Held Back by the Past

The founders of the most suc­cess­ful ad­vi­sory firms won’t change be­cause of an “in­vis­i­ble scar” from their early years of prac­tice, Bob Veres says.

Financial Planning - - CONTENT - By Bob Veres

The founders of the most suc­cess­ful ad­vi­sory firms won’t change be­cause of an “in­vis­i­ble scar” from their early years of prac­tice.

I’VE OF­TEN LAMENTED THAT THE found­ing gen­er­a­tion of plan­ners is hold­ing back progress.

This is sur­pris­ing since this was the group who, back in the 1970s through the 1990s, led a sur­pris­ingly ef­fec­tive rev­o­lu­tion against a pow­er­ful in­dus­try whose mind­set was to sell prod­ucts with­out eval­u­at­ing its cus­tomers’ needs.

Whether they in­tended it, most of th­ese then-young, ide­al­is­tic ad­vi­sors wound up found­ing a new pro­fes­sion. It de­vel­oped its own body of knowl­edge, fo­cused ex­per­tise and ethos that is loosely de­fined by the fidu­ciary con­cept.


Ev­ery­where you look, younger ad­vi­sors now want to take the rev­o­lu­tion through its next log­i­cal steps and re­move all ves­tiges of the sales model.

They want to change their firms’ rev­enue model from as­sets un­der man­age­ment (which, to some of us, still looks an aw­ful lot like trail com­mis­sions) to a fee struc­ture that di­rectly aligns the com­pen­sa­tion charged with ser­vices and value.

They also want to em­brace the new­est tech­nol­ogy, like au­to­mated on­line port­fo­lio re­bal­anc­ing, re­port­ing and tax-loss har­vest­ing. Th­ese younger ad­vi­sors are look­ing for per­mis­sion to com­mu­ni­cate with clients via Skype and so­cial me­dia.

And, (most im­por­tantly, I think) they want to ex­pand their firms’ ser­vices beyond clients with sig­nif­i­cant as­sets and fi­nally bring the ben­e­fits of fi­nan­cial plan­ning to the rest of the pop­u­lace.


Older ad­vi­sors are re­sist­ing. The in­ter­est­ing ques­tion is why?

To un­der­stand what is go­ing on, have a drink or two with found­ing mem­bers of the pro­fes­sion and get them talk­ing about the early days of their ad­vi­sory busi­nesses. Chances are you will hear some ver­sion of this story:

I started my busi­ness on a leap of faith be­cause I wanted to work solely on be­half of my clients — not for the firm and not for my own self-in­ter­ests. I thought, be­cause I per­son­ally knew the dif­fer­ence be­tween the ser­vices and ad­vice I would pro­vide, ver­sus the self-in­ter­ested ser­vices and ad­vice that bro­kers would pro­vide, that peo­ple would flock to my door.

Peo­ple didn’t flock to my door — at least, not im­me­di­ately.

In fact, it took me years be­fore I was even able to take a salary. For the first cou­ple of years, my re­cep­tion­ist made more than I did. I hon­estly thought my new ven­ture was go­ing to go un­der.

This was fol­lowed by three to five more tough years where I barely eked out a liv­ing. I was ter­ri­fied that I had made a ter­ri­ble de­ci­sion, that I would have wasted my money

To un­der­stand what’s go­ing on, have a drink or two with found­ing mem­bers of the pro­fes­sion.

and al­most a decade of my life on an ide­al­is­tic whim.

And then, for rea­sons I still don’t to­tally un­der­stand, things turned around. My clients got richer and my an­nual fees went up ac­cord­ingly. More peo­ple found their way to my door. I al­most couldn’t han­dle all the busi­ness that was com­ing in, and I had to in­vest, and in­vest, and in­vest again, and that was scary.

But now I’m do­ing re­ally well, the firm is do­ing well — and … Why are you ask­ing me about this?


This is the Pi­o­neer’s Story. I sus­pect it is a ver­sion of the tribu­la­tions that the first hardy Amer­i­can pioneers ex­pe­ri­enced when they mi­grated from the safety of the eastern cities to the open lands to the West, built their homes with their bare hands and hoped that the land would pro­vide them with enough food to sur­vive.

It’s easy for us to look back and imag­ine that, since ev­ery­thing turned out all right in the end, some­how those pioneers must have had con­fi­dence all along.

They didn’t, and nei­ther did the fore­run­ner of the in­de­pen­dent fi­nan­cial plan­ning pro­fes­sion, whose leap of faith was com­pa­ra­bly brave.


As we look at the dy­nam­ics of the pro­fes­sion, it’s im­por­tant to re­al­ize that those early years of ter­ror left an in­vis­i­ble scar on the founders of ad­vi­sory firms.

They won’t talk about it, but they live in silent fear that they are one or two bad busi­ness de­ci­sions from be­ing trans­ported back to the pi­o­neer­ing days.

It’s a place where the clients are un­fa­mil­iar, where they’re not sure of the vi­a­bil­ity of their busi­ness model, where change is com­ing at them fast but cer­tainty is in des­per­ately short sup­ply.

This is the dy­namic that causes many found­ing ad­vi­sors to re­sist the rapid change de­manded by the mar­ket­place.

It’s why they are re­luc­tant to en­cour­age younger ad­vi­sors who see op­por­tu­nity ev­ery­where they look.

The hid­den trauma in the Pi­o­neer’s Story, the fear of risk­ing it all and giv­ing up hard­won com­fort and cer­tainty, is some­thing our pro­fes­sion’s younger as­so­ci­ates must rec­og­nize and ac­com­mo­date if they’re go­ing to drive their firms’ wagon train into the pro­fes­sional fu­ture.


Ac­com­mo­date how? Those re­luc­tant found­ing ad­vi­sors will re­spond more fa­vor­ably to change if they see, clearly, that th­ese rec­om­men­da­tions will not up­root them. New pioneers should start with a busi­ness plan that lays out, in writ­ing, the op­por­tu­ni­ties and the risks.

It would be help­ful if:

1) The busi­ness plan clearly out­lines how the op­por­tu­ni­ties vis­i­bly out­weigh the risks; and

2) There is some re­as­sur­ance that the firm won’t be plunged back into un­prof­itabil­ity in the in­terim.

I hap­pen to think that the in­stinc­tive op­po­si­tion to change is an ir­ra­tional, emo­tional re­ac­tion, and un­pleas­ant mem­o­ries block ad­vi­sors from con­sid­er­ing even the most care­fully planned pro­pos­als.

If plan­ners would rec­og­nize that the scars in­flicted by the pi­o­neer­ing days are still af­fect­ing their de­ci­sions to­day, and see that they’re safely on the other side, they might be able to move for­ward.


And if their younger co­horts would ac­knowl­edge how their men­tors are still haunted, they’d be more likely to get the go-ahead to cre­ate the firms they’d want to in­herit some years down the road.

Mean­while, if those fears aren’t ad­dressed ef­fec­tively, younger ad­vi­sors will be forced to go out on their own and build the pro­fes­sion of the fu­ture.

Then they will get a chance to learn first­hand how hard it is to live like a pi­o­neer.

If younger ad­vi­sors would ac­knowl­edge how their men­tors are still haunted, they’d be more likely to get the go-ahead to cre­ate the firms they’d want to in­herit.

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