The financial services landscape is in constant transition. Global economic developments, regulatory updates, market volatility and newly emerging asset classes and product offerings are just a few of the drivers of change that wealth and asset management professionals must navigate to keep their businesses thriving. With shifts taking place so frequently, building a business that maintains steady growth trajectory and achieves long term success is a significant challenge. The following lessons learned the hard way over IRON Financial’s 20 years of growth offer insights to advisors and other asset management professionals who are in it for the long haul:
- Focus and find your niche
In the financial services industry, vision is critical. Recognizing your strengths and business goals, and making decisions that reflect your vision for the future is crucial to building a business with staying power. In the early days, you may have to provide an extremely wide array of services to secure clients and grow the firm; however, it can be a challenge to scale your offerings for growth and streamline business processes for efficiency if your business model is scattered. The sooner you can zero in on the asset classes, clientele and services that play to your interests and strengths, the better positioned you will be for success in the long term.
In the case of IRON Financial, we have narrowed our offerings over the past two decades to focus on alternatives in asset management, eliminating other ancillary services little by little. These areas reflect our professional background and core competencies. Specializing has allowed us to grow the business with a clear direction for the future of the firm.
- Fill skill gaps as you grow
As an entrepreneur, you have to be a jack-of-all-trades – until you don’t. When one or two individuals launch a new advisory or wealth management business, by default they are responsible for every task and function. This includes the core services and consultation they provide to clients, as well as all of the administrative, marketing, human resources and other activities required to keep the lights on and the business growing. But if you spread yourself too thin, you’re slowing down your potential for growth instead of speeding it up.
New clients and more revenue generate the need – and the capacity – to hire more employees. To keep the business moving forward, make it a point to diversify your collective skill set as you grow. Identify the capabilities your firm lacks, or the areas in which there is room for improvement, and hire people who demonstrate the ability to support you in those areas. Make sure to chart a career path for employees that leverages their skills and interests while affording them new challenges and room to grow in their roles, whether they’re managing a portfolio worth millions or the CEO’s appointment calendar.
- Adapt early and often
To be sure, there’s no crystal ball in financial services; to make hard and fast predictions as to where this industry is going next is an exercise in futility at best and a recipe for disaster at worst. That being said, it is critical to be attentive to trends and prepared to adapt accordingly. For example, the explosion of index funds and ETFs more than 15 years ago was a turning point in the industry. Firms that recognized the significance of this trend and were willing to incorporate these new products into their investment strategies and clients’ portfolios reaped the returns, while many that resisted were left in the dust. The same is true of the current debate over active versus passive asset management strategies. Clients do not want to pay for beta – and embracing a new, more creative approach is essential to staying ahead of the proverbial curve and proving your value to clients. In financial services, close-mindedness and failure to adapt can be killers; the best defensive tools for asset managers are knowledge and flexibility.
- Listen to clients’ needs – whether they voice them or not
In order for asset managers to thrive, they must be attentive to clients’ needs: including unspoken ones. In many cases, although he might be loath to admit it, what a client really needs is education – and this is one of the biggest opportunities for advisors and asset managers to add value. Providing timely insights and thoughtful counsel is a fundamental component of building trust in the client relationship. Asking the right questions to determine what the clients are ultimately looking to achieve is a critical part of the equation. When you truly listen to clients – not just what they ask for, but where their real pain points, concerns and goals lie – you’re equipped to deliver education and solutions as a true partner. It is these partnerships that deliver returns over time, and that yield the personal referrals and new business opportunities that drive growth.
Financial services is a dynamic industry rife with challenges and opportunities. In order to build a business with staying power, asset management professionals must invest in growth with an eye toward the long term while staying abreast of immediate shifts and their implications for the business and its clients. As IRON Financial has grown from a two-person advisory and asset management hybrid to a 30-person asset management firm specializing in alternative assets, these critical lessons have been instrumental in achieving the founders’ vision and positioning the firm for its next 20 years of success.