LOS ANGELES -- Some RIAs are intentional entrepreneurs and some are accidental ones, as one Los Angeles financial advisor puts it.
But both types may need help developing the skills required to build a growing firm. Jonathan Foster, founder of Angeles Wealth Management, calls himself one of the former: He started out in the wirehouse sector, shifted to a series of roles at eTrade, Carson Wealth Management and other RIAs before founding his practice in late 2011.
"Accidental entrepreneurs," he says, are advisors who go independent to maximize current income for their practices, while intentional entrepreneurs set out to build a business.
A panel at the Milken Institute's annual Global Conference in Los Angeles on Monday gathered successful CEOs for a discussion of entrepreneurial culture. On the agenda: how to create a workplace culture that takes smart risks, encourages new ideas and communicates a credible and compelling long-term vision.
"Let people fail," Barry Sternlicht, CEO of Starwood Capital, told the room. "Reward off the wall, non-traditional ideas and be willing to take failure."
But don't focus on the failures, cautioned CEO Greg Maffei of Liberty Media: "Be a fundamental optimist."
6 TIPS FOR RIAs
Several advisors offered Financial Planning their tips for RIA entrepreneurs.
1. Design and deliver a great elevator speech. "When people ask you what do you do, the deck is often stacked against you if no one has heard of your firm," says Los Angeles HighTower advisor James Hausberg, a Milken Conference attendee. RIAs must build a brand and be able to explain something that's very complicated very quickly, he says.
2. Be prepared to do every job in the firm. Even if you don't know how to do it, learn it and do it, Foster says. "Entrepreneurship is an all-hands-on-deck experience, every day," he says. Know what's going on in all parts of the company, he adds, so you can step in and teach new staff as the firm grows or loses key people. As CEO of a firm with $109 million in assets under management, Foster says that in a pinch advisors must be willing to do a $50-per-hour job even if their time is worth a multiple of that.
3. Accept a slow startup. You will not be as productive while you're building your firm, warn Foster and other RIAs, so be prepared to make $0 in income in the first couple of years: "At wirehouses, they do everything for you, he says. "Once you become an entrepreneur be prepared to be the last person to get paid."
4. Accept automation. Buying software is a lot cheaper than hiring labor, says HighTower's Hausberg, and lets advisors deploy resources more effectively and efficiently. Those RIAs who fail to use technology effectively will get left behind, he says.
5. Build a succession plan immediately. In order to build a successful business and gain equity, Foster says, RIAs need to let other people take authority. "Until you're willing to accept the risk that work might go out that's only 90% as good as you can do, you'll never find someone who's better than you," says Foster. Try to hire people who you think could do your job, so that you can make yourself obsolete, he adds: "I always try to hire people who are better than I am."
6. Stay focused. Nick Stonnington, an advisor in Woodland Hills, Calif., says the most frustrating part of his job is the mundane, administrative work that comes with being an entrepreneur. "I get sidetracked on the management of my business when I'd prefer to be investing, bringing in clients and working directly with clients while developing relationships and a business plan," he says. Be sure to spend enough energy on the business itself, he says.
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