By Austin Philbin
Some advisors make the move to independence for the opportunity to become a true entrepreneur—for the freedom and flexibility to craft and mold a brand and a service offering for their clients. For others, it is the ability to act as a fiduciary to their clients. But there is a subset of advisors that use a new business model or service offering as a catalyst for their move to independence.
These advisors seek to capture new streams of revenue or establish stronger client “stickiness” by creating value that cannot be delivered in their previous employment environment. While this can be an incredibly attractive opportunity, there are a few rules of the road to ensure prudent decisions are made during this diversification process:
- Affinity and Alignment: Carving out a portion of advisory services that are distinct from standard deliverables such as investment management, financial planning and retirement planning require the principals to have a real interest in the offering. There also needs to be alignment between the client base and the development of the ancillary business line. This intersection between affinity and alignment will ensure that enough time and attention will be placed on the research and development phase of the process and maintain focus when obstacles occur.
- Beware of the Shiny Object Syndrome: Advisors should break down their goals and desires into distinct phases—each with defined time frames and success measures. What that means specifically to a new registered investment advisor is that the first 60 to 90 days need to focus on: movement of client assets (if making a platform shift), billing of client assets and reporting on assets. Once those aspects of the business are solid, the RIA can move onto developing concepts for new deliverables. Keeping a strong mental picture of what the business should look like (and memorializing it in a business plan) will prevent the business owners from chasing trends.
- Play to Your Strengths: For more than 20 years, Intellectus Partners, a San Francisco-based RIA has been advising technology and disruptive companies in many industries to ideate, create, build scale and exit. The focus of the RIA is around the entire stage of the entrepreneur’s lifecycle, rather than the liquidity event alone. “Intellectus is built upon the principle that a successful entrepreneur is a truly rare animal,” says Dave La Placa, founder and CEO of the RIA. “If a successful entrepreneur is one who builds and exits one enterprise, then how does an entrepreneur learn? How do they plan an optimal business? Where do they learn best practices? Where do they go to figure it out? The answer is, nowhere. In other words, a first-time, or for that matter, a successful entrepreneur has no tried-and-true resources to rely upon to help build and scale a new enterprise while managing the greater complexities evolving in their financial life.
- Alignment Should Enhance the Enterprise: Matt Celenza, who runs Boulevard Family Wealth, found that there was a distinct need for a differentiated life insurance offering for clients in the ultra-high-net-worth space. Using that finding as a guide, he created Boulevard Insurance Strategies. Celenza describes his vision for the enterprise as an all-encompassing approach to managing wealth while paying special attention to legacy planning. “What we do to help guide the client towards long term planning is critical to the way we approach the current environment. Sensitivity towards tax planning and inter-generational wealth transfer become the main focus and the available insurance strategies we customize for our clients greatly help accomplish their needs and goals.”
- Leaving a Legacy: Some firms are building businesses with the hope that their efforts last. Jim Maher, and his team at Archford Capital Strategies, have created a philanthropic business model called Archford Angels. Maher discusses the genesis of the model and the impact it has had for the RIA and the community: “One of the core values established by our team when we launched Archford Capital was ‘Shared Success.’ You are witnessing something special when each team member is given $1,000 and allowed to go to a nonprofit of their choice and compete on community impact, sustainability of the project and personal development for grants of $10,000, $5,000 and $2,500. This type of local impact would never have occurred in my prior wirehouse environment.”
By thinking about these guidelines, RIAs will have a good starting place for making decisions around how they structure their offerings to clients in a logical and enduring way.
Austin Philbin is director for the Western Division at Dynasty Financial Partners.