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'Cake Boss' Fix for a Stale RIA

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I was channel-surfing the other day when a TLC show about baking, of all things, hit a little close to home.

The show, "Buddy's Bakery Rescue" is a spinoff from the reality show "Cake Boss"; a master baker sprinkles wisdom on a new generation of dessert makers. What struck me, however, was how similar the issues that affect mom-and-pop bakeries are to those at wealth management firms.

This episode featured a bakery that had gone to seed with the second generation, even with a matriarch still involved. It's not that the next generation lacked skills: The son- and daughter-in law were trained at the Culinary Institute of America, and had better technical training than the founder.

Yet somehow, what should have been a great combination of old and young was instead creating a dynamic that threatened the business. No one was sweating the details; innovation was discouraged.

At the shop, called Grandma Millie's, the day-to-day requirements of food preparation weren't being met; the equipment had gotten old; the floors had become dirty and the family was putting so much energy into internal battles that they believed they were simply overworked.


The specific trouble boiled down to the changing roles of the founder and the next generation bakers. The founder did not want to give up control, yet for a variety of reasons was unable personally to contribute at the pace the business required. The next-generation bakers who needed to pull the wagon, meanwhile, were completely demotivated.

Because the new generation never learned Grandma Millie's signature apple pie recipe, meanwhile, the founder felt she wasn't respected.

In truth, both generations were at fault. It was easy to blame the founder for the troubles, but no one in the staff was really stepping up either. And an ongoing blame game prevented solutions from taking hold.

Does any of this sound familiar to you?


Wealth managers who don't identify with these issues can consider themselves, at best, fortunate. But be careful: You also could be unaware that you are in Grandma Millie's kitchen.

Here are some of the indicators of similar problems percolating at your wealth management business:

  • Do you have culinary masters making cold cheese sandwiches? Or, translated: Do you have myriad employees who are CFAs, CFPs or CPAs, whom you consider to be merely processors?
  • Is your staff not entirely empowered or incentivized to bring in new business? Instead, are they simply babysitting an aging client base?
  • Do you usually use your veto at investment committee meetings?
  • Are you offering the same services as when you started the business?
  • Is your firm built around some sort of apple pie "proprietary worksheet" that you developed, even if better technology is now available for these processes?
  • Is the firm's identity centered around you, the founder?

If you answered yes to a couple of these questions, you might have Grandma Millie's problems.

Of course, for firms to outlast their first generation, the successors should respect the firm's founders, their craft and their customers.

Over the last 25 years, we've seen the rise of an entire wealth management industry built by sleeves-up entrepreneurs who mortgaged everything to build their empires. These founders knew their customers, and their customers knew the founders. The founders were the embodiment of the brand.

But the new generation of staff needs to demonstrate leadership skills and bring in new ideas.

You might have chosen your heirs not because of their stellar leadership qualities but because they have stayed at your firm for the long haul, supporting you. They might be good operations managers, but poor leaders.

This is how bread and small businesses get stale. The founder stays on as an emeritus and rainmaker, and everyone else just administrates. Things are not progressing, and no one feels responsibility. There's no innovation, and the client base ages with the firm. The clients move into the wealth drawdown stage of their lives, and the business erodes.


The bakery on the TV show eventually got it right, emphasizing communication, modernization and protection of the brand as part of its succession planning. RIAs should do the same.

When clients fret about the future of the firm, advisers should be able to say: "Grandma's still in the back, but now we have a firm full of great bakers updating her recipes." In order for this to work, these new bakers need to know that the firm will reward their innovation and rainmaking with both compensation and authority.

The firm may need to make other changes as well. Some of the founder's ways are timeless and should be treasured, yet that apple pie recipe needs to be first learned and then updated as necessary -- and other recipes, to continue the metaphor, will need to go. The founder needs to recognize the seriousness of the situation and embrace change.

This is the process will help the next generation become the new generation. At the same time, the founders can enjoy their own retirement -- the very apple pies that they've been selling for all those years.

Yvonne Kanner is president and chief operating officer of Fiduciary Network, which provides funding to wealth management firms for internal equity transitions, acquisitions of other advisory businesses and buyouts of retired or inactive shareholders.

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