The second generation often cannot afford to pay anywhere near a fair market value for the business. Beyond the financial burden of personal debt, the second generation might not have the risk profile that the entrepreneurial founders did.”

Are RIAs Engaging And Retaining Employees?

Martine Lellis
Martine Lellis, Chief Talent and Administrative Officer, Mercer Advisors

According to Martine Lellis, Chief Talent and Administrative Officer at Mercer Advisors, and a keynote speaker at DeVoe Elevate, RIA retention rates tend to be on par with overall retention rates, but can vary by role, generation and demographics. “For example, like most industries, we tend to see higher turnover in entry-level positions and within younger generations.”

“Engagement, however, I believe is generally higher,” she said. “There is a clear client-centric purpose and mission in what we do. In general, the closer you are to the client, the more engaged you become because the impact your work has and the value you get out of your employment is more tangible.”

Lellis believes that engagement and retention could suffer post-COVID. “COVID certainly changed our work modes, and we’ve seen this same impact across a variety of industries. We could see trends toward lower engagement and retention due to displacement of working teams that leads to lower levels of loyalty over time.”

Strategies To Retain Top Talent

Lellis sets out several key areas that determine a firm’s retention – how a firm rewards talent, how it paths talent to succeed in careers and whether the work environment allows them to thrive at work and outside.

Lellis advises firms to take the steps that her firm takes to address these key areas, including “careful coordination of a compensation philosophy (that generally includes access to equity over time), a clear career path and access to mentors who can be advocates for the talent, and an understanding of what the talent requires to make them happy in the long-term.”

Lellis concludes, “The company needs to be growing to sustain interesting opportunities and rewards.”

The Relationship Between Growth And Talent

Building on the point that growth is necessary to sustain talent, Lellis explains, “Growing companies allow for more rapid trajectories for talent to move up or onto different pathways. Generally, as a company grows, new opportunities within a business line open up or new divisions emerge which require new leadership.”

She adds, “It’s also just more exciting and fun to be part of a company where change is part of their DNA. The culture then tends to attract employees who embrace a rapid pace and pursuit of excellence.”

Looking at the relationship between growth and talent from the opposite angle, Lellis points out that “RIAs are built (or destroyed) by the capabilities, actions and engagement of the people in the organization. It is challenging to have a great hospital without great doctors.”

“At Mercer, for example, we believe in working together as ‘one team.’ That means advisors are not mercenaries working for their own success but for the success of their teammates,” Lellis said. Returning to the medical analogy, she stated, “You could have a state-of-the-art hospital, with great doctors in every discipline, but if those doctors, nurses and caregivers are not all working together, they will struggle in providing an excellent standard of care.”

DeVoe points out the importance of top talent to growth. “People are not only the key value and success driver – they are also instrumental to growth. Your people will share the story of the company and ensure that prospects feel confident to entrust their life savings with your firm.”

Examining in reverse, considering the importance of growth to talent, DeVoe says, “a firm without growth will lose their people. This industry employs smart, driven, curious people. If they don’t see growth then they don’t see a career path for themselves. Growth is the best metric for the health of a company, and it is also what creates opportunities for employees.”

DeVoe concludes, “RIA leaders who understand and engage with this interdependence will find greater success.”

Janeesa Hollingshead, Executive Editor at Wealth Solutions Report, can be reached at editor@wealthsolutionsreport.com.

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