Brand, culture and long-term planning are some of the most important aspects of running a successful wealth management firm, according to industry leaders.

Brand, culture and long-term planning emerged as some of the most important aspects of running a successful wealth management firm, according to talks given by industry leaders at this year’s FOX Wealth Advisor Forum.

David Lincoln, managing director of research at FOX, set the scene for the discussions with some data about the industry, demonstrating the growth that is underway.

Drawing on comprehensive data from 22 multi-family offices, Lincoln said assets under advisement grew at the median firm by 9 per cent between 2010 and 2011. In terms of client relationships, the median firm had 50 clients in 2010, 65 in 2011 and 70 in 2012.

The median firm had revenues of $11 million in 2011, growing to $13 million at the end of last year. Firms grew revenue both in 2011 and 2012, he said, at 13 per cent and 8 per cent respectively.

"There are a lot of new sources of cost…there’s technology, there’s information security, there’s compliance cost. So it can’t be the case that cost structures are improving, it must be the case that there’s a good growth story to tell in this industry," said Lincoln.

Michael Cole, president of Ascent Private Capital Management, Leslie Voth, president and chief executive of Pitcairn, and Thomas Melcher, executive vice president at Hawthorn, told delegates at the Biltmore in Coral Gables, FL, about their experiences running businesses in this environment.

Ascent: building a brand

Cole, who was hired by US Bank in 2010 to build out its ultra high net worth business, discussed how he set about putting brand at the center of its proposition from the start.

“We really began to think about: what did we want that brand to be about? Because if we were going to hire great people who were focused on and passionate about working with ultra high net worth families, we knew that we couldn’t just have the US Bank brand by itself, that we needed Ascent to be able to stand on its own,” he said.

The concept they came up with was: “Wealth is more than money, that it’s not just about managing wealth it’s about managing the impact of the wealth.”

Cole said the brand then needed to infuse everything that took place at a firm, right down to the conversations that took place.

“Every single person we hired we talked about the fact that this is the culture we’re building, it’s the brand we’re going to represent,” he said. “In every marketing material we built and every space we looked at, every design we had, in the architecture of what we built, is the concept of wealth is more than money.”

But this brand is by no means a finished product, he said: “I don’t want somebody who comes in and thinks it’s a done deal and you can just take our standard way to operate and do it. Our standard way to operate has to be evolving. I’m looking to hire people who can add value because they’re architects, because they’re willing to take the concept and continue to stretch it further.”

Addressing change

The theme of change was picked up by Voth, who said she likes to remind herself daily of the maxim: “Change is a reality, not an option.”

“Investing has changed…and it will continue to change,” she said. “When I first started at Pitcairn our board had 18 members. Today, it has 11, and it represents three generations of the Pitcairn family and includes four women.”

However, amid change there needs to be continuity, said Voth, and this means making an effort to decide what is working well and keeping this alive. At Pitcairn, this meant retaining whatever it was that made its employees tend to stay at the firm for a long time.

“As we set out to make our changes over the last five-plus years, we purposely wanted to honor the parts of the culture that made it such a special place to work,” she said.

She and the firm’s other leaders decided that this would involve collaboration and long-term planning.

“Collaboration is a word that’s thrown around a lot, but it’s rarely achieved,” she said. “In order to collaborate better at the firm, I had to break down a lot of department silos, so we’ve created nine different multi-disciplinary teams around the firm [and] it’s a much flatter organization, that’s very nimble.”

The firm also, three years ago, invited 15 colleagues to its strategic planning initiative, carefully selecting colleagues across two generations.

“By the time we got to the SWOT analysis, talent and succession was the number one issue that was surfacing,” said Voth – something she thinks would never have come up if the firm hadn’t been so inclusive in its planning.

“The reality was that 25 per cent of our employees were turning 65 in five years, there had to be some discussion of continuity, but it was awkward because there was no guide… so we identified it as a strategic issue and I put a multi-gen team together to tackle it.”

Nurturing younger talent was something Cole touched upon, saying: “I really believe in trying to hire young people that have the potential and to be able to grow them. We’ve lost training programs in the industry, we don’t have a lot [of them], so we have to nurture our own.”

Defining culture

The balance between change and continuity was a theme maintained in Melcher’s talk, who seemed to chime with Voth when he said culture both had to adapt and be protected in some ways. “Investing a new culture every two or three years is a recipe for disaster. You have to take your culture and maximize it,” he said.

An important aspect of this is realizing that there is a culture at every firm – even if it’s one that has evolved unconsciously. “The question is do you have the culture you want?” said Melcher. “Every firm has a macro culture and a micro culture and you have to understand both, particularly when you’re growing.”

He acknowledged the cultural challenge Hawthorn had faced, saying: “I inherited a company that had been split in half, and then grew by acquiring three companies.”

But he saw the recipe for dealing with this as embedding the perhaps nebulous concept of culture into the tangible elements of business.

“Words, actions, business practices, strategies for growth, compensation, success measures – they all have to be aligned,” he said. “How many people have worked in a firm before that says its client centric but then has a sales process based on how much they sell: the ‘feel good’ culture versus how they get paid.

“If you’re serious about it you have to tackle these major issues.”

Cole agreed, saying: “You can’t have a culture that says we operate as a team, we’re about the client, we’re client-centric, and then have a compensation structure or an award structure that says something different.”

Melcher created the program “Hawthorn Track” which was “all about client promise,” he said. “I didn’t care about sales…because I really believed to my core that our model was right, our model would work, and that if we gave our advisors the ability to work together as a team and be much more clear about what was expected of them and how we were supposed to go to market, sales would take care of themselves.”

One of the things he learned implementing this was that “our most experienced advisors were the ones who had the most trouble following a process,” he says. He views it as a success though, and says the business has added 50 people over the last two years.

Deeply embedding a culture into a firm’s business practices requires “self confidence but not arrogant leadership,” he said. “If you say things are important as a leader, but then you look the other way the first time something comes up that challenges what you say is important to you, you’re done….so you have to be willing to make those tough decisions.”

Wrapping up his talk, Melcher gave delegates something to think about: “What is your culture? If you don’t have an answer to that question it’s okay, but I would suggest there’s work to be done. The more important question is what do you want your culture to be?”