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Is the lead-advisor model outdated?

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 clients. These advisors position themselves as a wise sage 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 originates in the 1800s 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 — egocentricity of the advisor, lack of clear career paths for support staff and reliance on one person who could suddenly disappear from death or incapacity.

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.

Most lead advisors work hard, care about their staff and clients and worry about how to transfer duties to the next generation. However, there is a definite continuum of lead advisors who think others can’t do their 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 work load increases, they hire junior advisors 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 book of business and may be handed the less profitable clients to manage.

mcclanahan-carolyn
Toxic firm cultures deride people for saying they don’t know something or for making mistakes, says Carolyn McClanahan, director of planning at Life Planning Partners.

The junior advisor is often given an additional carrot in 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 the majority 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, their succession plan in ashes. Because they are getting older, their years left in the workforce are numbered and they don’t have a lot of time to regroup.

TRANSITIONING FROM THE GRAND POOBAH MODEL
There is a commonsense fix— move to a true ensemble model. Instead of a junior advisor toiling in the background, make the junior 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.

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.

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 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.

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-year-old financial planning graduate. He came with some experience but was still pretty green. We immersed him into the insurance planning and he is now working directly with clients in this realm, though 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 of the few 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. And, as for our 25-year-old? He is delighted with his significant responsibilities and shares with his cohorts at other firms how big of a role he plays in our practice. They are envious.

It would 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.

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