After an avalanche of AUM in 2020-2021, some RIAs are stretched thin on service bandwidth, but the answer is to begin 'productizing'
As seen in RIABiz
The word 'product' is anathema to RIAs but the open-ended promise of high touch service isn't sustainable for advisors, and it's also not ideal for the client
Brooke's Note: I always enjoy talking to Amy Parvaneh because she bursts with enthusiasm at the potential she sees for the RIA business. Coming from Goldman Sachs, she is aware of just how much better off clients are with most RIAs. See: How an ex-Goldman superstar asset gatherer in LA is bringing her bazooka to the RIA knife fight But she is also tormented by just how little of Goldman Sach's marketing and organizational discipline the typical RIA brings to bear on their practice. Here she takes a good stab at describing what she means by that and hoping the recent AUM windfall will be the extra prod some advisors need to heed her words.
Most RIAs are are finishing out 2021 on a high note flush with net new assets but on a lower note when it comes to keeping up with the service demands. The business model of high touch service depends too much on them and a few good associates.
There is a way to close this mounting disparity without sacrificing integrity but it requires organizing and marketing the service offering more like a product.
Though "product" in financial advice evokes a high-commission, off-the-rack boondoggle in some cases, there is another way to see it. What makes a 'product' effective is that it has a defined beginning and an end to both the benefit of the buyer and seller.
Most RIA’s set themselves apart from the wirehouse world by promising a comprehensive, all of the above service menu (heck, I’ve seen advisors even coordinate with a client’s wedding caterer to go over the budget for the event and help select the DJ!)
Clients are wowed but may not be sustainable without constant hiring and training. It's a challenge even at the big firms. Look at Fidelity's unprecedented effort to hire 3,000 people every month until year's end. See: Fidelity Investments pulls out stops on perks to raise headcount by 7,000 -- by hiring 9,000 -- to shrug off labor shortages, escalating wages and call center attrition
Embrace unthinkable
Chris Stanley: 'Advisors are generally free to charge a combination of asset-based fees and fixed fees.'
One test for an RIA is to ask: If tomorrow my firm wins five, $10-million clients in one day, can my team handle it as it currently stands? How about 20, 30 or 50 such opportunities?
If you answered no, then your promise of a bespoke, high-touch boutique wealth management firm is either going to crush your existing team, your clients or your bottom line (from constant hiring) if you don’t start scaling it…ASAP!
RIAs need to start embracing the unthinkable by transitioning some of their service offerings to a "product" with the net effect of delivering much better streamlined service and far better sleep.
Sizing up skills
"Producticizing" by an RIA is less of a mass-production process than a change of mindset. I’ve had many advisors tell me 'Yeah, but if we producticize we’re no different than a Vanguard or Betterment.'
It's typically not that black and white.
There’s a happy medium between becoming a Vanguard or a robo-advisor and going all the way to the other side of the spectrum and start asking your team to become wedding planners.
By cleaning up some of the all-of-the-above service offerings and putting some guardrails around how much time you’re spending on each client and what you’re doing for them, you, your team and ultimately your clients will be happier.
It will also make it very clear what skills you need to hire for, since it’s hard cloning a teammate who is a CFP but also calls florists and destination venues for brides!
How does producticizing work for a service business? It has three parts and it requires introspection and quantification of what can be quantified.