Culture is a major contributor to a firm’s viability and long-term success in the quickly evolving wealth management space. Wirehouses owned by money-center banks, IBDs consolidated into scale players and smaller RIAs rolled into private equity-backed aggregators have all impacted long-standing cultures that are no longer ingrained in the fabric of these firms.
The right culture can contribute to organic growth and value creation. A positive culture can be the “secret sauce” that retains advisors, as a positive firm ethos can improve employee satisfaction, service, innovation and productivity.
We spoke with Bill Sowell, CEO and Founder of Sowell Management, about why passing the culture test is crucial for an RIA aiming to retain its advisors and attract new ones. Bill started his career in 1990 and is a pioneer in the independent wealth management industry, shifting to the fee-based fiduciary model in 1995.
WSR: Everyone has a different definition of “culture” in the independent RIA space. As someone who has had their name on the door for a while, how do you define a firm’s culture, and how important is maintaining a culture with all the changes swirling around the industry?
Sowell: Culture is what defines a firm. Yes, AUM, EBITA, GDC and all the other financial acronyms are critical to the business, but culture cuts to the core of a firm’s beliefs and values. It’s one of the most important — yet often overlooked — factors advisors should consider when evaluating a new affiliation.
In an evolving and maturing industry, a strong and inviting culture can enable a firm to stand out among the commoditized tech stacks, product offerings and operational efficiencies that most RIAs, even of modest scale, can offer. As a first-generation owner, I’ve helped build a culture that I am proud of and one that has become institutionalized, ensuring its long-term endurance. It’s not about one person. It’s about a shared vision and purpose on how the team works together to implement strategies and goals that start with the advisor and end with the client.
WSR: Most firms talk about their terrific culture, but how can a potential advisor cut through the platitudes and buzzwords to learn a firm’s true culture?
Sowell: To answer a question about clichés with a cliché, you have to go out and kick the tires. A home-office visit is a must, but it can’t be just a pitch book presentation in a conference room. It must be a true fact-finding mission, where every interaction, big or small, contributes to a decision.
If a firm claims to have an advisor-centric culture, do you feel it? Are you taken to dinner the night before and then picked up and driven to the office the next morning? If a firm touts its collaborative nature, is the staff interacting in a collegial manner with each other? Does senior management greet employees by name? You can learn about forgivable loans, payout and tech stack during the pitch, but is the receptionist happy and the team engaged? That might tell you more than anything else you will hear. At the end of the day, if you have to convince yourself a firm is right for you, you’re at the wrong place.
If you have to convince yourself a firm is right for you, you’re at the wrong place.
WSR: In this era of consolidation, as a firm grows, how can leadership preserve and enhance the firm’s original cultural DNA?
Sowell: An RIA firm must grow to achieve long-term success. However, it must not pursue growth at all costs. Growth should be strategic and beneficial for the organization. Hiring advisors, management or staff who are not a good fit is the quickest way to damage a well-established culture. I’ve seen a single hire disrupt the cohesion and dynamics of an office.
M&A deals driven solely by financial motives can end poorly for everyone involved. However, when done correctly, expansion can strengthen a culture if the increased revenue is invested in value-added advisor-facing areas such as increasing staff, enhancing advisor services and fostering technological innovation.
WSR: If you could give one piece of advice to an advisor preparing to “culture test” a potential RIA partner, what would it be?
If people seem to truly like each other, that’s a sign of a winning culture.
Sowell: Like with most things in life, talk less and listen more. Firms will reveal who they truly are if you pay attention and read between the lines. So, whether you’re in a home office meeting or just walking the halls, if people seem to truly like each other, that’s a sign of a winning culture. If they pass that test, the rest is a negotiation.
Michael Madden, Contributing Editor and Research Analyst at Wealth Solutions Report, can be reached at michael.madden@wealthsolutionsreport.com.
