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Practice Management > Building Your Business

Dilemma for Advisory Firm Owners: A Long-Time Employee No Longer Fits

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One of the hardest employee issues that I deal with involves long-time employees when advisory firms grow. Often one of the first employees—or even the first employee—that an advisor had, these people can have a very hard time adapting to radical changes in “their” firm, and their role in it, as the business gets larger. That can make for some very tough decisions for the owner/advisor.

Of course, it’s not as if startup independent practices suddenly become Fortune 500 companies; even the largest advisory firms are still considered “small” businesses. Still, viewed from a “first employee’s” perspective, the changes to their situation can be quite dramatic. As the first, and only, employee of an advisor launching his or her own practice, an administrative assistant or bookkeeper or office manager usually plays a crucial role in the success of an advisory practice. Wearing many hats—from receptionist to trading to handholding clients—doing whatever it takes and working long hours, the employee often works alongside the advisor/owner to launch the firm and make it work.

It’s no surprise, then, that these employees can feel a keen sense of “ownership” in the firm they helped build, and an even greater friendship with the advisor and their families with whom they’ve worked alongside for 10, 15 or even 20 years. Imagine their reaction as the firm prospers and grows, adding new staff, junior advisors, larger offices and sophisticated technology. Not only is their interaction with the owner/advisor often greatly reduced, but instead of being the “key” employee, quite often they suddenly find themselves to be among the least qualified on a staff of young professionals and specialists. Their role within the firm can, and usually must, change—but these employees can become quite unhappy, and even resentful, about it.

There’s no easy solution for these very common situations. Often we move long-time employees into office manager or client relationship manager positions, and some of them even study to become paraplanners or CFPs themselves.  But this is rare and even these “happy” outcomes usually involve a period of adjustment for the employee, to adapt to a new role in what’s become a very different firm. Very often, while they’re happy for the advisor’s success and proud of the role they played in it, in their hearts, they liked things much better the old way.

Unfortunately, all too often, their resentment and resistance to change can translate into an increasingly bad attitude that can affect the whole firm. That’s when a firm owner has to make some very tough choices. I’ve had cases where we bent over backward trying to make long-time employees happy in the “new” firm; giving them different positions, allowing them greater flexibility

such as working from home, and increasing their compensation (usually beyond reasonable ranges, out of the owner’s sense of loyalty, and often, guilt). Sometimes these measures can work, but in the vast majority of cases, it doesn’t.

It’s a hard truth, but it also seems to be a reality of growing a business: when an employee either can’t, or more often won’t, grow with the business, at some point, they no longer have a place in it. This is by far the hardest decision that most owner/advisors face, and I’ve seen more firms than I can count go through years of turmoil because owners couldn’t bring themselves to take action. In the end, though, nobody likes to be in unhappy situation, and both the employee and the firm are much better off when they each move on—sometimes even and unfortunately at the cost of a frienship. Of course, this problem doesn’t even begin to compare to the times when the employee in question is also the advisor’s spouse—but we’ll save that can of worms for another time.


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