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Elevate: Growing RIAs Provide Experiences, Not Products

On day one of DeVoe & Co.’s Elevate conference, attendees were told to channel 'Kung Fu Panda' and be more like Starbucks.

On the first day of DeVoe & Company’s fourth annual Elevate conference, held in Nashville this week, speakers stressed the importance of growth for RIA firms, shared thoughts on how to motivate employees and clients, and heard new ideas for how independent firms can outcompete established institutions long into the future—and even have fun while doing so.

The three-day event was built around the dual themes of growth and talent, and DeVoe & Company, the boutique investment bank and RIA M&A consultant, slated Wednesday's sessions on the topic of growth.

“Valuations are really driven by a myriad of different elements, but it falls into three major categories.” said David DeVoe, founder and CEO of DeVoe & Co. “Growth, profitability, and risk—and growth is the most sensitive.”

A self-described nerd on the topic, DeVoe said for every percentage point a firm increases its growth trajectory, the value of the firm jumps by 7%.

He also noted that average organic growth rates across the RIA space have decreased by more than 50% since 2017—the same rate at which the average advisor cut their marketing and business development budgets over the same time.

“This is a tragedy from my perspective,” he said, pointing to the need in the marketplace for bias-free advice. “We're the good guys.”

He argued an annual 1% increase in a firm's growth rate should easily be attainable with a “sustainable, comprehensive and integrated" business development strategy.

“That’s what I really encourage all of you to seek to achieve,” he said. “That’s what we’re going to focus on here these next few days is helping you put those tangible elements into place.”

DeVoe said an effective growth strategy relies on the identification of a target client profile and differentiated value proposition. Then he dusted off some favorite research—begun by Richard Ryan and Edward Deci in the late 1970s—to underscore the foundational importance of having a clear mission, vision and values statement.

Ryan and Deci’s research found that financial rewards are less motivational than are feelings of accomplishment and social reinforcement. In a subsequent study of more than 200,000 public sector employees, Yoon Jik Cho and James Perry found engagement levels were three times more strongly correlated to intrinsic motives (feelings of personal achievement and satisfaction) than extrinsic ones (outside approval and financial returns.)  

“A great way to underscore the importance is, of course, the classic movie Kung Fu Panda,” he offered.

The film’s protagonist, a pudgy animated panda with little coordination but big dreams of becoming the one chosen to save his village, is driven by intrinsic motivations. Meanwhile, his friend and accomplished rival is vying for the same position, but motivated to gain money and fame.

Guess who wins?

“Giving people more money to do behaviors is much different than inspiring them or helping them find that place to do it intrinsically,” said DeVoe. “So, what I encourage you to do is not just think about your employees, but even your clients and the people you're going to be selling to. Inspire them to focus on the intrinsic side of the equation.”

Quoting frequent TED talker Simon Sinek, he added, “People don’t buy what you do, they buy why you do it.”

Wednesday’s keynote speaker was Dennis Moseley-Williams, founder and CEO of an eponymous practice management company, and a "certified expert in the experience economy." His focus was to push advisors to see that the growth path was not simply about adding more services to the menu.

He reiterated the oft-given encouragement to financial advisors to be "more like Starbucks" and worry less about the cup of coffee and more about the client experience. Howard Schultz, the CEO that established Starbucks as a global phenomenon, hasn’t thought about the coffee for more than 25 years, he said.

Just offering investment advice, said Moseley-Williams, is tantamount to not thinking beyond that cup of coffee, or selling that good.

“What business are you in?” he asked. “Do you sell stuff, deliver services, or do you guide transformations? How do you know when your business is done? This is the progression of economic value of you.”

According to Moseley-Williams, most RIAs have gone beyond selling goods but are stuck at delivering services—aka financial planning. Firms that want to add more value and command higher revenues should be thinking about how to provide memorable, personalized and unexpected experiences for their clients.

Decreasing prices doesn’t add value, he pointed out. “It just makes things cheaper.”

“You don't want to win that race to the bottom,” he said. “If you want to make more value, you give them something else, something generous, something they weren't expecting in the financial services industry.”

What Starbucks did was create a home away from home for its clients, spending the money to give them things like free Wi-Fi and insulated cups and creating a narrative around community.

“When you don't think you sell coffee and you think you're just trying to create comfort, you don't even worry about what those things cost,” said Moseley-Williams. “You generously give them away because you know in the end the people will pay! It’s not about the coffee, it's about how the coffee makes them feel.”

Moseley-Williams said he recommends that firms identify and adopt a central idea or theme with which their clients are all on board.

“This is the big idea that brings me and all my clients together; it's like going to church,” he said. “Everyone here, me and all my clients, we all believe the same thing and we're in pursuit of that thing.”

Ultimately, he encouraged advisors to become advocates for their clients. This includes making time and holding their hand through difficult life events, as well as proactively providing supportive materials and connections relevant to them, staging client events and checking in consistently.

McKinsey agrees that’s where the industry is headed, he noted. A report published in early 2020 found that advisors will “gradually shed their role as investment managers and become more like ‘integrated life/wealth coaches’ who advise clients on investments, banking, healthcare, protection, taxes, estate, and financial wellness needs more broadly,” by the year 2030.

Moseley-Williams said 79% of clients currently have a purely transactional relationship with their advisor, while 73% would be willing to share more information “if it led to perks.”

“The value of the advisor is not the financial plan,” he said. “It's that once you have a financial plan, you can actually talk about things that are interesting and important, who you want to be when you grow up and what you want your life to be. Financial planning is a return on investment; I'm talking about return on time.”

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