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