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Practice Management > Building Your Business

Dealing With the Difficult: Employees, Clients, Referrals...

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I’ve written a lot about leadership recently, but it seems like there’s always more to say. I think that’s because leadership is such an important topic for owners of independent advisory businesses, yet their training usually doesn’t tend to offer much help. And these days, with advisory firms growing ever larger, leadership is becoming an increasingly important issue.

The challenge for owner-advisors is also compounded by the fact that many of them come from a sales background, and are usually what’s called “people people.” Those skills are important—if not essential—for launching an independent advisory business, and continuing to attract new clients. But running a growing advisory business requires a very different skill set. 

Now, don’t get me wrong here: as I’ve written before, to be an effective leader, it’s important that people like you—especially the people who work for you. Very few successful organizations of any kind are run by jerks. But to run a successful business, the person at the top has to do more than be likable and respected: they also have to make hard decisions from time to time. And all too often, those hard choices can interfere with one’s “nice guy” image. 

Some business leaders solve this dilemma by having someone else actually run the business and make the difficult choices that a successful business requires. Often these folks are known as “hatchet men,” because they take the tough actions that successful businesses often require. But we don’t see them much in independent advisory firms, because they usually aren’t big enough to warrant another top executive—and because most owner-advisors aren’t comfortable giving up that kind of authority. 

Instead, we work with the owners of our client firms to make the hard decisions that business success sometimes requires. We find that having a clear vision of what their business is now and what they want it to become makes most choices a lot easier. It’s also very helpful to have a process for making decisions: one that includes setting timetables, gathering information, determining who will be involved, how the decision will ultimately be made,and how the results will be monitored and assess. 

But even with a good decision process, firm owners sometimes have difficulty doing what needs to be done. Here’s how we help them work through some of the most common problem areas:

1: Difficult Employees

Clearly the most common management problem that owner-advisors face, problem employees strike right at the heart of their “good guy” image. The inclination of virtually every owner advisor is to try to work with a problem employee and to give them lots of time—and numerous changes—to come around. We find that perspective is key in these situations: a clear picture of how an employee currently is affecting client relationships and service, the morale and performance of other employees, and the goals and plans of the business.

From this perspective the choices and timing usually become clear. Even employees with great potential can become even greater liabilities. And even unhappy employees are usually much better off getting a nudge to look for some place they will be happy. The more senior the employee, the greater the impact on the business, and the quicker a resolution should be found.

2: Difficult Clients

These can be an even stickier problem for some firm owners than difficult employees. Perhaps because they still remember the days when clients were scarce, most advisors have a very difficult time letting go of clients, no matter how many problems they create. We find putting problem clients into the same perspective that we use for problem employees can be very helpful.

This is more than just a cost/benefit analysis because it’s often hard to put a number on the real costs of a constantly difficult client on advisor and employee workload, morale and ability to service other clients. But when it becomes clear a client is having a noticeable effect on a firm, it’s time to let them go. 

3: Difficult Referrals

Referrals are always a tough issue for advisory firms. I’m talking about referrals of friends and family from existing clients (particularly very good clients), who really don’t fit your service model or target clientele. There is no clear answer on this one. It usually boils down to just how important a client the referrer is. But what’s often overlooked is the other side of that equation. How much of problem will the new client be? Often they’re really just too small. And happily, the new digital advisory platforms that many custodians and BDs now offer can greatly reduce the impact of these smaller clients.

The bigger problem is when the referral has complex finances that require the addition of a major new service or two. That’s the point where we advise our firm owners to draw the line—unless of course the referral comes from a really, really, really good client.

4: Difficult Strategic Partners and Vendors

This is one of the biggest issues we come across. Because firm owners tend to be people people, they tend to form attachments not just with their employees and clients but with other folks their firms work with as well. That’s especially the case if those relationships go back a while—like to the launch of their business. But as advisory businesses grow, so do their needs: for technology, for back office, for client services, and for marketing. And usually they outgrow some of the firms that helped them get their start.

Sometimes our client firms can find a way to maintain the business relationship while getting their needs met elsewhere. But usually that’s not a very good idea for the business. 

I’m not saying that to grow an independent advisory business owner has to become a bad person. But he/she will have to make tough choice that sometimes affect other people. We think it’s important for advisory firm owners to have a clear vision of where they want their business to go—and what it’s going to take to get there. Sometimes, growth just isn’t that important to them.

But if it is, then they are going to have do the things that make growth happen. Or, if they can’t, bring in someone who can.


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