Small Firms Can Make a Big Impact with the Right Advisors

Ryan Shanks April 16, 2020

If you visit the home page of your favorite industry news publication right now, you're likely to see a story announcing a significant merger or acquisition. The M&A activity is hard to miss - and it's inspired a few major camps of thought regarding the future of our industry. One of the most important conversations revolves around how smaller firms can "stay competitive" in a space that's so rapidly evolving.

I don't believe the strong foothold of boutique firms - which DeVoe & Company categorizes as $250MM AUM or less - is going away at all. In fact, I don't even think "staying competitive" is the conversation we should be having. Because if smaller firms focus on the value they offer their advisors, rather than simply going head-to-head against larger entities with bigger pockets, they'll be positioned to build winning teams stacked with talented advisors who see the many benefits of joining a smaller firm. And this will keep them thriving.

In order to build powerhouse teams that drive incredible results, I often tell boutique firms to focus on these three golden rules:

1. Play to Your Strengths

We can't overlook the fact that so many advisors out there prefer a boutique firm versus an enterprise, and vice versa. It simply comes down to personal preference.

So, small firms, instead of focusing on the resources you don't have, play to the strengths of your business and the value you provide advisors because of your size. These sellable factors include:

  • Greater exposure: The "big fish, small pond" mentality can be a major value proposition for advisors looking to join your firm. In an environment where each and every advisor is seen, the results they produce for the greater team can be easily traced right back to them. This transparency can be refreshing for those coming from a larger entity.

  • Decision-making power: Advisors on your team all get a seat at the table. This benefit is huge, especially for advisors who have more of an entrepreneur mindset.

  • Professional growth: A smaller team equals more "hats" per person and more experience for everyone. You'll want to be clear about the diverse responsibilities and career training candidates will be able to take advantage of by joining your firm.

  • Equity: If your firm doesn't already offer equity options to employees who are rolling up their sleeves and helping to build the company brick-by-brick, consider doing so. This can be a tremendous value-add for candidates and is a tangible offering that shows commitment to your team.

2. Don't Over-hire Support Staff

I've seen it time and time again - partners at a boutique firm allocate a huge portion of their revenue towards hiring support staff they don't need. This usually happens because they've recently come from larger firms where these roles are needed. But in this new environment, many of the same roles can be facilitated more efficiently and more cost effectively with the right technology tools. Make sure you shop your tech wisely; try to find a platform that does many things well and can offer a comprehensive service, rather than building a Frankenstein tech stack with many different products.

3. Purpose Before Ego. Always.

Spending money on a giant, shiny office space may make you feel great, but if it sits half empty for 15 years, it's not serving anyone except your own ego. When you're trying to build a team that's lean and mean, these wasted extravagancies will quickly set you back. No matter what size your firm is, if you put the greater purpose of your firm above all else (serving clients and making their most important goals a reality), then you'll attract advisors who will share and help further your mission. Investing in areas that directly impact your team will drive success.

The inevitability of industry consolidation is worth the media attention, but it doesn't signal the end for you smaller firms out there - as long as you can measure your goals and value offerings, activate on hiring advisors who share your beliefs, and are mindful of your time and intentions. A diverse and dynamic industry is a beautiful thing.