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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 Schlaffani and I'll be your host. Immediately after a merger or the formation of a new ensemble,
Everyone assumes that whatever tensions might have built up during the process will soon resolve themselves. More revenue, more scale, more power. Surely these benefits will offset any lingering friction, but they don't. We're often engaged by firms to help partners resolve these conflicts and the most common underlying issue probably isn't what you would normally expect.
It's not a matter of one partner being lazy while the other's ambitious. It's not that one partner is deeply committed while the other one's more complacent. What's typically at issue is that they're in fact pursuing two very different models of growth. Frequently we see one partner who's grown up in a very typical eat what you kill kind of world. Their identity, their ego and their performance metrics all revolve around production.
new clients, new assets this week, this month, this year, meetings that don't directly drive production are at best viewed as a distraction and at worst a threat. The other is a partner who sees an opportunity to build something bigger than themselves, a firm rather than a loose collection of high achievers. Someone who is thinking about intangibles like leadership and capacity and systems and governance and value creation.
Ray Sclafani (01:59.766)
In short, a person who thinks about growth beyond their own capabilities. While both of these models have merit, depending upon what you hope to collectively achieve as owners, troubles arise when the partners aren't aligned as to which vision of growth approach they plan to take to achieve their agreed upon goals. It's a recipe that's quietly destroyed more than just a few partnerships I've seen.
Perhaps your firm decides explicitly or implicitly that everyone must produce. Everyone who's an equity owner must bring in new clients and actively grow the ensembles assets under management. In principle, it sounds perfectly logical. Everyone will do their fair share and no one will get a free ride. What you've actually created, however, is a producer only organizational model.
If everyone must produce in the same way, you're actually placing the highest demands on the people with the least capacity and the largest relationships. Inevitably, they become a bottleneck. It also creates a hard ceiling to growth. No matter how good any one producer is, the capabilities and capacity of the organization required to support growth must take center stage when scaling an ensemble.
If there's only a focus on production and revenue per professional, without a corresponding investment of time and money in infrastructure, major foundational fractures will result in stalled growth, increased tension, and underlying resentment between the partners who are doing the work and those who are supporting the business. It's important not to lose sight of the fact that building the kind of team
which can efficiently and effectively support the demands of a growing client roster is every bit as critical as growing the client roster itself. Failure to do so will likely lead to high team turnover, which is soon followed by client turnover, brand reputation suffers, and ultimately profits will fail to grow. This is where a mindset shift is required by all equity owners. Of course, your
Ray Sclafani (04:15.518)
absolutely needing rainmakers and other producers. Production is what fuels the firm. But you do not need everyone to produce in the same way, to the same extent, or for the same reason. The fastest way to grow isn't to force everyone to sell more. It's to institutionalize the production by creating a system in which demand creation, client experience, relationships and expertise are appropriately distributed across a team.
by recognizing that specialists and leaders and builders, they all produce differently, but no less effectively. When team members are all pulling in the same direction, production becomes more, not less reliable. Lead generation accelerates, the client experience is enhanced, overall organizational risk is reduced, capacity and capability both increase. But going together requires leadership, coordination and time.
And it's often the place where tensions can become personal. For production focused partners, leadership time may be viewed as unproductive. If it doesn't appear in the next commission run and doesn't close a new client relationship this week, then it's an activity without an immediate payoff. For the visionary builder, on the other hand, production demands can feel frustratingly short-sighted as though they're being forced to focus on meeting this year's number.
rather than building long-term sustainable enterprise value. Although finding a middle ground may not be ideal for either partner in this equation, it's imperative for continued success. For the producer-minded person, it means realizing that leadership is not an expense, it's an investment. And for the builder, it means recognizing that production matters and that strategy without revenue growth isn't sustainable. It's not a question of whether one aspect is more important than the other, rather,
It's a matter of realizing how both are critical parts of the whole and deciding how decisions regarding what to prioritize and when will be made. Where teams tend to go astray is in avoiding the conversation and failing to create working agreements that effectively sync with strategy. Often partners fail to deal openly with the uncomfortable questions of how each partner should be valued and compensated.
Ray Sclafani (06:39.362)
based upon their contributions to the future growth plan of the firm. Instead, they opt to take a pass, kicking the can down the road. And over time, this leads to simmering tension that is eventually bound to boil over. Governance generally becomes the weapon of choice. The conversation changes from how do we grow to who has control? The partnership legal agreements come under scrutiny. The decision making processes are called into question.
and exit strategies are carefully reviewed. What partners fail to realize until it's too late is that the sobering reality that dissolving an ensemble or removing a partner is far more expensive financially, emotionally, culturally than having this conversation upfront. So here's the takeaway. If you're a partner group and this conversation is proving to be an issue for your team, the good news is you do not have to agree on everything, but the bad news is
you do have to clarify. Clarity on the kind of firm you're building, clarity on the definition of contribution, clarity on the decisions that require full alignment among the partners, clarity on what happens if all the partners are unable to align, clarity around the value of what each partner brings to the table and an acknowledgement that what got you here won't get you there. The diversity of skills required to build a thriving enterprise and the enterprise value of that enterprise
can be worlds apart from the production skills needed to be a top producer. Simply avoiding these questions won't bring harmony. It will bring conflict and increased cost. And the firms that successfully navigate this phase, well, they're almost always the ones that do one thing exceptionally well. They appreciate the difference between contributions while achieving alignment on outcomes. They quit asking the question, who brought the most to the table this year?
and they start asking the question, what have we created together that will make the next few years better, easier, stronger, and more repeatable? Now that is true leadership and the necessary price for traveling the road ahead together. With each episode, we provide a series of coaching questions. And today I'd like to share a few. First, what is your mutually agreed upon vision of growth over the next three years? And I would consider three questions specifically here.
Ray Sclafani (09:07.34)
The rate of growth, take out the capital markets, take out any inorganic growth, focus only on your organic growth, new client acquisition and new revenue, new assets from existing clients. What's your rate of growth? What's the direction of growth? What kind of client do you wanna bring in? What's an A plus client? What's an A client? Consider revenue or profitability per household as a measure. And third, what are the methods of growth? Where do you wanna invest capital in marketing?
in brand building and referral generation. Okay, the third question today is specifically what outcomes are more important to you than individual production totals as the firm scales. Thanks for listening today. And please share this episode with a friend or colleague who may find it most useful. 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.