Next-Gen Advisory Leaders Focus More, Wear Fewer ‘Hats’

As registered investment advisers enter a “retirement boom,” with 37% of advisers expected to retire between 2024 and 2033, according to McKinsey & Co., succession planning is increasingly important. However, the generational change may also alter the nature of RIA leadership and the structure of advisory firm roles.

Gary Wagner, president of the Carnegie Investment Counsel, an Ohio-based RIA offering both wealth management and retirement plan advising with $7 billion in assets under management, sees future leaders preferring specialized roles and prioritizing work-life balance—including chief operating officers and strategy roles—rather than taking on the many roles previously handled by many firm founders.

In a recent conversation, Wagner shared with PLANADVISER his thoughts about how to prepare the next generation of leaders.

PLANADVISER: When it comes to notable RIA leaders, how have attitudes changed over the years?

Wagner: Typically, with [RIA] firms that were started 20, 30 years ago, the operator of the firm was also an adviser. Now, I think there has to be somebody dedicated to that [operational] role, versus the adviser trying to wear that hat.

The next generation, some just want to do what they do well—serving clients, helping them reach their goals—and don’t necessarily want to be operators. There’s no doubt they want to participate in equity and have some of the entrepreneurial aspect. But in the past, I think it fell 100% on the founders of the firm.

Having a quality of life is a big part of that. You can’t do both [operations and advising] without working 70, 80 hours a week—and maybe you shouldn’t, anyway.

PLANADVISER: How can advisers find leaders, if not internally?

Wagner: If firms want to stay independent, their options are either to join up with a firm that can be the operator and let their advisers do their best work, or to find outside professional management to come in and run the firm. Everybody can participate in equity and growth and that entrepreneurial piece of it, as opposed to it being an all-or-nothing proposition.

Specialization and roles continue to evolve—it’s no different than any other kind of industry that grows up and makes those investments. We decided [at Carnegie] a long time ago that we wanted to hire. Once we got to a certain point, I think it was $1 billion in assets, we were able to start having more professional management roles within the firm. I used to be the chief compliance officer, and now we have two dedicated compliance people. [Principal and CEO] Richard [Alt] was the chief investment officer and made all the portfolio decisions. Now we have a team that makes those decisions.

We hired a chief operating officer two years ago, and he’s taken a lot of things off my plate. I still do a lot of the [mergers-and-acquisitions] part of the equation, as well as act as [chief financial officer] and leader of the advisers. It’s helped us fuel our long-term growth because I’m spending less time on things that other people can do better.

PLANADVISER: How do early-career advisers figure out their strong suit?

Wagner: I think it starts with having a conversation. What do you like to do, what do you want to be? I’m basically the CFO of the firm, and I’ve passed off some things to a younger, next-gen person who wants to learn. On the M&A front, [I’m] educating him on how we look at potential opportunities, how do we model them out.

He raised his hand and said, “This is what I want to do.” You’re not going to know without somebody putting their hand up and saying, “I really want to learn. As much of it you can feed to me, the better.” Eventually, if something happens to me or Richard, we have people that really have a pretty good feel for how to run the firm if they need to.

PLANADVISER: When you started out, did you have a mentor who taught you how to be a CFO?

Wagner: I had to figure it out on my own, but that’s OK. We took over the firm in 2009, and we didn’t really have a choice. We were in the midst of the financial crisis, and I focused so much more on what happens on the downside than the upside. The situation was more a baptism by fire.

I don’t think that’s necessary now. If we had tried to hire a CFO back in ’09, there were very few that had any idea how our cash flows worked, and it probably wouldn’t have been productive. I’m more optimistic about the tools and people that are available now, moving forward.

This interview has been edited for length and clarity.