The Must-Have Traits For A Billion-Dollar Firm

Bull markets are like gold rushes for our industry. When the market takes off, people with a bit of financial knowledge decide to stake their claim to a piece of the advisory action.  They hang out a shingle, build a website and offer generic investment advice to whoever comes through the door.  

Some of these firms actually survive the inevitable market downturns and continue to operate for years as middling firms with slow growth. 

What’s the difference between these average performers and truly great advisory firms?

Author Jim Collins tackled that question in his bestselling book “Good to Great.” He examined the distinctions separating the just OK companies from stellar ones. And he discovered a fundamental truth that applies to our industry..

It boils down to this: Challenging times expose truly great companies and dispose of the merely good companies. Because when the financial going gets rough, being simply “good” isn’t good enough. You’ve got to be great to thrive and advance in adverse conditions.

I’ve talked with hundreds of RIAs over the years. Those conversations revealed four secrets to building a great firm — a  billion-dollar firm.

First, our industry’s highest performers do something exceptionally well that sounds ridiculously simple. They have developed an expertise and are hyper-focused on generating leads through a specific channel. Be it digital marketing, COI referrals from accountants and estate attorneys, or something else, these RIAs consistently lead the pack. They don’t merely dip their toe in a growth channel—they dive headfirst.

These RIAs also have a strong focus on operational efficiency. They have dedicated themselves to building their business. They have a deep understanding of the benefits coming from non-revenue generating roles that help build the overall business. Their operational focus is evidenced in the way they document their processes and then build the tools around the process to ensure that each one is followed by every staffer. 

As you examine these firms you see there’s a clear “why” that explains how they got that way. It goes far beyond simply managing clients’ money or being a solid investment advisor. The thing that sets these RIAs apart from their competitors is their culture and vision, which serve as a magnet to prospects aligned with their mission. 

Here’s an example from another industry. Consider Dell and Apple. They both sell computers. But one is viewed as a computer company while the other is hailed as a revolutionary company. That difference in perception is rooted in their respective cultures and motivations. Apple set out to change the world and, along the way, sold a bunch of computers. Dell just sells computers. One inspires, the other just does. And the great billion-dollar firms inspire.

Billion-dollar firms also have a relationship-first approach. We all understand that relationships are supposed to come first in our business.  But the truth is, relationships too often get shorted. We only pay lip service to the concept.  Not at the great billion-dollar firms. They are keenly focused on building a relationship with their clients that extends beyond managing money. Mediocre firms, in contrast,  emphasize being on the investment management side of things. 

So, if you’re serious about wanting to check the final box for being a great billion-dollar firm, then you absolutely must spend more time finding ways to surprise and delight your clients rather than simply report to them on the next best investment vehicle.

It all comes down to your vision for your firm. Are you satisfied with managing money? Or would you rather design and inspire a truly lifestyle firm that provides you with a work-life balance? 

Do you want it to be good or great?