COVER STORY
The first rule in the jungle is to not be eaten . So successful advisories will create financial incentives ahead of time to keep their best people , long before any other organization tries to recruit them .
ject changes , a successful firm can create parallel operating systems that effectively grandfather certain key individuals into past compensation structures .
4 . Successful firms will reset their cultures .
Equally important to re-engineering an operating model is resetting a culture . Organizations with high rates of organic growth are obsessed with new client recruitment . They are high-stress workplaces that hold every employee accountable for the firm ’ s growth .
Unfortunately , most advisory firms today are low-stress , relaxed places to work that , years ago , effectively stopped recruiting new clients aggressively . Even firms that previously had high rates of organic growth lost their focus over the last decade as many were acquired and their founders — who drove their marketing efforts — retired .
The most successful firms will quickly reset their organizations ’ cultures . But doing so will be no easy task and will likely lead to many departures .
5 . They also will do whatever is necessary to quickly acquire the necessary talent to grow .
Even with more efficient operating models and reset cultures , successful firms will require additional talent . They will need to replace large numbers of retiring professionals and add others . They will do whatever is necessary to quickly get them .
Since the industry has no pool of available trained professionals for hire , advisory firms will instead poach their competitors ’ best people . That might turn their management into pariahs at industry events ( where they will be treated like lepers at a nudist colony ). But that ’ s irrelevant given the talent scarcity and the organic growth opportunity at hand .
The first rule in the jungle is to not be eaten . So successful advisories will create financial incentives ahead of time to keep their best people , long before any other organization tries to recruit them . ( And it ’ s a fool ’ s errand to rely on restrictive covenants to keep people .)
6 . Successful firms will develop cost-effective , powerful brands .
Thriving wealth management firms will develop cost-effective , powerful brands . These brands have up until now been largely irrelevant , which is why they can ’ t drive large volumes of prospects to firms ’ doors . Certainly , Schwab ’ s and Fidelity ’ s brands do this . However , those companies spend hundreds of millions of dollars annually on marketing , outstripping what even the largest aggregators can currently afford .
Certainly , some larger advisories will try to go toe-to-toe with Schwab and Fidelity , ignoring the costs . But the most astute firms will instead build potent , cost-effective brands that communicate their expertise in diagnosing and solving the problems of a specific target audience . The most successful bigger firms , meanwhile , will rely on a collection of sub-brands wrapped in a larger national one .
7 . They will embrace rather than just endure the many changes forced on them by cyber threats .
The Securities and Exchange Commission ’ s new cybersecurity regulations are going to transform the way businesses operate — and not for the better . The firms that thrive will recognize the immense threat cybercriminals pose to their clients ’ wealth and well-being and make the necessary investments to upgrade defenses . The firms that can demonstrate these defenses ( and make their cyber investments part of their marketing ) will do better than less-prepared peers .
Successful firms will also have to explain the risks posed by the vulnerable third parties they work with . They ’ ll be obligated to disclose to current and future clients that custodian and brokerage agreements obligate the clients to bear most of the risk of cybertheft from their accounts . But rather than just
DECEMBER 2023 | FINANCIAL ADVISOR MAGAZINE | 41