By Steven Clark, Senior Managing Director and President of Search, Gladstone Group
When Your Firm Outgrows Its People
There’s a conversation I have constantly with founders and CEOs across the wealth management space. The firm is growing, revenue is up, and AUM is climbing past the billion-dollar mark. Things look great on paper. So why does growth feel harder than it used to?
Nine times out of ten, the answer is talent.
The people who built the firm to where it is today are not necessarily the right people to take it to the next level, and most founders are reluctant to say that out loud. I’ve been doing executive search in this industry for multiple decades and through many different markets. The talent problem at scaling firms is one of the most consistent patterns I’ve ever seen. The good news is that it’s also solvable, if you’re willing to address it honestly.
The Growth Ceiling We Need To Get Honest About
Picture a $300 million AUM firm. There’s an owner-founder, two or three key employees who’ve been there since the beginning, and a tight operation that runs on trust and shared history. That team got the firm to $300 million, and that’s no small thing.
Now picture that same firm at $800 million, a billion, $1.2 billion. The complexity of the business has grown dramatically. Compliance demands are heavier. Technology decisions are more consequential. Client service expectations have risen. For the first time in the firm’s history, there may be a genuine need for a Chief Operating Officer, a Chief Marketing Officer, a Head of Technology, or a Head of Operations—roles that didn’t exist and weren’t needed when the firm was smaller.
The people who were exceptional at $300 million don’t always have the skill set that can scale with the business to $1.2 billion or beyond. That’s not a character flaw. It’s just a reality of organizational growth, and most founders underestimate how much the job changes between those two points.
The other thing I consistently see is founder-concentration risk. When the owner is personally managing the majority of client relationships, they become the bottleneck. Every hour spent on client service is an hour not spent on growth strategy, leadership development, or running the business. Making the right senior hire to build out the client service model doesn’t just free up the founder’s time. It actually makes the firm more valuable by reducing owner dependency, a factor that buyers and acquirers scrutinize closely.
The Real Cost of Getting It Wrong
The instinct for most founders is to promote internally or make a hire quickly because the need is urgent. That instinct is understandable. It can also be expensive.
We’ve had a saying at Gladstone for as long as I can remember: hire hard to manage easy. Front-loading the rigor into the search and assessment process is almost always worth it, because the alternative is a bad hire, and bad hires in owner-led firms are extraordinarily costly.
The U.S. Department of Labor estimates that a bad hire can cost a company at least 30% of that employee’s first-year salary. SHRM puts the replacement cost even higher, ranging from 50% to 200% of annual salary, depending on seniority. A separate analysis by Leadership IQ found that 46% of newly hired employees fail within the first 18 months. These are not abstractions. In a firm with 15 or 20 people, a bad senior hire doesn’t just cost money. It runs a real risk of disrupting culture, straining team dynamics, and triggering the departure of people you can’t afford to lose. Larger firms can absorb that. Smaller and mid-sized owner-led organizations cannot.
The Aggregator Problem
The talent challenge intensifies considerably for PE-backed aggregators, and that’s a segment I focus on. These firms are acquiring businesses at scale across dozens of locations, often simultaneously. There is rarely a national HR team with recruiting experience equipped to run thorough, market-fluent searches simultaneously in McLean, Virginia; Austin, Texas; and Orlando, Florida.
What I see more often than not is that the internal talent acquisition function at these firms is staffed by HR professionals who’ve come from industries outside of wealth management. They’re skilled at managing internal processes, but they often don’t have the network depth or industry fluency to go over the wall and find the right candidates, especially for specialized roles.
Executive compensation for senior RIA roles has increased 20 to 30% year-over-year, and top talent is increasingly scarce and expensive. That environment rewards firms with dedicated search partners who understand the platform, can communicate the culture, and have the relationships to reach candidates who aren’t actively looking.
What “Right Fit” Actually Means
There’s a tendency in this industry to treat a senior hire as a job description problem. The goal becomes filling the role as quickly as possible, so the pain goes away. Experienced search practitioners approach it very differently.
The questions that actually matter aren’t found on a resume. They’re found in how someone describes the worst hire they ever made. They’re found in how someone answers when you ask who had the biggest impact on their life as a leader. They’re found in what their calendar looks like on a Tuesday afternoon in February, when no one is watching, and there’s no pressure to perform.
According to Schwab Advisor Services, two of the top five strategic priorities for RIA firms are talent-related. It’s not just recruiting new talent, but developing and retaining the talent already in the firm. That’s a significant statement about where the industry is placing its attention, and it aligns exactly with what we see in the firms that are growing most effectively.
The firms that treat hiring as a strategic function rather than a reactive one consistently outperform those that don’t. The difference isn’t always visible in the short term. It shows up two or three years later, when the right people are in the right roles, the founder is running the business instead of running client meetings, and the growth curve is sustainable rather than fragile.
The Takeaway
If your firm is approaching or has crossed the billion-dollar mark, it is worth asking honestly whether the team around you was built for the firm you have today or the firm you’re trying to build. Loyalty matters. Tenure matters. Experience matters. So does the skill set required to operate at the next level of complexity, and those things are not always the same person.
The firms that figure this out early, before the growth stalls and the founder burns out, are the ones that come out the other side with something genuinely durable.
That’s a conversation worth having sooner rather than later.
To learn more about our thorough talent search process for firms like yours, schedule a time to talk with our team.
Steven Clark is the Senior Managing Director and President of Search at Gladstone Group. He has conducted hundreds of high-impact executive searches across the wealth and investment management industry, ranging from closely held RIA’s to global asset managers.