Many RIA firms are not doing enough to get the most out of their "most valuable resource" — their advisors and other employees — and not doing enough to keep them with their firms, according to David DeVoe, CEO and founder of DeVoe & Co.
Because of that and other reasons, the industry "is facing a potential crisis here with succession planning," he said Tuesday during the webinar "RIAs: Unlock the Power of Your People." There is "quite a bit of room for improvement in this industry," he said.
The COVID-19 pandemic is also potentially "game-changing" for the industry, he warned, pointing out 80% of deaths from the virus have been people over 65 years old. And about 46% of RIA firm owners are over 65, he noted. For those folks, it is "now a life or death decision to go into the office," he said.
Therefore, it has become more important than ever for RIA firm owners to put their succession plans in place, he said, urging them: "Please go do it. It's critical."
Underscoring just how much of a "significant" part of an advisory firm human capital represents, he said "75% of an expense structure for a typical RIA … is tied up in their human capital expenses."
So "being a smart business manager," if you are running an RIA firm, "you need to manage that very effectively [and] optimize that investment as well as the economics side of the equation," he said.
But in this industry, the importance goes "well beyond economics," he said, adding: "Your people are ultimately what will make or break your organization."
Not only is it "critical" to "hire great people, smart people, wonderful people, the people that are focused on taking care of clients and executing with great expertise," but it is also "critically important to get the most out of your people," he said.
DeVoe also challenged a common belief, saying: "Maybe your clients should not come first." He argued that, while prioritizing clients is admirable, "maybe your employees should actually come first" because of how critical they are to an organization.
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DeVoe also pointed to survey results included in his company's recent report, "It's Time for a Human Capital Revolution."
