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Why RIAs need a COO

A common misconception in the RIA industry is that COOs add to a firm’s expenses but do little to boost the firm’s revenue.

That mistaken belief could, however, be a very costly one.

There comes a time during the evolution of every business that the owners need to step away from the day-to-day administration of the firm and focus 100% of their time and energy on business development and client service.

Regardless if the firm is pursuing an organic or inorganic growth strategy, they need a skilled, competent chief operating officer to take over the management of the business so they can go back to doing what they love: serving clients.

Matt Sonnen

COOs are responsible for three crucial areas of expertise:

1. Day-to-day administration of the firm.

Advisors need the peace of mind in knowing they have a fully competent COO to steer the ship while they are out meeting with clients and prospects. Their COO must be able to uphold the firm culture and execute on the business plan they have worked so hard to build.

As the executive providing direct leadership and oversight to the firm, the COO needs to be the go-to person for staff inquiries and should align all operations decisions with the compliance initiatives that the firm has in place.

2. Driving workflow improvements.

As the chief operating officer continues to drive workflow improvements through the firm’s administration, he or she will also be overseeing the RIA’s technology infrastructure and managing those relationships with key vendors.

They determine and monitor the key performance indicators of the firm, and work to develop, plan, and implement future strategies. In order to allow advisors to work as effectively as possible, it is the COO’s role to leverage the firm’s existing technology to ensure proper workflow processes are in place and adopted across the company.

3. Managing human resources.

The COO will be responsible for recruiting, developing and retaining employees as they continue to build and define career paths and compensation levels for existing employees. The executives also coach, motivate and manage staff.

In addition to these duties, a COO can also be a valuable resource for an RIA seeking an M&A buyer.

The COO can strategically engage with the buyer and help close the deal by further validating the enterprise level of professionalism his or her firm has attained — and is available for the advisor to leverage. The COO can also best explain the efficiencies developed within the firm and the operational burden that will be lifted for the buyer.

If trusted and leveraged thoughtfully, a chief operating officer can be an RIA’s secret weapon as they commit to and execute their growth strategy.

For a more detailed look at the role COOs can play, see the PFI Advisors white paper on the benefits of professional management.

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