As RIAs grow, they continue to struggle with the optimization of their back office operations to achieve increased profitability as they gain clients and additional AUM.  It’s no secret that there are inefficiencies that creep into RIAs’ processes over time, and it is our experience that at some point in the evolution of the firm, professional management will need to be hired to push the firm to the next level.

Industry studies point to the benefits that come from bringing in operational management to free up principals from the day-to-day activities that can consume their time and prevent them from focusing on client relationships and new business development.  Cerulli Associates suggests, “Billion-dollar RIAs need to seriously consider creating professional management roles.”[1]  In a recent interview, EP Wealth Advisors’ co-founder and managing director, Brian Parker, stated that the “…top brass at EP fired ourselves when we hit nearly $1 billion under management and hired a President to run the firm day to day.”[2]  He went on to say that by leveraging operational management, he was able to go back to what he loves – being an advisor, and “…going that extra mile for our clients.”

Once RIAs realize that a Chief Operating Officer can be the key to future success, they should define their future COO’s core responsibilities.  Should they hire someone from outside the firm or groom a junior associate to step into the role?  Let’s face it, because it is such a specialized position, there aren’t that many RIA COOs sitting around looking for a job!  Thus, firms need to manage this issue for themselves, and the lack of experienced talent often prevents them from moving forward.

To provide some guidance and resources in this area, PFI Advisors has identified three areas of functional expertise needed: (1) day-to-day administration of the firm; (2) driving workflow improvements; and (3) managing human resources.

(1) The key to managing the administration of an RIA is to maintain a holistic view of firm-wide operations.  This includes being the beacon for upholding firm culture while executing the firm’s business plan.  The COO should be the go-to person for staff inquiries on all operational and HR aspects.  To succeed in this role, the COO needs to be detail-oriented, be able to multi-task and prioritize, be extremely organized, and possess outstanding communication skills.

(2) In order to drive workflow improvements and increase the efficiency and scale of the organization, the COO should oversee all aspects of an RIA’s technology infrastructure, including vendor management.  The COO needs to be able to determine and monitor the key performance indicators of the business so that they can identify problem areas and process improvements to keep the firm running optimally.

(3) On the Human Resources side of the equation, the COO is responsible for recruiting, developing and retaining employees.  As part of this responsibility, the COO needs to build and define career paths, coach, motivate, and manage staff, while providing direct leadership and oversight.

Clearly, this is a very diverse skill set to master for any experienced professional, and often new COOs or even ones that have been in the role for several years could use outside guidance, training and help.

After observing this repeated theme throughout the industry for several years, we are very pleased to introduce PFI Advisors’ COO Resource.  This turnkey consulting platform consists of helping firms identify and hire a COO as well as onboard and train them to be able to hit the ground running.  As part of this process, our COO Resource includes weekly calls to counsel on the specific nuances of the RIA service model, compliance, HR, advisory agreements, technology infrastructure, vendor evaluation/management and more.

If a hired COO has operational experience from other industries, but none running an RIA, this new service offering can be invaluable to getting them up to speed.   Likewise, if someone from the team has been filling another role and is now taking over the traditional COO responsibilities, this service can help that individual feel confident and secure that they have the proper guidance to execute the vision of the business.

Regardless of the COO’s experience, our goal is to draw out his or her strengths and allow the executive team and advisors to focus on what they do best: servicing clients.

[1] “U.S. RIA Marketplace 2017: Ascendance of the Billion-Dollar Firm” Cerulli Associates, 2017

[2] “One M&A Player Gives Purchasing Power Back to the FAs it Buys” Financial Advisor IQ, 2018


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