Armond Dinverno is the co-chief executive and president of Balasa Dinverno Foltz, a Chicago-based registered independent advisory firm that he co-founded in 1986. Dinverno discusses the importance of establishing a firm's culture before seeking clients; the growing competitiveness of the RIA space; and why acquisitions can be a difficult path for growth.
1. What are three factors that you think have had an influence on your firm's success?
I would say focusing on our culture and people, focusing on our clients and service, and focusing on creating opportunity for our people with growth.
2. Which factor has had the biggest impact on getting your firm to where it's at now?
It's splitting hairs, because we have to retain our clients. So that's important. We have to have great people, so culture and people are important. Which comes first? That's a debate, but I would tell you the people at the firm and culture comes first. You build that, you attract the right people, and then you go out and get the clients and have the people who will take care of those clients. If you did it in reverse and got the clients, but had a bad culture, it wouldn't work as well.
The culture comes from creating opportunity and career paths and having transparency in how we run the firm. It is very important to us here to have a team culture. It's not about any one person's performance; it's about the team's performance. You have to have alignment of your strategy with your incentives in how you run the company. That gives people confidence in leadership; they know where they're headed and then they go.
3. In what areas do you see your firm growing in the next three to five years?
We hired eight advisers last year and we'll hire five people this year, so we are growing. It's all about hiring the best advisers that we can find. But we have to attract clients so we can grow opportunities for our people and hire more people. It's really a domino effect. If one piece is missing, the dominoes won't fall, so the timing and alignment have to be right.
We looked at [acquisitions] before and they're not the easiest fit for an independent and objective firm such as ours. They are not the panacea and they're not easy to find. We did a merger in 2001 and they are hard to do; you need excellent execution. Ours has worked fabulously for us, but you don't undertake those lightly. I'd be open to another one, but it's not easy to find firms that you're so compatible with that you would say, “Let's do that.”
4. What do you see as the biggest challenge to your firm's growth potential?
I think the marketplace is changing and there is more competition, so that makes it necessary for us to continue to change. There's the advent of the breakaway brokers and what's going on in that space — now everyone looks like they're fee-only. They may not be fee-only, but they're trying to look like it and sound like it and it's hard for the public to differentiate between firms with true independence and objectivity, and that are truly conflict-free, versus firms that aren't. We are definitely spending more money today than we ever have on marketing and business development.
5. How do incentive compensation plans affect your firm's performance?
They're really important to us because they align everyone behind a consistent strategy. Ours are based around retention of our clients, business development, what the market does, and also the net promoter score, which is measuring the relationship that you have with your clients.
6. What advice would you give someone who is starting up his or her own practice?
I would really tell them to focus on the client. You've got to take care of that first client so you get the second, and the second one gets you the third one. You can be big and have poor client service, and you can be small and have great client service; you have to know what you want your brand to stand for and then you need to go from there.
