3 types of social capital behind financial advisor success

Small- and mid-cap stock investing legend John Rogers, who also launched the first Black-owned mutual fund firm, isn’t resting on his laurels. 

Processing Content

As the co-CEO of Ariel Investments, managing more than $16 billion in client assets alongside Mellody Hobson, Rogers is only thinking bigger about the firm he started in Chicago in 1983 at the age of 24. He shared his thoughts with an audience of hundreds of financial advisors, insurance agents and other industry professionals during a fireside chat at the annual Conference of African American Financial Professionals held this week in Chicago by The American College of Financial Services. 

“Most of the time, I spend my time thinking about how we’re so much smaller than we need to be — and we are a small money manager compared to Fidelity and Vanguard and T. Rowe Price and all the big, big guys — so, I’m cognizant of, we’re just scratching the surface of where we should be,” Rogers said. 

Having been a member of the board of insurance firm Aon for 18 years, Rogers recalled what it was like to have a “front-row seat” as founder Pat Ryan built the multibillion-dollar company. The experience left Rogers questioning his own trajectory and wondering why he hadn’t yet replicated that level of success. 

“So, most of the time, I’m thinking about how much harder we need to work, how much more there is to do to build the kind of business that we think is possible,” he said, adding that he and Hobson share a commitment to building a multigenerational legacy.

READ MORE: As PE crowds out RIA buyers, here’s what sellers need to know 

Create a productive culture

While Ariel’s large scale likely surpasses the potential size of most advisory practices, Rogers and other conference speakers shared lessons about the power of strong recruiting and retention and the referral networks that apply to a wealth management business at any level. Specifically, Rogers cited “overcoming the challenges of keeping a talented team in place” as a critically important goal for any entrepreneur. Equity compensation for employees and “giving people opportunities to build their own parts of the firm and be proud of that” have helped fuel his company’s success over the past 42 years, Rogers said.  

“There are lots of challenges as an entrepreneur,” he said. “And we all know, in the beginning, all of us, everyone knows what it’s like to try to start a small business. Getting talented people to come and join you is the hardest part, and then getting really good people to come and stay, trying to create a culture where people like Mellody stayed for 35 years, is something that is, I think, an important part of overcoming challenges.” 

Tap non-financial networks and other communities

Most advisors, however, will never reach the point of hiring a team the size of Rogers’ firm, which has 128 employees and, in addition to the Chicago HQ, offices in New York and San Francisco. Advisors who want to grow need to first identify and convert a client base that is large enough to sustain their business in a competitive industry.

For James Dean, founder and CEO of Greensboro, North Carolina-based advisory practice JD Financial Group, that process began by sending “a handwritten letter to every successful person” in two counties around his business, he said in a breakout session at the CAAFP event. 

“I didn’t go as a financial advisor,” Dean said. “I went as an entrepreneur. I said, ‘Hey, you’ve been successful building a practice, whether it’s an attorney, a CPA, whether it’s a general contractor, you’ve been successful. When you look at success, there’s a transferable skill there. I would love 15, 20 minutes to just talk, for you to impress upon me some ideas,’ whether I got them as a client or not. They knew at that point in time what I was doing, and that’s how you start building your social capital.”

Dean suggested advisors consider their professional backgrounds, hobbies, intellectual interests or any other characteristic that could connect them to people. For example, he mentioned one advisor who came into the field after working as a nurse and successfully cultivated relationships among medical professionals. But he challenged advisors to think more deeply about non-financial topics as fruitful subjects for podcasts or the foundation for social relationships that could unlock access to larger groups of people with similar interests. 

While he said the industry must better support Black advisors, who are underrepresented in the field, and market toward Black clients, Dean stressed that social capital should extend to other prospective customer groups as well.

“What I don’t want us to do is get to a place where we’re not creating strategic partners that go beyond our community,” Dean said. “And what I will tell you is, this is the best time right now in your local community to be building partnerships with people that don’t look like you, and that’s challenging. But we have to do it.”  

READ MORE: Why the book-an-appointment tab is high-stakes for financial advisors 

Forge relationships with mentors and sponsors

Advisors can also build social capital by forging connections within industry mentors who provide guidance and sponsors who offer employment and business opportunities. 

For Rogers, those figures included Stacy Adams, who mentored him at a young age and was the first African American stockbroker in Chicago; Ebony and Jet media mogul John Johnson; and George Johnson, the first African American public company founder.

“I had these two literal giants that were here on the South Side of Chicago that I had a chance to rub shoulders with and get inspired by,” Rogers said. “And so I said, ‘Jeez, if they could build their businesses in publishing and hair care, maybe I could do the same thing in the money management and mutual fund business.'”

That message resonated with Rogers’ interviewer in the keynote, George Nichols, CEO of The American College. With aspiring professionals in the audience alongside veterans who have decades in the field, the relationships provide value in each direction, he said.

“We talk a lot about the importance of role models and mentors and sponsors, and I hope that you, as an audience, hear what he just said about having people that you can look at that inspire you and then can take you to the places you want to go,” Nichols said. “There are people looking at you, and you’re going to inspire them, and so it’s really important that we see both sides of that.”