One of my advisor clients had a problem. Her part-time accountant was very diligent, rigidly paying all the firm's bills on time, and everyone in the firm knew it. But when it came to paying the employee bonuses, he paid late: sometimes a month late, sometimes more. She'd get calls from the employees: "When are we going to get our bonuses?
Can you find out?" It really bothered the employees, and was affecting morale.
Simple problem, right? Have a chat with the accountant to find out if there's reasonable explanation. If there isn't, tell him to pay the employees on time, and if he still pays late, find a new accountant. Except this problem wasn't so simple, because (you probably guessed it) the accountant was the advisor/owner's husband. For whatever reason, she just couldn't have that conversation. To her credit, my client realized she had a serious problem here, so she solved it by explaining to her husband that because the practice had grown, she needed to get a full-time accountant.
In my experience one of the stickiest--and most common--sources of problems in advisory practices comes from hiring advisors' spouses. I understand from my business management experience that in small businesses--such as most independent advisory practices--there are myriad reasons that make employing your spouse attractive. Those reasons range from simple economics, to creating a lifestyle that's conveniently flexible for the couple, to enabling your spouse to better understand--and appreciate--what you do. However, (dare I say it), a spouse in an advisory practice almost always results in more problems than it solves--employee morale issues, control issues, and lifestyle issues. But if you just have to do it, here are some suggestions that can smooth out the inevitable bumps in the road.
The Trouble With, and Benefits of, Spouses
The biggest source of problems that occur when advisors hire their spouses is that the owner can no longer act unilaterally. (Actually, the biggest problem is divorce, but I'll just let you work out the potential endgames on that one.) As I've written before, to run a successful firm owners need to act like owners. But once you bring your spouse into your business, you've introduced relationship politics into office politics, and the results usually aren't attractive.
There are essentially three ways a spouse can be introduced into an advisory practice: When two amorous advisors merge their practices; when a spouse works with his/her advisor wife/husband to start up a practice; and when a spouse is hired into an existing practice. Let's start with mergers, because that's by far the easiest and one of the most successful ways for spouses to work together. The financial planning world is filled with high profile examples of already successful advisors who have merged their practices and their lives together--Harold Evensky and Deena Katz come immediately to mind.
These working relationships are successful (at least from a business standpoint) largely because as partners in the firm, both spouses naturally share input into the workings of the business. But if you're contemplating such a move, keep in mind that when you add a new boss, the culture of a firm is going to change, as well as the personal dynamics. All of your existing employees may not fit into the new firm culture, and because it's not the firm they hired into, some of them might not want to stay.
The other structure--also common and often successful--is when one spouse works for the other advisor/spouse to start up their firm. In this arrangement the couple are essentially partners from the get-go. As the firm grows and adds employees, the non-advisor spouse typically serves as office/business manager/bookkeeper/receptionist. That position is rarely resented or challenged by employees because of the spouse's experience with the firm, and their de facto ownership interest.
As these firms grow, both in size and in complexity (especially in technology) the business can outgrow the abilities and/or expertise of the non-advisor spouse. At that point, both spouses need to decide how important a larger firm is to their long-term goals. It's my observation that many non-advisory spouses are more than happy to make their exit just as soon as the firm can afford to replace them with more qualified professionals.
Late to the Game
That leaves us with the "late entry" spouses, which typically fall into three categories.
First are "lifestyle" spouses, who have a lower-paying but more corporate job than the advisor but who are brought into the firm primarily to give the couple greater lifestyle flexibility: longer or more frequent vacations, shorter working hours, flex time, and/or shorter work-weeks.
Because the motivation for hiring the spouse isn't really for the good of the business, his or her employment often isn't good for the business. I know, I know, there are plenty of exceptions. But the simple fact is that "finding something for your spouse to do in the firm" for which your spouse has no experience or training is just setting your spouse up for failure. It is also somewhat of an insult to your existing employees who take their jobs--and their contributions to the firm--very seriously. Employees often resent "lifestyle" hired employees, and thus start to resent the owner of the firm for making such a hire.
What's more, bringing your spouse in at a level that typically doesn't come with ownership interest can create confusion about who has what authority, about the new change of command, and about workflow and teamwork within the firm.
The second type of late-entry spouse is the professional career-changing spouse, who's either taken early retirement or just wants out of the corporate world. These folks often have great technical skills and training: marketing, management, IT, HR, and/or accounting. If your spouse fits this description, the first question you need to ask yourself is: "Are you hiring your spouse to fill a necessary role in your firm, or is this really just a lifestyle hire?" Then: "Does your spouse's experience and skills really fit the job you have?" If they are over-qualified--which they probably are--they are often bored to unhappiness and forget the little things that become big things, like say, paying bonuses.
And finally, there's the new wife (I don't mean to be sexist, but rarely does a husband fit here), whom the advisors brings into the firm so "she can see--and appreciate--what I do." This case often exacerbates the problems we discussed above because new wives are often less motivated to perform their new jobs, and way more focused on establishing their position as the "wife" of the owner.
Making It Less Bad
So if you're bent on hiring your spouse, how do you at least mitigate these problems? First, ask yourself this question: "If things don't work out, can I honestly say I will be able to fire this person?" Trust me on this: you'll be a lot better off to ask your new wife, old wife, professional wife, and/or retired husband to do whatever she/he can on the home front so you can focus on work, and spend more time on vacation with her/him.
Okay, if that didn't dissuade you, then definitely have THE DISCUSSION, in which you both agree on how exactly this is going to work: kind of a "Me, Advisor/you, employee" sort of thing. Then create a real job description and share it with your staff. But don't be surprised when that goes quietly out the window in the first two weeks, and you then spend your earnings on a marriage and family therapist.
The best advice I can give you at this point is to face up to the realities of the situation. If you hire your spouse, he/she is best served as a partner, with an appropriate role in the firm. When I make this suggestion to clients, I invariably get this response: "Oh, I couldn't make my wife/husband a partner in my firm because my business is the only part of my life where I have control." Well, guess what, my married friends? If you bring your spouse into your firm in any capacity--accountant, file clerk, business manager, or receptionist--you can kiss that "control" thing a long goodbye. Believe me, I know. I am married to a business owner and so is he.
Angela Herbers is a virtual business manager and consultant for independent financial planning firms. She can be reached at firstname.lastname@example.org.