The Four Pillars Of Hypergrowth Every Competitive RIA Needs To Focus On

RIAs Must Make Appropriate Steps In People And Culture, Strategy, Execution And Capital To Accelerate Growth
Darius Mirshahzadeh, Co-Founder & Executive Managing Partner of Rise Growth Partners
Darius Mirshahzadeh, Co-Founder & Executive Managing Partner of Rise Growth Partners

In the competitive landscape of RIAs, growth isn’t just a desire – it is an imperative. Just like any living organism, RIA businesses must adapt and grow to thrive. This journey presents many challenges and considerations unique to the industry, as well as many unknowns. How fast can I grow without experiencing growing pains? What unknowns will I face in my path to building a great company? Can I navigate the many challenges? Do I have the right team to get me to where I am trying to go? The list goes on.

Venturing into the blind alleys of growth should excite – not frighten – RIA founders who are committed to building the company they have always envisioned. It is noble to build a business that serves people in their pursuit of living better, more fulfilled lives. However, scaling a business into a thriving mid-market enterprise that embodies these values requires a deep understanding of what truly makes a business great. As most leaders learn, growing businesses introduces new challenges and opportunities to level up as an organization.

Regardless of what phase of growth the company is in, there are four pillars of growth that must remain front and center in order to succeed:

People And Culture

To scale successfully, RIAs must take a hard look at their culture and people. Whether expanding the team from 50 to 500 people or growing assets under management from millions to billions, growth comes with the risk of diluting the culture that created success in the first place. I cannot overstate this enough: We need to protect this at all costs. Cultures are fragile and they can change rapidly if they are not cared for.

Growth comes with the risk of diluting the culture that created success in the first place.

Given this, the importance of strong leadership cannot be overstated. In an industry where the product is more or less a commodity, the greatest differentiator is the people, the strength of the team, and leadership’s ability to support the team as they work to create better outcomes. Your inside customer’s experience (i.e., your team) reflects your outside customer’s experience.

It is the job of leadership to invest in the team at every level of the organization, fostering a culture of accountability and autonomy, and most importantly, creating a deep sense of purpose. People want to be part of something greater than themselves. We are wired for it. This means making sure that the team understands and is excited by the company’s long-term goals and vision, and is aligned with the company’s core values.

A simple test to see if the team is aligned with the firm’s values is to ask each of your team members if they can articulate them without looking them up. If the answer is “no,” then work needs to be done. When the team knows and uses the values in their everyday work – and most importantly holds each other accountable to these shared principles – only then is the company is ready to grow without risking the dilution of its culture.

Strategy

If you’re thinking about growing your company fivefold, good for you, but remember, this will not happen without having a well-thought-out, long-term strategic plan in place. For example, the plan needed to expand from 50 to 120 team members is very different from the plan required to increase your team from 200 to 500. Each stage of growth will require different skill sets, systems and strategies in order to be executed well. Sadly, many organizations will lack in some, if not all, of these areas until they pay the necessary tuition to the “gods of growth.”

Each stage of growth will require different skill sets, systems and strategies in order to be executed well.

Just as the team needs to know why the company exists and embrace the company’s core values, they should also clearly understand the vision for the growth of the organization. If your team is neither clear on where you are going nor fighting to get there, then how can the company expect to succeed? People buy clarity, and it is our job as leaders to set a clear vision for the team to buy into.

Establishing a “big hairy audacious goal” that aligns with the company vision can inspire the entire team to work together to build something that they can all be proud of. Firms must also define their unique value proposition, i.e., the problem they are uniquely positioned to solve that cannot be copied without a great investment of time or resources. Regular reviews of the strategic plan allow the firm to recalibrate its execution in response to ever-changing market dynamics. Most importantly, this reinforces a culture of accountability around actualizing the firm’s plans and goals into reality.

Execution

Execution is the ultimate differentiator when building a high growth RIA. According to an article in the Harvard Business Review, only 10% of companies effectively align their strategy with their organization’s design, which represents execution. Thoughtfully designing and building accountability systems within a company will define whether it becomes a well-oiled execution machine, or lives in the camp of the 90% that fail to execute.

There are a couple of key elements that will make this happen in any company. First, make sure that the team is sitting in the right seats and working in their strengths. It is incumbent that we as leaders own this if we want to have great results in our organizations. Secondly, leaders need to take a hard look at their meetings. Generally speaking, well-run meetings reflect a well-run company. Inversely, poorly run meetings are likely a symptom of a company that needs some help in execution.

It’s also important to recognize that, as Marshall Goldsmith famously said, “What got you here, won’t get you there.” Distractions, such as “shiny object syndrome” can divert the firm’s attention from what’s most important and should be avoided at all costs. Firms that care about growth must maintain focus on the critical few items that will move the needle in actualizing their strategic plans, while also sustaining alignment across the team. This becomes exponentially more difficult as more team members join, making it critical to leverage business operating systems like EOS, Scaling UP, 3HAG and OKRs.

Aligning long-term objectives with quarterly goals, while measuring what matters most, will increase the odds of building the future envisioned in the company’s stated vision. This sentiment is best encapsulated by the age-old maxim, “If you can’t measure it, you can’t manage it.” Most importantly, identifying and addressing friction points within the organization and with customers is necessary for sustained growth.

Tools like net promoter scores and employee engagement surveys provide data to continuously improve firmwide processes and proactively get in front of problems that could slow growth. Scale is a friction removal process, and the best way to remove friction is to get ahead of it before it arrives.

Capital

As my partner Joe Duran likes to say, “When they are handing out apple pie, you should get a slice,” meaning it’s important for businesses to seize opportunities when a season of capital abundance occurs. Capital availability fluctuates, impacting valuations and multiples. As seen in venture capital, capital influx can quickly go away. Given that none of us know what the future holds, the best time to raise capital is when things have never been better and you don’t need the capital – take the slice.

The best time to raise capital is when things have never been better and you don’t need the capital.

Moreover, choosing the right capital partner requires a thoughtful evaluation process. Key questions regarding the prospective capital partner’s experience, industry connections, value-added capabilities and core beliefs are central to this process. Considering the potential impact on the firm’s growth as well as risk mitigation strategies should also inform the decision-making process. Not all capital partners are created equal – for some, a strategic or synergistic investor may be the best fit, while for others, whoever offers the best price may be the right choice.

Navigating the growth journey in the RIA sector demands a holistic approach, anchored by a deep understanding of scale principles and a commitment to one’s core values. By prioritizing the pillars of people and culture, strategy, execution and capital, RIAs can navigate the journey for sustainable growth even with uncertainty. Having a clear vision and creating a culture of innovation and accountability, RIA leaders can seize opportunities for growth while staying true to their ultimate mission of serving clients and enriching lives.

Darius Mirshahzadeh is the Co-Founder and Executive Managing Partner of Rise Growth Partners and author of The Core Value Equation.

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