Diamonds in the Rough: Reorganizing the Org Chart

I got an email the other day from an owner-advisor looking for help training an associate advisor to work directly with clients. Like many younger advisors, the employee didn’t know the firm’s planning software very well, but he knew how to create a financial plan and screen for investments that fit into individually designed investment portfolios. The problem was that he didn’t have any experience working with clients, but he didn’t have time to sit in client meetings. It’s a Catch-22 that prevents younger advisors from getting the training they need to become lead advisors, and keeps owner-advisors from increasing the client capacity of their firms and transitioning their firms internally.

My clients wrestle with the problem of training young advisors for face-to-face meetings with clients and learning the essential component of talking with the clients. We’ve used the traditional structure of a lead or senior advisor supported by one or two associate advisors who do much of the back-office work (see Figure 1). Yet, without a program for training the associates to work directly with clients, we were using the same illogical plan as the rest of the industry: hire a lot of associates and hope that one of them will be a super star and miraculously be able to work with clients.

So, a few years ago my research team and I set out to find a solution. The result is a rather radical reorganization of the traditional advisory firm’s organization chart into what we call “diamond teams,” which, to our surprise, turned out to be much more than a new organizational strategy: Diamond teams created a clear career path for young advisors, a succession plan for lead advisors and an exit strategy for owner-advisors. They have ended recruiting problems for our client firms, tied clients more directly to the firm and have significantly boosted firm productivity.

The concept of diamond teams is simple. Imagine a baseball diamond: On second base is a senior advisor, who is usually the firm owner or a partner; on first and third bases are lead advisors; and at the bottom of the diamond at home plate is a younger associate advisor (See Figure 2). This team is responsible for a group of clients, or in the case of a smaller firm, all the firm’s clients. The senior advisor works directly with the most important clients, usually around 20% of the group’s top clients, which frees the rest of his or her time for bringing in new clients and managing the firm. The rest of the team’s clients are then split between two lead advisors.

One of the unintended consequences of the diamond team structure is that it tends to encourage specialization among the lead and senior advisors. For instance, one may focus on financial planning while the other creates and manages the investment portfolios.

Most owner-advisors are easily sold on this structure at first. The resistance usually comes with the final piece: the role of the associate advisor at the bottom of the diamond, which ironically is the key to making the diamond teams work. Remember that the diamond structure was originally conceived as a solution for training young advisors to work with clients. We’ve found that the best way for them to get this training is to make their primary responsibility (80% of their time) to sit in all client meetings and take notes. In addition, they are responsible for any follow-up work (20% of their time) from those meetings, such as changes to client information or rescheduling appointments.

Yes, you read that right: For at least the first couple of years after younger advisors join the firm, they’ll essentially be getting paid to sit in client meetings all day and take notes. You can see why we might get a little pushback about this strategy. Most owner-advisors are looking for new associate advisors to leverage themselves and other lead advisors to work with more clients and bring in more revenue. In the long run, though, that’s a shortsighted plan: As we’ve seen in the example above, in our client work and in virtually very advisory firm in the country, it’s really a dead-end job for young advisors, who find it very difficult to move into a lead advisor role because they have learned nothing about speaking to and working with clients.