Editor’s Note: Ray Sclafani is chief executive and founder of ClientWise, an executive coaching firm based in Mt Kisco, NY, which works exclusively with financial advisors. Here, he shares his experience of working with clients to create value at owner-run firms. Views expressed are the author's but this publication is grateful for the right to share them.

Erin Botsford spent years building a successful financial advisory practice in Frisco, TX. As her days grew busier, she realized something was missing - she had bought herself a job, rather than establishing a business that had intrinsic value.

“I didn’t know how to create a business that didn’t depend on me,” relates the CEO of The Botsford Group, who was recently hailed as one of the top women financial advisors in the country by Barron’s. “As long as the business depended on me, I couldn’t scale or leverage it. As a business owner, it’s a scary place to be. If I couldn’t do my job, I wouldn’t have an income.”

This is a problem that financial advisors - and other small business proprietors - have endeavored to solve for years. “In the old days, we had commissions, where advisors were only as good as their last trade. Then came assets under management, which seemed to be a cure, but was just as flawed because you still have to be there to meet clients' needs,” Botsford says. “When the business depends on you, you really don’t own a company.”

Jeff Staggs, a Master Certified Coach with the firm I founded ClientWise, agrees that some financial advisors find navigating that transition between operating a financial advisory practice to owner of a wealth management enterprise challenging. “Inevitably, financial advisors hit a plateau that they need to move beyond,” he says. “They need to know they are on the plateau and that the business is running them and they are reacting to the business instead of running that business.”

At that point, the advisor needs to figure out how to get back into the driver’s seat. This will require a mindset change, a step-by-step plan, and time set aside for carrying it out. “You have to carve out that time immediately,” Staggs says. “Stop doing some of the things you are doing, delegate them out and make time to strategically look at what you need to change.”

Design a team-focused business

For Botsford, re-engineering her business so that it could stand alone meant taking herself out of the equation to the greatest extent possible. In other words, she made an effort to redefine her brand, building a practice that didn’t depend on her facing clients on a day in and day out basis.

“I drew a line in the sand with my new clients with a new set of rules - they had to agree to work with my whole team,” she says. “I actually include my expectations about the engagement that clients have to sign off on. New clients are buying the philosophy of my entire firm, not just me.”

She trained existing clients to get comfortable with the new model over time. She started out by including other members of her team in client meetings, assigning a member of her team to follow up with any action items with the client following a meeting and referring phone calls from clients to other team members.

If she schedules a conference call with a client, at least one other team member is always on the call and she defers to their expertise, allowing them to answer client questions. “Suddenly, you pretend you don’t know the answer to that question and defer to the others on your team - that builds those team members up in the client’s mind,” she says. “It’s the philosophy of letting go to grow - you can decide, is your ego or the growth of your business more important?”

Botsford notes that there are always exceptions - there may be a big meeting with a client that she has to take, so it’s important not too make too many hard and fast rules. At a certain point - and this could take up to a year - a light bulb goes off in the client’s mind and they realize that other team members know more about their situation than you do. It’s a way to train them, she adds.

“Start thinking about yourself like you are the CEO of a major corporation - there are certain meetings you have to be there for, but certainly not everything,” she advises. There’s a benefit for clients and for Botsford - they get some assurance that if something happens to her, the trusted team of wealth management advisors won’t be affected. For Botsford, she obtains the freedom to have a life outside of the office and to build a sustainable business, of which she is the owner and CEO.

Moving beyond teaming

At a nuts and bolts level, a key step in this process is intentionally developing a team that can support the business today and in the future. For many advisors, this process involves a lot of fits and starts.

It can take time and energy to find the right structure that works for your business. In search of the best model, many advisors move to an ensemble model, where they set up shop alongside another advisor or advisors, sharing office space and some staff, but still essentially working on their own.

In some ways, that type of structure can be a trap because while it seems like you are getting somewhere by creating some scale, you really aren’t because you are still the main point person and decision-maker in your practice. What it takes to truly move to the next level is creating and developing a team. It’s something that I’ve given a lot of thought to because it is so vital to creating a viable business for advisors. I addressed this in a presentation at the 2012 Barron’s Top Advisors Summit, where I gave a pre-conference talk entitled “Beyond Teaming.”

It’s my belief that team formation has several stages, each one critical to the overall endeavor of creating a successful wealth management enterprise. These stages are:

Phase one: "solopreneur," mature solopreneur

Phase two: team selling, ensemble practices

Phase three: team, mature team

Phase four: firm

Initially, when a team comes together, that team is immature. The members of the team are just learning how to work together. The task of the advisor at that point is to create a structure in a sequenced manner that is going to allow the team members to understand their roles, develop within the organization and work together in the most effective and efficient manner possible.

That’s where processes come in – when the team is developed in an intentional way over time, there is a much better chance that it will be successful. This involves strategic planning. The advisor needs to consider the roles that are needed in the team now and in the future, create an organizational chart to reflect that and take the time and energy to communicate with the team on an ongoing basis. Regular team meetings are essential. Advisors must realize it takes significant time and energy to nurture and develop a team and that there will be challenges along the way.

This means advisors need to take a deep and profound look at their own skill set and the value they bring to the firm and create a role for themselves as CEO that leverages their abilities. How successfully you navigate the shift from advisor-in-chief to CEO depends on how clear you are about your strengths and weaknesses.

“If you’re a great rainmaker and enjoy client acquisition and client engagement, focus on that and get an office manager or COO to handle operational details,” Staggs continues. “If you’re into numbers and don’t enjoy client meetings, get someone on your team who loves to do that to take the client meetings. Align your business and your team with your strengths.”

As an advisor fully defines his or her role, it is easier to define the roles of team members because the team members will be there to fulfill the functions that the advisor can’t handle. It’s at that point that the advisor begins to develop the professional staff and begins to intentionally share the responsibility for operating the firm. That needs to happen on a day-to-day granular basis and on a big picture basis.

Successful delegation, meanwhile, requires setting performance objectives for team members and measuring results. “Pay attention to your team and help them develop,” Staggs advises. “Analyze the health of the business, step outside of yourself so the business isn’t so much about you but about the business entity that is separate from you.”

When advisors set up a structure that defines the value proposition of the firm that is derived from - but not completely built around - the founder, they can leverage the ability of a team to connect with clients based on an individual methodology. However, a CEO/founder doesn't want to get too distant from their clients or team, because that could create some problems. It’s a fine line. It's also important to create agreements with team members so that they can’t poach clients should they decide to go out on their own.

The path to independence

For many advisors, the operator to owner transformation in mindset comes when they decide to leave a broker-dealer or wirehouse and go independent, says David Armstrong, CFA, managing director and co-founder of Monument Wealth Management, who made such a change four years ago.

“I’ve always had an entrepreneurial mindset and what I realized at a certain point is that when you work for someone else, that institution is in charge of how you deploy your resources,” he says. “One powerful advantage of being independent is the ability to deploy your resources to grow the kind of business that you want to have.”

Armstrong says that, for him, the realization that he could invest more in his own business by going independent and using pre-tax dollars was a game-changer. “We are paying pre-tax dollars and making investments in our firm’s success, not someone else’s business,” he says. “That’s much more efficient than writing off business expenses after the fact.”

At the beginning, Armstrong and his partners had to make virtually all the decisions about leasing office space, hiring staff, technology and other operational details. But as the practice has grown, they’ve been able to delegate.

“We’ve grown to the point where we have a brand manager, so the task of managing our brand falls on the shoulders of someone else,” he says. “To me, the brand is important, but that’s not my primary job. I spend my time on business development and client engagement, so I outsource that to an employee who manages it for us.”

It requires focus and discipline for a founder to build a business that doesn’t depend on them being there every minute of every day.

Botsford considers that it is worth the effort. “I’m out of the office most of the summer and last year I skied 31 days,” she says. “This gives me freedom and has built a business with a value in it outside of me.”