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Growth seems to be the operative term in the financial advisory industry. Everyone wants growth—clients want growth in their portfolios, advisors want growth in their practices. However, growth can be a double-edged sword, especially if it comes through hasty strategies, or at the expense of client service or your wellbeing. If growth isn’t planned for and approached in the right way, the clients will suffer and, eventually, so will the business and even your quality of life. It is imperative to have a clear strategy in place for addressing change and growth before they happen.
You don’t always get a say in whether or when growth happens, but there is one question that you should be asking yourself well in advance: Why do you want to grow? Asking this question helps identify not only the forces that are driving you to grow, but a plan for approaching that growth in a conscious way. It is vital to be clear about your motivations, personal beliefs and conditioned habits , as they will steer your choices.
The Downside of Unmanaged Growth
Many financial advisors start off their businesses as an individual advisor. As their business grows, they bring on an assistant to help them manage the workload. They keep adding staff as the demands of the business grow, and suddenly they realize that they have a group and end up calling them a team, purely by default. I am not aware of any successful sports team that recruits talent using this approach. Unmanaged growth usually also ends up hurting the business. While revenues and profits can be increased in the short term, trust and loyalty are built slowly over time. That trust and loyalty can, however, be lost very quickly with poor service, eroding client loyalty and eventual retention. This creates an even bigger overarching problem: additional staff have been hired to handle the growth, but new anxieties about increased costs and reduced production have been introduced.
Similarly, focusing too much on aggressive growth targets just for the sake of growing does not usually lead to lasting positive outcomes. It is also easy to operate on autopilot when it comes to growth, going about it in a way that leads us to mindlessly put one step in front of the other. Under this method, it’s possible to become consumed in frenzied activities, all under the pretense of growth. Neither option is ideal.
The Upside of Conscious Growth
It is possible to grow your practice and your profits while at the same time enriching the lives of both your clients and your staff with a planned, systematic and strategic approach. Transitioning from a solo entrepreneur to an effective CEO of your firm starts with a shift in mindset—your way of thinking.
I’ve envisioned a three-level growth model for financial advisors that I believe can take their business to the next level, if they so choose to pursue.
Level One: At this level, one individual makes all of the firm’s decisions. This is a very popular initial approach. In 2005, there were over 20 million solopreneur businesses in the United States. People prefer this method of conducting business because they have freedom they wouldn’t have working for someone else.
As time goes on, the entrepreneur in charge brings in more employees to help with his growing business; their day begins to be consumed by operational details as opposed to client-facing duties, which is where the founder’s talents and interests actually lie. This causes more strain and worry on their everyday life–– that is a signal that it is time to move on to Level Two. Unfortunately, this transition can be challenging for many entrepreneurs due to both fear and control issues. This is a choice not to be approached lightly. The growth between levels is not automatic, nor is it mandatory. If your mindset as an entrepreneur shifts, the time may be approaching to choose an approach to the next level.
Level Two: If you can evolve into this level, two people share the decision-making responsibilities and run the business together. The transition between levels one and two is the most difficult, because often the individual who was originally in charge has invested a lot of time and money in the business and is fearful of the risk of losing it all and often feels like there is a level of control he or she needs to maintain. The transition is worth it: it takes 3.6 times longer for a solo entrepreneur to establish themselves than with a good partner or manager.
Level Three: If you truly wanted to build a business that is bigger than you, this is the level entrepreneurs should aspire to reach. At this level, the business has evolved to a place where it is being managed by three or more members of an executive team. This allows for stability, both day-to-day and also when unpredictable changes occur. This can also keep the founder’s ego from potentially hindering the business. Growth is usually most productive in this phase.
Keeping Growth In Mind, and Your Mind On Growth
In addition to dedicating significant effort to attracting the right talent to the firm, the organization systematically needs to align its talent acquired over time (i.e., first you have to get the right people on the bus, then you have to make sure the right people are in the right seats on the bus). Your approach to growth is a personal choice—one that can either improve your quality of life or diminish it. When you get obsessed with growth for the wrong reasons, not only have you become extremely vulnerable to the vagaries of the market and irrationality of human beings, but also willingly give up your peace of mind.
Taking on the challenge to transition from level one all the way through level three is truly a worthwhile endeavor that will generate lasting value. It will push you to switch your perspective from viewing everything as a cost to viewing it as an investment, and will bring you the security and freedom of running a firm. If, during the course of growth between levels, you find yourself unable to make the switch, it is important to reconsider or reevaluate the reasons you want to grow—or if you want to at all. Unless you are open to shifting your mindset in a way that will allow for collaboration and sharing the growing responsibilities with others in your firm, the risks of the transitions will outweigh the rewards.
Go back to the most important question: “What’s driving me to grow?” Spend some time reflecting on your personal beliefs regarding success. From there, you can make the choice that best suits your business and your personal goals. This choice, once acted upon, is what will cause your life to either flourish or struggle. The system of levels I’ve presented above offers three options for growth. Your decision will be strongly influenced by your beliefs, conditioning and drives––the choice is yours.