7 Powerful Reasons to Formalize Your Advisory Board

As a CEO or an executive leader, at some point, you’ll likely realize it takes a total team to navigate the challenges, opportunities, and complexities of running a growing RIA firm. Ours is a dynamic and ever-changing industry. Without a reliable support system, your ability to navigate obstacles and effectively steer your company toward key goals will be hampered. This is where an advisory board provides crucial benefits that can help elevate your firm to new heights.

Alternatively, perhaps you’re one of the handful of publicly traded RIAs or current/future beneficiaries of private equity. In that case, you may be thinking about how to manage a fiduciary board—the formal governing body responsible for overseeing the management and stewardship of your organization’s assets and resources in a trustworthy and legally compliant manner.

Moving beyond a typical advisory council

Based on my experience over the years, I urge any firm nearing the $1B in assets mark and growing to consider formalizing a board of advisors to help drive strategy without the threat of liability or the burden of legal exposure. This differs from the ‘advisory council’ most advisors think of (i.e., a group of key clients and allied professionals who come together occasionally to be a sounding board and provide feedback, insights, and suggestions). As focus groups, these entities serve an important purpose—helping you keep your finger on the pulse of what clients want and what they value.

But what I’m suggesting here is the establishment of a formal advisory board, an indispensable council to help guide larger, rapidly growing firms in service to the following principles and strategic areas of focus:

1. Strategic Guidance: At the helm of your firm, you need access to informed perspectives and strategic insights to make sound decisions. Advisory board members bring a wealth of experience and expertise, offering valuable guidance on industry trends, market analysis, and identifying potential opportunities or threats. Their strategic advice can help you navigate market shifts and capitalize on emerging trends to keep your firm agile and competitive.

2. Network Access: In today's interconnected world, relationships are paramount. Advisory board members offer extensive networks of contacts spanning industries and sectors. Leveraging them can open doors to partnerships, collaborations, and new markets—providing your firm with invaluable opportunities for growth and expansion. Whether forging strategic alliances or accessing key resources, the network access provided by your advisory board can be a game-changer for your business.

3. Accountability: Your advisory board serves as a check and balance system—holding you and your executive team accountable for decisions and actions. Constructive feedback and candid observations from board members help ensure your firm remains aligned with its strategic objectives and on course toward success. Embracing accountability also fosters a culture of transparency and continuous improvement within your enterprise.

4. Specialized Knowledge: Advisory board members bring diverse backgrounds and expertise to the table—spanning areas such as HR, finance, technology, marketing, compliance, and operations. Their specialized knowledge provides invaluable insights and guidance, enabling you to make more informed decisions across all facets of your business. Whether navigating regulatory changes or optimizing operational processes, their expertise adds immense enterprise value.

5. Risk Management: Risk is inherent in our industry, but effectively managing that risk is critical to long-term success. Your advisory board is crucial in identifying and mitigating risks—from regulatory challenges to competitive threats. By offering diverse perspectives and strategic foresight, board members can help anticipate potential pitfalls and implement robust risk management strategies. Ultimately, their proactive approach to risk mitigation safeguard your firm's reputation and financial well-being.

6. Long-Term Vision: Maintaining a clear long-term vision is essential for sustainable growth. Your advisory board acts as a strategic partner, assisting you in setting ambitious yet achievable goals for the firm's future. By challenging conventional thinking and offering fresh perspectives, board members help shape your long-term vision and chart a course for success. And their strategic input helps ensure the business remains innovative, adaptable, and well-positioned to thrive.

7. Develop Future Partners: The importance of ongoing guidance and mentorship for next-generation leaders cannot be overestimated. Advisory board members bring a wealth of experience, wisdom, and diverse perspectives to the next generation, and they can offer strategic insights, constructive feedback, and practical advice honed from their own successes and challenges. By tapping into their collective knowledge, next-generation leaders can navigate complex decisions with greater clarity and confidence, accelerate their learning curve, and avoid common pitfalls. Moreover, the mentorship and networking opportunities facilitated by an advisory board foster personal and professional growth—empowering emerging leaders to cultivate their skills, expand their horizons, and forge meaningful connections to help propel their careers.

Setting up your board

If you want your advisory board to be productive and successful, you have to be willing to invest time and money in the endeavor. Pay your board members for their time and wisdom. Develop a schedule of quarterly meetings throughout the year and create agendas for each session—one meeting in person and the rest via Zoom or WebEx should suffice.

Keep the discussions focused and prepare accordingly. Focus on one or two problems you’re trying to solve or decisions you’re trying to make. And allow your next-generation future partners to play a role in presenting to the advisory board. Ask them to provide feedback and consider this opportunity a performative one to develop the necessary skills and decision-making abilities for future partners.

An engaged and productive advisory board is an incredibly valuable asset—a trusted group of advisors providing unparalleled support and guidance to RIA leadership and next-generation partners. From strategic insights to network access and specialized knowledge, by harnessing board members' collective expertise and experience, you’ll be better positioned to navigate the complexities of running a successful business with confidence and clarity—unlocking new opportunities for growth and prosperity.

Coaching Questions From This Article

• What problems do you seek to solve, or decisions do you need to make that will affect your business strategy over the next five years? How might a board of advisors help you think more strategically?
• Who within your network would make a valuable board member with experience and expertise to help you make more informed decisions?
• Where do you typically seek advice or guidance from other thought leaders and industry insiders?
• How might an advisory board help your firm's leaders develop and strengthen the next-generation entrepreneurs?
• Which clients and others in your firm’s network do you admire the most who could provide immense value if they better understood the firm and its strategic direction?