How and Why for RIAs • Financially Simple


The RIA space is a highly competitive one. This is exacerbated by the fact that so many people fail to understand what a financial advisor truly is. Therefore, it’s incumbent upon you to take intentional steps to differentiate yourself from the rest of the pack. In this entry, we’re going to explore how you can use competitive research and a holistic assessment of your own firm to gain a competitive edge and move toward an eight-figure exit.

Follow Along With The Financially Simple Podcast!

This week on The Financially Simple Podcast:

  • (3:48) Knowing the Destination: The Key to Good Planning

  • (4:52) Business Owners Often Fail to Plan

  • (5:55) Take Inventory of Right Now

  • (6:38) Standard Operating Procedures

  • (8:24) The Key Metrics

  • (9:29) Take a Holistic Assessment of Your Business

  • (12:35) Competitive Analysis

  • (14:04) The Ideal Client

  • (15:12) Listen to Thought Leaders & Business Experts Across Multiple Industries

  • (17:16) The Pros & Cons

Everyone’s a Financial Advisor

Not too long ago, I was attending a networking event. As I sat there sipping my coffee and chatting with an attorney friend of mine, we were approached by a gentleman that I’d never met before. I explained that I owned an RIA in town, and this gentleman said, “Oh! You’re a financial advisor.” I politely smiled and responded, “Sure. That’s one term people use to describe what I do.”

The man then pointed to another individual across the room, saying, “Have you met ‘so and so’? He’s a financial advisor too.” In fact, I had known the man he was pointing to for years. He is a banker and specializes in creating loans for people. So, not exactly a “financial advisor.” I kind of chuckled to myself and said, “I don’t mean to be rude, but have you met my friend?” At this moment, I pulled another colleague into the conversation, introducing them.

The friend that I introduced sells supplements to individuals for an insurance company. Once again, my new acquaintance said, “Oh! Well, you’re a financial advisor.” At this point, my attorney friend began laughing and said, “So, is everyone a financial advisor?” It can certainly seem that way sometimes. With so much confusion around who or what is a financial advisor, how can we position ourselves to stand out?

What’s Your Destination?

I have a client who is preparing for a vacation. In a recent meeting, I asked where they were going. They told me that they hadn’t decided yet. They’ve blocked out about 13 days for their vacation, but have no definitive plans for where they’re going or what they’re going to do. When I heard this, I said, “Well, if you don’t know where you’re going, then anywhere is going to be fun.”

Without having a plan for their vacation, they could end up just hanging out at the house, working on various projects, and missing out on the relaxation and recovery that comes with a vacation. This is also true in our businesses. If we don’t know where we are going, then we have no direction. This can lead to taking on initiatives that ultimately, don’t move us forward.

According to a study by Smallbiztrends, only around 35% of small business owners have a completed business plan. Now, when I say “completed,” I mean it is fully developed and in writing. Based on the personalities of those of us in the financial planning industry, I would imagine that number is much smaller in the RIA space. If we don’t have a dedicated plan, how can we reach our goal?

Take Inventory of Right Now

Before you can begin working toward the eight-figure exit, you have to know where you’re starting from. To do so, take an inventory of the current status of your firm. But here’s the rub… you have to be honest with yourself. You see, oftentimes, we’re not honest with ourselves, as business owners. We overly justify where we’re at. We don’t look at our baby quite as ugly as it truly is. So, you’ve got to take an honest inventory of where you’re at right now. How do you do this?

Standard Operating Procedures

I typically tell clients that the first thing I want to see is a list of their Standard Operating Procedures (SOPs). What I’m looking for are written SOPs, flow charts, and processes to show me how a client goes from step one to step four. When my daughter was younger, she worked in my company, cleaning the office. She was responsible for vacuuming a couple of times per week. Now, as a child, she would get the vacuum out and vacuum a few spots throughout the office and be done in about two minutes.

What I did to fix this was to write out a step-by-step process that her little ten-year-old mind could understand. It went something like this:

  1. Take the vacuum from the closet.
  2. Make sure the bag is empty.
  3. Plug the vacuum in.
  4. Using back and forth motions, vacuum Office 1 until the entire floor has been vacuumed.
  5. Using back and forth motions, vacuum Office 2 until the entire floor has been vacuumed.
  6. Empty the vacuum bag.
  7. Return the vacuum to the closet.

Because she now had a very detailed process to follow, she was able to improve her skills. After implementing and repeating the process, her work began to look like that of a professional cleaning service. That’s what detailed, written processes can do for your firm.

ROI of Your Strategic Spending

I’d be willing to bet that you’ve invested revenue into something. Let’s say you purchased a billboard because somebody told you, “If you spend $X, you’ll get ‘Y’ results.” Regardless of what it is, more than likely you’ve spent something strategically. What’s your return on investment look like? If you’re scratching your head, saying, “Justin, I don’t know how to do that,” that’s where a coach can help. Nonetheless, this is an inventory measurement that helps us see into your business.

Other Metrics to Track

Another area to look at is how many prospects do you have coming through the front door? Conversely, how many of your existing clients are walking out the back door? What are your close rates? Stick rates? How about your conversion rates? Friends, these are all very important metrics—Key Performance Indicators, even—that you should be tracking.

Each of these data points provide a clear picture of your firm’s overall health. Likewise, they can give you clues on how to strategically improve your practice. So, when you’re taking inventory of your RIA, look at things that you’re tracking actively; things that can accurately define how your business is doing.

Taking a Holistic Assessment of Your RIA

Once you’ve taken stock of your firm’s current performance, the next step is to conduct a holistic assessment of your RIA. This involves looking at your strengths and weaknesses via a SWOT analysis. You’ve likely done some version of this over the years, but I like to do this on an annual basis as part of the strategic planning process.

As you look through your strengths, weaknesses, opportunities, and threats, it’s helpful to look at your firm through your competitor’s eyes. This will give help you identify the ways your competition could be exploiting your weaknesses. By assessing your firm honestly and objectively, you can gain a better understanding of where it stands and what strategic changes need to be made.

Another method of doing this is to work with a consultant. As a consultant, we use assessment tools that measure businesses through 54 points or 256 points of measurement. These tools allow you to look at all of the strengths and weaknesses throughout your entire company. I remember the first time I did this with my business, I was overwhelmed by how poor we were in so many areas.

I sat there, looking at the results and thinking, “Whoa! There’s a lot of work to do here.” According to TD Ameritrade’s 2020 RIA Sentiment Survey, 48% of RIAs view legal/compliance as their greatest management challenge. But that’s just one area of opportunity for today’s RIA firms. Succession planning received the second most responses with 36%, while technology updates were the third greatest weakness/management challenge, with 32% of RIAs reporting. So, you could do a personal assessment, or you could do as I did and work with a business coach.

Competitive Research & Analysis

Now that you’ve completed a holistic assessment, it’s time to conduct a competitive analysis. How do you do this? Well, there’s really no science to it. I would begin by looking in your own backyard. Who are your closest competitors? I’m talking about the RIAs who offer the same services and have a similar value proposition as you. Identify who they are and take them out to lunch. Get to know them and share the ways each of you is winning and losing.

I know some of you are saying, “Justin, you’ve lost your mind. That’s my direct competition!” You’re right. They are your competition. But if I’m being honest, some of my closest financial advisory friends were my competition. They’re the only ones who truly understand what it’s like to be in your shoes and creating a relationship with them can allow you to understand what they’re doing differently. This can help you determine which services—or even which niche—can help set you apart.

So, who is your ideal client? What services can you provide to that client that your competitors aren’t equipped for? In my case, I found out that I was better suited to serve business owners. On the other hand, my competitors preferred working with retirees. Therefore, we were both pulling from the same geographical pool of clients but we were keying in on very different groups.

Listen to Thought Leaders and Experts

Finally, you can gain valuable insights simply by listening to various thought leaders and experts. Listen to podcasts or attend a conference. But don’t pigeonhole yourself by only listening to those in the RIA space. If I only read books on financial advisory businesses, I would have missed out on so many of the most impactful books that have shaped my career. In fact, one of the most profound takeaways I’ve ever had was at a Heating, Ventilation, and Air Conditioning (HVAC) conference. It had absolutely nothing to do with financial services but folks, business is business.

Wrapping Up…

Friends, running a successful RIA is hard. You have to work diligently to remain compliant with state and federal regulators, be an expert time manager, and so much more, all while keeping an eye on your competition. It’s exhausting. However, taking inventory of your current business metrics, conducting a holistic assessment, and researching your competitors can help you identify areas for improvement while also giving you insights into how you can prepare your firm for the eight-figure exit.

I know life is hard. And as I said, running an RIA can be frustrating. But it doesn’t have to be. By taking a good hard look in the proverbial mirror, and conducting thorough competitive research, you can make growing your firm at least financially simple. Hey, let’s go out and make it a great day!

Want to know more about this and other ways to grow your independent RIA? Reach out to our team. We can help.

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