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Hosted by Financial Advisor Coach, Ray Sclafani, "Building The Billion Dollar Business" is the ultimate podcast for financial advisors seeking to elevate their practice. Each episode features deep dives into actionable advice and exclusive interviews with top professionals in the financial services industry. Tune in to unlock your potential and build a successful, enduring financial advisory practice.
Ray Sclafani (00:00.142)
Welcome to Building the Billion Dollar Business, the podcast where we dive deep into the strategies, insights, and stories behind the world's most successful financial advisors and introduce content and actionable ideas to fuel your growth. Together, we'll unlock the methods, tactics, and mindset shifts that set the top 1 % apart from the rest. I'm Ray Sclafani, and I'll be your host. As a leader, how do you set the right...
pace of growth for your firm while balancing both ambition with the stability that teams need to deliver the promises that you're making to clients. We all know that growth is the lifeblood of every thriving organization, especially in this competitive world of financial advisory firms. However, unchecked or poorly managed growth can derail even the most successful teams. Let me share a story with you.
I recently received an unexpected call from a Barron's ranked advisor. He mentioned that he reached out because he had seen me speak at the Barron's Teams conference about how teams grow with intention. He explained that he was facing a mutiny on his hands. I thought a mutiny, you gotta be kidding me. Well, you see, his team had expressed concerns about their pace of growth and he ignored all the smoke signals. Over the course of the year, team meetings on a weekly basis, the quarterly retreats, the annual offsite planning session,
The team continued to voice their concerns over and over again, and those concerns were left unaddressed. He explained that it finally came to a breaking point. He told me the team had signed a petition stating they would all resign if he didn't make changes. So he called me asking for help. This sounded so dramatic. I took the assignment and immediately began interviewing his team members. Each expressed two very specific concerns and they were both valid and really interesting. First,
Ray Sclafani (01:57.474)
They were worried that they would not be able to keep the promises he was making the clients. They didn't have the capacity. Everybody told me we don't have the capacity, to take on more clients. And he was making promises to provide advice they didn't think beyond him. They had the capability to deliver. So there was an integrity issue. The second concern was about culture. Everybody told me, hey, Ray, if we're going to expand, well, we're going to lose our family feeling.
We really like traveling together for family vacations. We get together for barbecues in the summer. That bond was something they deeply valued and wanted to preserve. This story, while sounds dramatic, it's true. It illustrates this fundamental challenge many teams face as they grow. While growth is exciting and necessary, it can also threaten performance and culture if it is not managed with intention and aligned with the team's goals and vision of growth.
The advisor had built this incredible business. By the way, finding ultra high net worth and high net worth clients was not the challenge. The pressure to grow had created such tension between his vision of growth and his vision of the future and the team's ability to keep pace. So as leaders, we must recognize the signals our teams are sending and foster open, honest communication. It's the number one reason teams break apart. They lack that shared vision of growth.
Ignoring signs can lead to burnout, disengagement, or in this case, full-blown mutiny. The good news is we turned that ship around and got everybody aligned around a realistic vision of growth. Growth has to be this shared journey built on capacity, capability, and culture. Balancing these three elements ensures that teams can thrive as they expand.
without sacrificing the bonds and values that made them successful in the first place. I also think this story highlights a crucial reality. The challenge isn't whether to grow, but how fast and with what degree of intention. Teaching growth with intention is a primary responsibility for every leader aiming to maximize enterprise value and cultivating future owners of their firm. Striking the right balance between ambitious expansion and operational stability
Ray Sclafani (04:22.656)
is vital for sustainable success. As the popular saying goes, if you're not growing, you're dying. So how do you balance this ambitious growth focus and the goals that firm owners have for growing enterprise value with the stability necessary to retain top talent and provide a consistent, excellent experience for clients? There are key considerations involving managing your firm's growth pace. You've got to collaborate.
developing the growth plan with your team, having a shared vision of growth. You want to establish clear timelines and foster innovative leaders within who can facilitate scalable intentional growth. Growth is the lifeblood of every thriving organization, especially in this competitive world. Uncontrolled or poorly managed growth can quickly become operational chaos, threatening the stability and reputation that helped your firm stand out.
I often think that growth without scale is chaos. And if you scale without growth, you go bankrupt. So the challenge is not whether to grow, but it's about how fast and with what intention, what manner, what kind of clients you choose to grow with. Finding that right balance between ambitious expansion while maintaining everyday operational effectiveness and excellence for clients. That's the essential balance you're seeking to strike.
Among the key considerations are the importance of pacing your firm's growth, structuring a well-defined timeline, and then the seamless integration without compromising that daily operation. So we've already talked about the cultural clashes. We know that to be true. We also want to think about the strain on infrastructure. Rapid expansion can overwhelm existing technology platforms, compliance processes and workflows. And then there's some risk management issues.
Rapid growth without updating cybersecurity measures or compliance measures or internal processes can erode the team's ability to regulate how they're actually growing. So you end up with potential regulatory fines or data breaches. And then there's the client service lap and the team that I mentioned earlier in this episode, they were really focused on growth outpacing their capacity, which would erode the client trust due to those inconsistent experiences.
Ray Sclafani (06:44.28)
Let me take a moment and just highlight one of the main risks that teams face as they grow without intention. Cybersecurity is one of these issues that most teams aren't paying a whole lot of attention to. Beyond exposing critical vulnerabilities and disrupting operations or compromising data and systems and potentially generating negative publicity for your firm, breaches significantly undermine client trust, especially when clients
may question whether the firm's growth negatively impacts their interests. Cyber threats are not gonna go away. In fact, cyber crime is projected to reach $10.5 trillion in 2025, and that'll surpass the global illegal drug trade. According to Mark Hurley's 2024 white paper, Confronting the Realities of Cyber Threats, he highlights a number of key issues and data points that should draw every team's attention.
to recognizing growth without intention, one of the main risks are these cyber threats. The remote work, by the way, that many employees crave after becoming accustomed to it during COVID-19 and the aftermath magnifies a firm cyber risk. In fact, Hurley notes that 82 % of financial services breaches originate from remote work vulnerabilities. These threats and the expenses associated with time-consuming recovery efforts
are drawing greater regulatory scrutiny. So while we're talking about growth with intention, I just want to highlight that this risk alone, reputational risk, client experience risk, all that I've outlined so far, could create massive challenges for your firm if you're not growing with intention. Sustainable growth refers to expanding without compromising these kinds of risks or operational instability or client experiences. So here are a few key areas you definitely want to focus on.
Talent retention would be one, client relationship management too, and quality over quantity. So a couple of things here. Measured growth enables your team to adapt and decrease burnout and boost morale. There's a crucial McKinsey projection that 38 % of advisors are gonna retire in the next decade. I think we've been saying that for a while. So I don't know how exactly precise that number is, but that'll impact.
Ray Sclafani (09:05.934)
roughly 42 % of total industry assets today when you look at the age of advisor. So you want to focus on talent retention. So your next gen has to be aligned with the vision of growth. The second is safeguarding client trust during periods of expansive growth. You got to maintain client service consistency, particularly during client relationship transitions. That will guarantee longevity of these relationships and increase your lifetime client value. The third is
properly integrating acquisitions or new service lines. So there's a lot of &A that's happening in our marketplace, especially in the RIA vertical. And there are firms that are expanding services, whether it's tax services or estate planning or insurance and risk management, all of these new service lines, if you're not managing quality over quantity, will prevent all kinds of issues that'll pop up and potentially harm your reputation. So you want to be intentional about how you either do &A,
or expand services in your firm. So those would be three areas, talent retention, client relationship management, and quality over quantity. Here are five practical steps that if you're thinking about sustainable expansion and wanting to grow with intention, here are five things I would pay attention to. First, assess your capacity before you start to scale. Identify the gaps, audit workflows, look at client portfolios, look at the time spent per client, your tech systems,
all of that capacity assessment before you expand. And if you need help with a detailed way to do that, just contact our team at clientwise.com. The second is phase your growth plan. Divide your journey into achievable steps with clear goals and metrics. So client satisfaction scores is something you should track. Compliance benchmarks, having a written cyber policy that's in place, all of that phasing your growth plan and determining with your capacity that we just talked about.
you'll be able to model out what that looks like. The third would be to invest in team-based models. Cerulli data indicates that team advisors oversee larger client portfolios and implement team structure can increase capacity and enhance better outcomes for clients. So we know that to be true. That seems really obvious, but are you still operating like silos in your firm? Are you moving from those silos to more ensemble and interdependent structures?
Ray Sclafani (11:32.044)
Number four, and I mentioned it earlier in this episode, but I just want to highlight, you got to strengthen your cybersecurity, implement multiple layers of security protocols, educate your team and your clients on cyber hygiene. Hurley's findings show that human error and remote work vulnerabilities continue to pose significant risks. His firm actually does a terrific job for a very low fee to educate clients and educate team members.
Number five would be to foster greater leadership development. Think about how to delegate responsibilities related to growth, helping team members, especially the next gen understand and ensure your team is prepared to handle the complexity as you grow in scale. So identifying metrics like client satisfaction scores or team member engagement levels or compliance benchmarks so that you can assess how you're progressing at each phase.
will be critical to your success. And we all know even the best laid plans can go awry. So consider contingencies or delays such as regulatory approvals or unexpected market shifts. We've recently experienced some of that. Maybe technology issues or expanding your AI capability. Incorporate these little buffers into your timeline and keep some flexibility in your strategy and let your team know that you're flexible about your strategy so you can adjust.
if new information suggests that there's a need to either slow down or pivot. This transparent communication and the co-creation of the plan internally with teams and externally with clients is essential. Team members should understand what is expected of them and have adequate resources to meet those expectations and comprehend the rationale behind each step. The clients who oftentimes at the ultra high net worth space and high net worth space get concerned that if a firm grows too fast,
It won't be able to deliver for them. Well, your client should be confident because you've communicated that your service quality and the quality of advice is going to remain vital. Clients should understand why growth matters. And regardless of all the changes you're making in the firm, the client has to understand what's in it for them. What's the benefit to the team for growing? leadership serves as Leadership should serve as an anchor during growth. Leaders can balance the ambition with stability.
Ray Sclafani (13:58.562)
by combining the emotional intelligence, the clear vision, the operational rigor, empowering leaders throughout your organization enables faster and more adaptive response. Just one final thought before we wrap up. We know growth is essential, but how you grow impacts your firm's long-term success. Teaching growth with intention is a cornerstone of leadership. It safeguards your firm's legacy.
It cultivates future focused leaders and it maximizes enterprise value. I frequently tell our clients, as I did earlier in this episode, growth without scale leads to chaos and scale without results is bankruptcy. So refer to the outline in this article, take a look at the show notes. We put a checklist in the show notes to ensure you're creating a scale plan, merely a growth plan. Use those resources to your advantage. As Warren Buffett once said,
Someone is sitting in the shade today because someone planted a tree a long time ago. Cultivate the seeds of sustainable, intentional growth today. So here are a few questions for reflection. Number one, how have you prepared your entire team for your long-term vision of growth and have you co-created that plan in partnership with them? Two, what key operational areas may be taxed with the growth expansion that you think about?
And how can you mitigate those pressures? And third, who are your most capable leaders and what projects can you share with them to help them develop as the future leaders of tomorrow as your firm continues to grow? Well, thanks for tuning in and that's a wrap. Until next time, this is Ray Sclafani. Keep building, growing and striving for greatness. Together, we'll redefine what's possible in the world of wealth management. Be sure to check back for our latest episode and article.