Building a financial services group can be done--even in a tough economy--as long as you've laid out a well-developed business plan to achieve expansion and avoid the potential pitfalls that may await you, according to Ric Edelman, president of Edelman Financial Services.
Edelman, serving as keynote speaker at the 5th annual TD Ameritrade Institutional 2011 Elite Advisor Summit on Wednesday in Miami Beach, said the key for financial advisors aspiring to become registered investment advisors is to monitor their companies closely and make adjustments as their firms grow.
Edelman said there are five "evolutionary scales" in the financial advisor business that range from level one, "clerking," or developing your first set of clients, up to level five, where you manage your own company. He also outlined five steps an advisor should follow as a pathway to RIA success: Be passionate about what you do; always have survival as a goal; focus exclusively on meeting your clients' needs; realize that your firm must be the best at what you do; and realize as president that you cannot do all your firm's work by yourself.
To be successful as an RIA, you also have to have an inordinate-sized ego, Edelman said. "It takes a certain amount of ego and a strong personality to tell a client, "This is how I think you should invest your money,''' Edelman said.
The key to the future in the financial advisor business, said Edelman, is to invest money back into the firm to expand its technology footprint. "I am not in the financial services business; I am in the technology business," said Edelman, who today employs 15 information technology workers and has spend "several million" a year in bolstering his company's IT hardware and software.
Edelman also advised attendees that they never forget what service they provide and "who we do it for." "I'm interested in doing it for 10,000 people each year," Edelman said. "And you must adopt a very consistent, specific strategy--not a 'one size fits all.'''
Edelman told conference attendees they need to "create a persona" for their company to ensure clients know what it stands for, and also advised them to avoid the "Kevin Costner Syndrome" of building a business and thinking clients will automatically come. "Just building it isn't good enough," Edelman said. "You also need to tell people how you do it." Getting that message out, says Edelman, means defining your business strategy so it clearly spells out the kind of client you are after.
"Only consider using mass media (advertising) if you want unlimited clients," he said. "There's no such thing as 'succeeding a little bit' if you use mass media."
Edelman says it's critical to "watch it closely and make adjustments as
it grows to prevent it from growing out of control."
The most difficult task for the entrepreneur of a growing financial advisor firm, Edelman said, is knowing how to delegate to other company staff. "The hardest part is to delegate--to pass the job skills onto others," Edelman said.