Avoid a Grand Poobah Trap

If your prac­tice re­volves around a lead ad­vi­sor, you may be headed to big prob­lems. Here’s a way that works much bet­ter.

Financial Planning - - CONTENTS - BY CAROLYN MCCLANAHAN

If your prac­tice fo­cuses on a lead ad­vi­sor, you may be headed for big prob­lems. Here’s an­other way that works much bet­ter.

Most ju­nior ad­vi­sors don’t want to hang around wait­ing for their boss to re­tire. More of­ten than not, a ju­nior ad­vi­sor leaves to start his own prac­tice or goes to an­other firm.

Most fi­nan­cial ad­vi­sory firms, both large and small, have lead ad­vi­sors who man­age client re­la­tion­ships and who are sur­rounded by un­der­lings who help them serve those clients.

Th­ese ad­vi­sors po­si­tion them­selves as wise sages, and most mat­ters con­cern­ing clients must go through them. They are the Grand Poobah within their firm — they run the show.

In gen­eral, a Grand Poobah is some­one who has a worth­less ti­tle and an in­flated sense of self-im­por­tance. (The term orig­i­nated in the 1880s in Gil­bert and Sul­li­van’s comic opera “The Mikado,” although you may re­mem­ber it from Fred and Bar­ney’s se­cret lodge so­ci­ety in “The Flint­stones.”)

Most ad­vi­sors are not like this, yet some struc­ture their prac­tice un­der a lead ad­vi­sor as their busi­ness ma­tures. It’s not the best model. How can you avoid fall­ing in the Grand Poobah trap?

There are a num­ber of prob­lems with this ap­proach: the ego­cen­tric­ity of the ad­vi­sor; a lack of clear ca­reer paths for sup­port staff; and over­re­liance on a sin­gle per­son, who could sud­denly dis­ap­pear be­cause of death or in­ca­pac­ity.

To be sure, many lead ad­vi­sors work hard, care about their em­ploy­ees and clients, and worry about how to trans­fer du­ties to the next gen­er­a­tion.

But there are other lead ad­vi­sors who think oth­ers couldn’t pos­si­bly do the work as well as they can and feel they are not eas­ily re­place­able. Their prac­tice gives them pur­pose and val­i­dates their worth. For some, this evolves into a sense of power and self-im­por­tance. It is not easy to ex­tract one­self from this sit­u­a­tion.

As a lead ad­vi­sor’s work­load in­creases, ju­nior ad­vi­sors are hired to in­crease ca­pac­ity. The ju­nior ad­vi­sor may be in the back­ground for years — run­ning re­ports, re­search­ing client ques­tions, tak­ing meet­ing notes and var­i­ous other du­ties.

Yet, they do not man­age client meet­ings. Over time, they are en­cour­aged to de­velop their own books of busi­ness and they may be handed the less prof­itable clients to man­age.

The ju­nior ad­vi­sor is of­ten given an ad­di­tional car­rot — a vague prom­ise that one day they will take over the

lead ad­vi­sor’s prac­tice. Think about the prob­lem with this. Most ad­vi­sors are hit­ting their stride in their late 40s and early 50s.

They hire an en­er­getic 30-year-old ju­nior ad­vi­sor. That young ad­vi­sor toils be­hind the scene for years. If they are mo­ti­vated and smart, they can learn most of what they need to know to be a lead ad­vi­sor in five to 10 years. Now their boss is 60 and they are 40.

The beauty of the fi­nan­cial plan­ning pro­fes­sion is you can work for a re­ally long time. Most ju­nior ad­vi­sors don’t want to hang around wait­ing for their boss to re­tire. More of­ten than not, the ju­nior ad­vi­sor leaves to start their own prac­tice or go to an­other firm.

Sadly, the Grand Poobah is left in the lurch and their suc­ces­sion plan is in ashes. Their years left in the work­force are num­bered and they don’t have a lot of time to re­group.

An En­sem­ble Model

There is a com­mon-sense an­swer — move to a true en­sem­ble model. In­stead of forc­ing a ju­nior ad­vi­sor to toil in the back­ground, make this ad­vi­sor the lead for a par­tic­u­lar com­po­nent of the client’s fi­nan­cial life.

I started out as a solo prac­ti­tioner. As my prac­tice grew, it was un­set­tling to me that so many peo­ple re­lied only on me for their fi­nan­cial well-be­ing. Life can be pre­car­i­ous.

I also re­al­ized that I loved fi­nan­cial plan­ning but did not en­joy the nuts and bolts of man­ag­ing in­vest­ments. Fi­nally, it was chal­leng­ing to man­age clients alone as my in­volve­ment in lead­er­ship and ed­u­ca­tion blos­somed.

To me, the per­fect an­swer was hir­ing out what I did not en­joy. My first hire was an in­vest­ment man­ager. He did the in­vest­ments and I did the plan­ning. After mak­ing cer­tain that the clients un­der­stood how we worked together and were re­as­sured they would be well cared for, they em­braced this change.

My next hire was an­other fi­nan­cial plan­ner. She per­son­i­fied why younger ad­vi­sors leave firms — for more than a decade she had worked for a lead ad­vi­sor who had no in­ten­tion of quit­ting any time soon.

The beauty of an en­sem­ble ap­proach? There is a deep bench, clients know they have a team they can rely on and it is dif­fi­cult for one per­son to leave and take clients with them.

We cross-trained to cre­ate a con­sis­tent plan­ning process, then she took over the insurance and pro­jec­tion plan­ning for each client. It took about two years to get her fully in­te­grated, but, again, the clients were de­lighted with this ex­pan­sion.

Our most-re­cent hire is a 25-yearold fi­nan­cial plan­ning grad­u­ate. He came with some ex­pe­ri­ence but was still quite green. We im­mersed him in the insurance plan­ning, and he is now work­ing di­rectly with clients in this realm, though he is not yet hav­ing meet­ings on his own.

His cur­rent project is to do all the col­lege plan­ning and he will lead the meet­ings on this sub­ject.

Ad­di­tion­ally, he will do the ed­u­ca­tion for em­ploy­ees hold­ing the 401(k) plans we man­age for our clients with busi­nesses. Our goal is for him to start hav­ing his own meet­ings next month, less than a year after he was hired.

We are all cross-train­ing, so we can fill each other’s roles at the drop of a hat. The beauty of our ap­proach? We have a deep bench, the clients know they have a team they can rely on, and it would be dif­fi­cult for one per­son to leave and take clients with them.

How is this work­ing out for our 25-year-old? He is de­lighted with his sig­nif­i­cant re­spon­si­bil­i­ties and shares the de­tails of is role with his co­horts at other firms. They are en­vi­ous.

It should be easy for firms with the Grand Poobah model to make this change. Once your younger plan­ners can be pre­pared to take over one part of the plan­ning process, an­nounce to your clients that you are go­ing to an en­sem­ble ap­proach and let it run from there.

Your clients will thank you, you’ll re­tain the next gen­er­a­tion and the world won’t fall apart the day you are no longer there for the many who de­pend on what you do. FP

As in sports, cross-train­ing to fill mul­ti­ple roles in an ad­vi­sory firm is a valu­able train­ing tech­nique.

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