The RIA industry “is facing a potential crisis here with succession planning,” said David DeVoe, CEO and founder of DeVoe & Co, during the “RIAs: Unlock the Power of Your People” webinar. The statement followed a report for his company last month that suggested the next generation of advisors is not ready to take the helm.
According to the DeVoe & Company report, 57% of the participants feel their next generation of leaders is not ready to take the reins of their firms yet.
During the webinar, the CEO noted how COVID-19 is particularly problematic for RIAs as 80% of virus-related deaths have been people over 65 years old and 46% of RIA firm owners are over 65. It is “now a life or death decision to go into the office,” he pointed out.
That means it’s more important than ever to firm up succession plans and it is up to current leaders to begin doing so. “The root of the problem is not G2 themselves,” stated the DeVoe, in a separate article on Wealth Management. “Most next-generation advisors are smart, energized individuals who have the potential to be strong leaders. In many cases, they simply have not been appropriately groomed through active and ongoing skill and career development.”
In the webinar, DeVoe pointed out that human capital represents “75% of an expense structure for a typical RIA.” He added, “Your people are ultimately what will make or break your organization.” Then he challenged viewers to consider the idea that their “employees should actually come first.”
However, the report did map out ways to improve potential successors, but suggested firms needed to start right away by assessing their skill sets and what they need to take the leap. Then build a plan and put it into action.
According to DeVoe, successful future leaders need four things:
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Regular Employee Performance Reviews. Make sure these happen at least quarterly--as of the moment 65 percent of firms are not employing adequate reviews.
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Craft an Incentive Compensation Plan. Look at your incentive compensation plan. More than likely, your plan needs some modernizing.
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Share clear career paths with your team. Career paths motivate your employees and are of critical importance for your future leaders. If they don’t know where they are going or how to get there, how will they ever take the next step? This also might cause some of your top employees to leave.
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Start a coaching program. Top executives use coaches, top athletes use coaches, everyone benefits from a little coaching now and again.
