In his view, however, many firms reach a point where they struggle to grow and achieve scale. Reaching the next level requires talent development and rewarding people, either through equity or other incentives.
Decision-making processes offer the most glaring contrasts between large and small firms.
“Entrepreneurs are OK with trying [new concepts] and failing repeatedly,” says Dell’Orfano, adding that RIAs are instinctual and trust their judgment. Moreover, it’s their own money.
In big companies, decisions take longer and are more process-oriented, requiring research, patience and many levels of approval. “Small company people [in big organizations] tend to be frustrated with the speed of decisions.”
Kevin Dorwin
Long before Horton and Dell’Orfano left their jobs at Fidelity to join their current firms, Kevin Dorwin had his eyes set on the RIA channel.
Dorwin, now co-managing partner at San Francisco mega-RIA Bingham, Osborn & Scarborough, started his financial career at Charles Schwab, where he advanced through the company’s management training program. “I rotated through a variety of roles there, from trading to operations to marketing, which gave me a nice, broad background in a number of areas,” says Dorwin.
Dorwin eventually landed in Schwab’s product and brand marketing group, where he helped develop products for the company, particularly in the areas of estate planning and charitable giving. He helped launch the Schwab Fund for Charitable Giving, now one of the largest donor-advised funds in the U.S. Dorwin also developed marketing strategies for Schwab products.
“My path at Schwab was more along the lines of the product side of the business,” Dorwin says. “I wanted to learn more.” He enrolled in business school at the University of Southern California, where he took a joint marketing/finance track.
After receiving an MBA at University of Southern California, Dorwin took jobs with Visa, then with Providian, marketing products with business partners like airlines and universities and developing credit card rewards programs. Working in the credit card business was unfulfilling, Dorwin says: The RIA world beckoned to him.
“I was doing the work but not really enjoying it,” Dorwin says. “I had a personal conflict with trying to sell credit cards to college students, so I started to spend my nights studying for the CFP designation.”
As he completed his CFP requirements, Dorwin realized that he had no experience working with clients. But in 2004, Bingham Osborn & Scarborough took a chance and hired him.
Dorwin says he found himself having to start all over from the bottom. “I ended up at the lowest level of the company as a portfolio associate, doing purely back-office work,” he recalls. “I had to take a 30% pay cut.”
Over time, he was promoted, and the RIA soon found that it needed his organizational and marketing expertise. “I found that I was being asked about some of the managerial things I did at Providian and Schwab, questions around marketing and business development, where the people here didn’t have much experience,” says Dorwin. “I ended up getting my hands on a lot of different issues. I was asked to work on a major project to help the firm rebrand itself and to come up with a new differentiation strategy. I had experience doing that. It became clear that there was a gap in leadership talent and that I could easily fill that need.”
Via a successful business transition, Dorwin became a managing director. “As the generation of founders started to retire, they offered for me to become a partner in the firm in 2008. At the time, I was actually the quickest person to be made a partner at the firm.” Bingham, Osborn & Scarborough now manages nearly $4 billion in client assets for around 900 clients.
Executives from larger firms bring business experience and behavioral traits that many RIA leaders have never been able to develop, says Dorwin. “When you’re a practitioner, you don’t really have time to think about some of the broader business issues, and you typically haven’t had experience in executive leadership.
“As firms become larger,” he adds, “their leadership either has to learn and adapt, or they have to bring in someone else with that experience.”
While big firm culture can place a lot of pressure on employees to meet sales numbers or to compete for attention, incentives and promotions, smaller firms typically don’t have those issues. “There’s more of a work-life balance aspect to RIA culture,” Dorwin says. “We expect people to be focused and to work hard during the day, but we also want them to go home at night. RIAs don’t want their staff to be there way late after work. They don’t want sick people to come in and work. At a larger company, there’s a lot of optical things about needing to work late into the night, not calling in sick, and going through a lot of difficulty simply to make it look like you’re working hard.”
Like Horton, Dorwin says that he enjoys working in a smaller firm. “Schwab was an excellent experience; that’s a company that tries to do things the right way,” Dorwin says. “There were 20,000 employees there, though, and at Providian I was one of 5,000 or 6,000 employees. This gave me the chance to be part of a smaller and more intimate group of people where I could make an impact not just with the clients, but where I could use my abilities to make the industry better as well.”
Jane Newton
Viewed from one lens, Jane Newton has enjoyed two careers. The first was as an investment banker at J.P. Morgan in 1981. But that career took a major turn after 12 years when she moved from the firm’s investment banking unit to its private bank.
During the go-go 1980s, investment banking on Wall Street was where the action was, as a wave of mergers and acquisitions reshaped corporate America’s landscape. For most of those years, Newton spent long hours working on transactions with Fortune 100 executives.
“After a dozen years in investment banking, I wondered if I could do this forever,” she recalls. “My job was all about enriching shareholders and the C suite, and I wanted a more personal connection.”
As an investment banker, she quickly observed that the same CFOs who could make split-second decisions about billion-dollar transaction financings agonized over smaller decisions involving their own personal finances. “The decision-making process is quite different when it’s your money,” she notes.
The move to J.P. Morgan Private Bank was “more rewarding than I could have imagined,” she says.
Then life intervened. “I wanted to be at home with my family at a crucial time,” Newton says. “It was a tough but easy, very personal decision to walk away at a critical time in my career.” She discovered another lesson that, to this day, she counsels clients to follow—have a plan but put it in pencil. Six years after leaving J.P. Morgan, she felt the urge to return to investment advice. So she started networking and in 2005 found RegentAtlantic, a fast-growing RIA in Chatham, N.J., with 23 employees and $1 billion in assets.
Though Newton had to earn her partnership equity at RegentAtlantic, the firm’s structure permitted her to tap her entrepreneurial instincts with a program targeting a new emerging wealth group, women on Wall Street. By 2005, many women were attaining executive status in the securities industry. CEO jobs might have remained elusive, but success, financial independence and the issues they spawned were not.
Today, Wall Street firms are falling all over one another with women’s initiatives, but Newton was ahead of the curve. In 2010, she launched an annual Wall Street Women Forum, an event held every spring that brings more than 100 female financial professionals together to address issues of common concern. It established RegentAtlantic as the firm in the forefront of this trend in the New York metropolitan area.
Today, RegentAtlantic has 50 employees and advises on $3.2 billion in assets. Growing at 10% annually becomes harder for RIAs that big.
Here again, Newton’s experience at a giant like J.P. Morgan plays to her firm’s advantage. Quoting hockey great Wayne Gretzky, she says, “You have to skate to where the puck is going. You can’t just wing it.”
As a professional who made a midcareer change, Newton realizes how important it is to “stretch yourself” and find new challenges. When J.P. Morgan senior management sought someone for a new position, she was quick to raise her hand and expand her skill set.
As a managing partner at RegentAtlantic, she is always helping younger colleagues design and clarify their career paths and take on a new project. “It helps us grow and retain talent,” she says.
Rolodex Transfer
The move from custodian to RIA is not without precedent—earlier this year, Gerald Graves joined Boston Private Wealth as executive managing director. Though he most recently co-founded and led a series of wealth management firms, Graves was at one point COO of Schwab’s Institutional Services for Investment Managers.
In 2012, Gail Graham, executive vice president of marketing at Fidelity Institutional, left the Boston-based giant to join United Capital, a fast-growing national RIA building its footprint through acquisitions. For Graham, the switch represented a chance to be part of creating the financial planning movement.
In 2014, Mariner Wealth Advisors hired Kevin Corbett into an executive relationship management role after he served for 17 years at Fidelity Institutional. Previously, in 2011, Mariner poached Brian O’Regan away from Fidelity, where he had served as senior vice president and regional vice president of sales and relationship management, to serve as the RIA’s vice president of corporate growth.
In 2014, Tiburon, Calif.-based Brouwer & Janachowski hired Peg Pike away from Boston’s Wellington Management. Pike had previously served as a vice president in Fidelity’s global risk management group. The list goes on and on.
It may prove to be a boon to RIAs to have someone with experience at major custodians in their executive leadership. Custodial executives who boast experience in RIA channel sales and relationships can also bring their extensive Rolodexes to advisories interested in growth from acquisitions, mergers and rollups.
RIAs for the most part are following custodians into fintech—it may be helpful to bring on a custodian executive who has experienced a technological build from a large-firm perspective as RIAs modernize and adapt to new demands.