When is the right time for a COO?
Can you afford to not have one?
As an advisory practice grows over time, advisors are faced with the challenges associated with the growth. Those challenges could be; dealing with technology, staff, compliance/regulatory, in no particular order. In my experience, consulting to advisors over the last decade-plus, one thing is fairly consistent, when focused on any of the items listed above, the first thing to lose attention (and time) are the business development activities. And when a business is not growing, there are bigger problems looming than the technology, staffing, compliance concerns.
In prior articles posted here, my colleagues and I at Dynamic Wealth have shared our experience working with advisors that have selected Dynamic as a partner for their business, and even the feedback of those who have elected to remain in place. We often speak of the highly experienced Advisor Support team that assists advisors with the day-to-day, month-to-month and annual tasks necessary to effectively service clients and free up time to find new clients.
One key component that has, up until now, been overlooked was the thought leadership, (practice management, business strategy and development knowledge) that is shared with advisors working with us.
Regular readers of my posts know that I read Investment News often and find that many articles throughout the year echo thoughts coming from the Dynamic team. A recent article penned by Jeff Benjamin was posted on November 2, 2018 and can be found by clicking on the link here. Jeff discusses the importance of the COO role and how having one in place can free up time for the advisor/founder to continue to grow the business.
At what size should a firm begin looking to add a COO role? Opinions vary on just when is the right time, but one of the individuals quoted in Mr. Benjamin’s article mentions somewhere between $500 million and $800 million in AUM. The advisory firm executive with experience as a COO was also quoted as saying, “I don’t believe there is a magical AUM number that automatically qualifies the firm for a COO. But whenever the owners of the firm are feeling overwhelmed with running the business, they should look into bringing in professional management.”
Depending on where your firm is located, a COO role could cost $150,000 or more per year. And adding a CCO could double that figure. While that might fit into the $500 to $800-million-dollar firm’s budget, it can be a very tall order for smaller firms, and nearly impossible for firms with less than $200 million of AUM.
We at Dynamic agree wholeheartedly that there is no magic AUM number. In fact, we have spoken with solo advisors with $25 million of AUM who felt overwhelmed and selected Dynamic as their outsource partner. And we have had $200 million-plus firms come to us to help solve the challenges they were experiencing.
When working with Dynamic Wealth, not only do you have a COO supporting your business, you have other C-level executives supporting your business for what amounts to basis points, and it doesn’t require that you have hundreds of millions of dollars of AUM.
About Dynamic Wealth Advisors
Dynamic is recognized as a premier provider of essential resources to professional wealth management practices. Its turnkey practice platform includes asset management and enables wealth advisors to save money and focus on clients while positioning themselves for success and growth. With myVirtualPractice, a suite of wealth management practice solutions, Dynamic hands the professional wealth advisor the keys to a comprehensive custom-built virtual office and practice complete with staff, back/middle office, accounting/billing, compliance and even a Virtual Assistant. The wealth advisor need only add clients and a laptop, and they are up-and-running instantly. For many breakaways and independent wealth advisors, being part of a nationwide community of like-minded professionals is one of the most valuable components of their affiliation with Dynamic.