By Stuart Silverman, President of Bluespring Wealth Partners
A critical component of building a successful business is timing and having the foresight to make important decisions, such as when to hire an executive, add another team member, or create a new department. But how do you know the right time to make these decisive calls?
In a panel discussion hosted by WealthManagement.com, I sat down with our long-time partner and business consultant Philip Palaveev, Owner and CEO of The Ensemble Practice and two of our acquired wealth management firms Bedell Frazier Investment Counselling, LLC President & CEO Mike Frazier, and Vector Wealth Management Managing Director Tom Fee, to discuss the gravity of timing in further detail.
Philip, Mike, and Tom shared their firsthand experience with the tricky path of organizational growth and lessons learned along the way:
● What does a CEO do in an advisory firm? When did you start feeling like a CEO? What’s the most difficult aspect of being a CEO and what’s the most exciting part?
○ Mike: Like most CEOs, I wear many hats. During the pandemic is when I really focused on being the CEO, by turning my center of attention to client communications, client experiences, and making sure our company was positioned to deal with whatever was coming our way. I love the intellectual challenge — it’s an entrepreneurial industry that’s dominated by creative thinkers. I feel like I have my finger on the pulse of planet Earth as an investor in working very closely with good people and making a positive impact on their lives.
● What’s your process for determining how much you want to spend in key areas such as marketing, technology, human capital, etc.?
○Philip: Statistically speaking, you want to have a 25% profit margin. At least 75% of your expenses should be focused on people, and look to spend no less than 5% of your year-end revenue on marketing.
● When do you invest and why do firms struggle not knowing when and how?
○Philip: There’s two types of investing in the business. One is the normal course of investing in the business, which requires you to continue updating things. This type of investment is incremental. In other words, you do what needs to be done. These investments lead to transitions, the first being from a practice to a business. The second transition is from a business which runs like a small family to an organization. This is the time that you need to re-invest in the infrastructure of the business and start thinking about who’s going to manage it, how we will communicate, organize, make decisions, etc. Things go from informal to formal.
●How do you grow your business development department? How do you make sure you grow your firm and train your own business developers or “G2’s”?
○Tom: One of our three year objectives was to have 50% of all new clients coming from client referrals. In less than 18 months after refocusing, we’ve got it up to 71%. This is a significant change and it’s because we really focused on referrable moments where we are trying to get our clients more engaged in our success.
●Who are the leaders of the operations department? Do you have a COO? When should a firm consider adding a COO?
○Mike: When we grew to a critical mass, we needed to embrace more specialization, and that’s where we built out our operations team that works with our broker-dealer to serve our clients. We brought in an additional person because the demand was so strong. It’s really important to frame out the area of specialization, identifying what roles are most important, what our value proposition is and how we’re going to execute that. We don’t want to institutionalize too much, as part of the secret sauce is maintaining the client’s boutique, personalized experience. I found as the CEO having someone that’s not client-facing who is going to make sure everything gets done on a daily basis is critical.
●How do you continue to grow and add new people without hurting the culture that your business is particularly proud of?
○Mike: In this digital age, you have to be creative and try to get people to think and engage. Culture is everything to a growing business and it’s one of those things that’s evolutionary. You have to build on how you were before to dictate when you go forward. Culture is absolutely essential.
●When you chose to take on a strategic partner did it impact your company’s culture and was it a concern?
○Tom: 90-95% of all the decisions that we’ve made since we’ve partnered with Bluespring have come from us. We’ve had the additional deep, deep resources to draw on those difficult decisions with a lot more financial capabilities and bench strength than we would have as a firm of 21.
●If you could go back 10 years in the past, what would you tell yourself?
○Philip: I’ve sat on many panels and heard many answers to this question and universally it's the same. Every CEO says that if they could correct one mistake it is having the wrong people on the “bus.” At times, I had the wrong people on the “bus.” I wish I spent more time recruiting and developing my teammates. Some of them I could’ve perhaps guided to better outcomes and some of them I could’ve steered away from joining the team because they weren't the right fit. This industry is all about people, and the one and only thing we are responsible for is the team we ensemble and put in front of clients. I wish I spent more time with my team.
Tune in to my full conversation with Philip, Mike, and Tom here. For more information on how we can infuse capital, provide consulting expertise, and help with succession planning, please contact Bluespring Wealth Partners.
*Responses have been condensed for brevity and clarity.