Many people don’t know this (guess they will now), but in my early 20s I was diagnosed with a serious “woman” issue. I went to see a world-renowned fertility doctor in Omaha, Neb. That doctor, for me and for my future, was nothing less than an angel. What has always stuck in my mind about his practice was that when I visited his office he didn’t have any of his myriad diplomas or honors up on his walls—anywhere. Instead, all along the lengthy hallway from the reception area back to the examining rooms were hundreds and hundreds of photographs of mothers and families with the children that he and his team had made possible. Thinking about it still brings tears to my eyes. A nurse told me: “This wall is a constant reminder of why I come to work every day.”
I thought about that wall again, recently, as I’ve been summarizing everything I’ve learned over the years about what makes advisory firms great. One of the key things about great firms is that the owners and their employees have passion for what they do. The good news is that virtually every independent advisor I’ve ever met has passion to provide his or her clients with the best financial care possible. They fully understand the importance and the responsibility of what they do for their clients, and their clients’ dependents: That children and grandchildren will go to college, the sick will get the health care they need, the elderly will get nursing care, and clients will live and retire with peace of mind, all because of what their advisor has helped them to do.
Unfortunately though, as good as most independent advisors are at taking care of their clients, in my experience they are equally bad at communicating and transferring their passion to their employees. In fact, the ability to instill their sense of passion for what they do in their employees is one of the keys to creating great practices. Because, without passion, employees will never be great, and great employees make great advisory firms.
One of the biggest challenges that independent advisors have today is that the vast majority of firm owners were never employees in an independent advisory firm themselves. Most of the time they were stockbrokers, insurance agents, or accountants who, because of their passion for their clients, decided to make the leap to creating their own independent firm. They have no idea what it is like working in their firm, and working for someone else in an independent firm.
Consequently, owner/advisors tend to make assumptions about what working in their firms is like. For instance, firm owners typically assume that their employees will automatically have passion for their jobs and expect their employees to have that passion. What they don’t understand is that coming to work everyday in your own firm, working with your own clients, and seeing the tangible results of the advice you give are all easy things to have passion about.
On the other hand, coming to work in someone else’s firm, having little or no direct contact with the clients, and infrequently or never seeing the results of what you do is a lot harder to feel passionate about. Instilling passion in firm employees requires a concerted effort on the part of owner/advisors.
Most owner/advisors’ solution for a lack of passion in their staff is to try to hire passionate people. This is another example of the “hire great employees” syndrome that I’ve written about before. It is doomed to failure for two reasons. First, it’s very hard to spot passionate employees in the screening and interviewing process. Everyone knows that you want to appear passionate and motivated in a job interview, so almost everyone does. In my experience, that rarely carries over for the long term once the job is offered and accepted.
One group of prospective employees that you can count on to be passionate is young advisors fresh out of university financial planning programs. Most of them started out in business school or accounting programs, and migrated to financial planning because they were attracted to the idea of helping real people and real clients—even though planning programs have less prestige on campus.
Here comes hiring failure No. 2: In my own tracking of the people I went to financial planning school with, and the many young planners I’ve met and stayed in contact with over the past 11 years, over 40% are no longer in the financial industry. “That’s because most of them went to work for brokerage firms or other non-client-centered financial institutions,” I hear you say. In the old days, that might have been true, but in my generation over half of the college graduates went straight to independent advisory firms.