New RIA COO? How to Prepare for Success on Day 1

September 17, 2019, by Matt Sonnen
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In the eighth episode of The COO Roundtable, featuring David Canter and Scott Slater of Fidelity Clearing & Custody Solutions, we talked about an uncomfortable but extremely important topic: how and why COOs often fail in their role at RIAs.  We’ve previously written about this unfortunate phenomenon on our blog, but with David and Scott’s unique insights into an abundance of RIAs around the country, they were able to provide new outside guidance that we wanted to highlight, as this is an all too common occurrence in our industry.  In fact, David Canter estimates the COO failure rate at 50% or higher.  Unfortunately, our experience interacting with operations professionals across our industry has only confirmed this.

Some of these hardships bestowed upon COOs are externally driven.  Many RIA owners erroneously assume the Chief Operating Officer role is solely focused around technology, as they often view the role as a one-time project, rather than a long-term change agent within their organization that can add to the firm’s growth initiatives.  “I just need someone to come in here and clean up the tech stack.  They should be able to bang that out in about six months or less, and then I’ll be stuck with a high salaried employee with nothing to do!”  This mentality obviously sets the COO up for failure right from the start.

But there are some things that a Chief Operating Officer can do early in their tenure to set themselves up for success.  As delivered in our podcast interview, David Canter identified four specific action items that every COO should perform almost immediately after accepting a new job:

  1. Aim to take a full 360-degree review of the entire organization. “Really getting the perspectives of the entire organization is key,” David advised.  “Look beyond the existing leadership to the folks who make the firm run day to day.  It’s sort of doing the job before you’re in the job.”
  2. Get clarity in writing from the founders/principals on what the COO role will entail in their mind. Don’t be afraid to ask how success will be defined for this role.
  3. Play the long game, not the short game. “The first 90 to 100 days should be [filled with] a lot of listening and absorbing.  Get a great understanding of how the firm works and where the COO can make an impact.  You have to pick your spots wisely,” David said.
  4. Make the first year about small, incremental steps that can pave the way for future success. Don’t try to come into a new firm and make massive change immediately; it will shock people.

Important to add to David’s list comes from Robert Cialdini’s best selling book “Influence: The Psychology of Persuasion.”  In his research, Mr. Cialdini has proven that people are much more likely to follow the lead of a credible, knowledgeable expert.  The trick is, authority must be conveyed and rightfully achieved before trying to influence someone.  While it is difficult to arrive on Day 1 and start bragging about accomplishments, Mr. Cialdini suggests having someone else deliver the message about your credentials.

In this light, it is critical that the owner(s) of the RIA set the Chief Operating Officer up for success and fully support the incoming COO by not only communicating to staff that the incoming COO has complete authority to act on behalf of the owner(s), but also by providing the background and credentials of the COO before they arrive.  In our previous article about the struggles professional managers face when joining RIAs, many COOs shared stories of arriving on Day 1 and the staff not even knowing who they were or why they were hired.  This simply cannot happen if the COO is to become the driver of growth that the owner is hoping (and hiring) for.

Scott Slater followed up on David’s list of recommendations and astutely pointed out that the COO “…is really a political position in a lot of ways.”  He continued, “In that listening that you’re doing in the first 90 to 100 days, you’re looking for the problems that not just the leadership struggles with, but others in the organization are frustrated with.  Can you help solve those [problems] and add value to create some political support behind you throughout the organization?  Then, get the flywheel moving and continue to build on that.”

Scott wrapped up the discussion with this advice, “Those that are going to be more successful [COOs] really recognize that their role isn’t to come in and be a bull in a china shop and shake things up, because that’s not what most organizations are looking for.  In fact, for a lot of firms, this is the first time they’ve really had serious management come into the organization…and that’s big change [in and of itself].  [The COO] has to be patient…and more selective in the wins that they want to get, and then the way they can really immerse themselves in the DNA of the organization itself and help take its best qualities to create a more effective organization.”

Fidelity Clearing & Custody Solutions® provides clearing, custody, or other brokerage services through National Financial Services LLC or Fidelity Brokerage Services LLC, Members NYSE, SIPC.

Fidelity is not affiliated with PFI Advisors.

 

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