We’ve all heard the old saying about two being company, while three, not so much. Usually, this refers to love triangles where an extra person can put a damper on the proceedings (I know what you’re thinking, but let’s not even go there). But “triangles” can also create problems in other areas of life—including business situations. In fact, we find that the traditional structure of most independent advisory firms includes triangular relationships that invite friction between advisors.
Psychologists tell us that sometimes “triangles” (situations that involved three people) can be beneficial: when the third person is a disinterested party—such as a therapist—who provides an impartial perspective that can decrease the tension between the other two parties. But in real life, outside of counseling, “helpful” triangles are rare. Instead, what usually happens in situations that include three people is that two of them form a stronger bond, which often makes the third person feel left out, and sometimes ganged up on. Consequently, these triangles do not end up as happy, stable or productive relationships.
How does this apply to advisory firms? In the “traditional” structure that has emerged in the independent world, three advisors working together has become way more of the norm than the exception. Often, it’s two associate advisors working for a lead or senior advisor, but we’ve also seen two lead advisors working for a senior advisor, or even a lead and an associate working for a senior advisor (typically the firm owner). We’ve even seen cases where the two junior advisors form an “alliance” against the firm owner (which, as you might imagine, never ends well).
Regardless of the titles or the experience of the advisors involved, in our experience, more often than not, these structural triangles lead to trouble. Usually, the more senior advisor forms a stronger bond with one of the other advisors: valuing their option more highly, giving them more desirable jobs or assignments, and/or paying them more, or promoting them faster. Or at least, this is how the “left out” advisor often perceives the situation. You don’t have to be a Michael Gerber to see where this will lead. We believe that these triangles are a key reason why professional turnover is so high at many firms, especially among young advisors—and consequently, why so many firms have a hard time growing.