In my previous article (Building leverage in your advice firm: Part 1 – Silos and Staffing), I discussed a number of problems that arise from outdated thinking about how best to progress junior talent in an advisory firm. I advocate bringing your junior talent in to the front office, to collaborate on difficult cases with your best clients, on joint appointments with your senior talent.
Principals sometimes try to validate their decision to get their newest talent on the low end clients with one of the following arguments.
“The money I make on the low end covers the wages of the new recruit.”
This is a classic case of ‘keeping costs low’ thinking versus ‘getting returns on investment’ thinking. New team members represent investments to be maximised firstly and costs to be minimised secondly. I believe there is a serious flaw is someone’s thinking if they pay $50,000 for a new adviser, and then attempt to maximise their return on this new adviser by getting them to work on their low end clients. Running a business is about managing risk and return. Where do you think you will get the best return? From your best clients or from your worse clients?
“But the young ones can’t advise my best clients; there can’t be a 30 year gap between client and adviser for trust to develop.”
What do you think the average age is of these people who are pulling off the private equity deals going around at the moment? Rapport-building, sales, trust-building, and technical skills can be taught. If you provide your junior talent with a learning and development program which involves significant exposure to the most complex clients with the most pressing financial challenges, in conjunction with your senior talent, do you believe they will develop quicker or slower than a new adviser working your low end clients?
“What about the low-end clients? Who looks after them? There are still great opportunities and long term relationships in that client base.”
Great question. The answer to this aligns with the strategic purpose of your firm, and it isn’t for me or anyone else to dictate to you what that should be. You’re in charge of your business and its destiny. Personally, I believe it will be increasingly difficult for small firms to outperform large firms in the management of low end clients.
“But my junior talent isn’t ready to work alongside me with my best clients.”
Think back. Were you ever really ready? I doubt it.
The January 2007 DEXX&R Market Projections Report of our industry predicted growth on growth for the next ten years of 10.48%. To put this in perspective, this growth rate approximates that of China last year, and is higher than India’s. The conclusion I draw from these facts is that we have an industry which will resemble two of the booming world economies for possibly the next ten years. Think about it.
If we continue to hire new talent and expect them to repeat the career that we have, we will become victims of the fast-approaching opportunities that are in front of us. It won’t be the lack of opportunities that hurts us, but rather, our inability to translate the opportunities into value for our clients and thus ourselves. Unless you’re dedicated to being a one-person operation, a massive rethink is necessary regarding how we induct, develop, and lead our new talent to build sustainable, valuable, and profitable advisory firms.
These are the best of times to build an advice-based professional services firm.