Philip Palaveev gets around. He is CEO of The Ensemble Practice consulting firm for wealth management companies, and founder of the G2 Leadership Institute that provides group leadership training for next generation – the “G2” generation – future partners of wealth management firms. In his spare time, he authors the annual analysis and financial metrics collection known as the Adviser Compensation and Staffing Study, is the author of The Ensemble Practice and has recently come out with a new business book for the profession, entitled G2: Building the Next Generation.
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| Philip Palaveev |
His consistent message through all of this activity is that
- the most successful firms have the most talented and competent advisors and support staff; and
- this doesn’t happen by accident. These firms are better at developing the skills of younger advisors and staff members.
Palaveev delivered a very strong keynote address at the recent Insider’s Forum conference in Nashville, TN, telling the audience: “The more I work with some of the largest and most successful firms in the industry, the more I realize that they are nothing more than a team, a team of people who bring their enthusiasm and their talents and observations and personal goals together. An extraordinary firm,” he continued, “is nothing more than a collection of extraordinary energies, and talents, all contributing to a shared vision.”
There were eight key lessons from Palaveev’s presentation that advisory and wealth management firms should heed:
- To build a team of experienced G2 advisors, you have to be willing to hire inexperienced talent and provide the training and experience in-house.
Palaveev told the audience that one of the biggest dysfunctions in the planning space is a reluctance to hire promising young professionals. Why? Because they’re holding out for someone more experienced.
To illustrate why that may not be the best approach, Palaveev recalled his days at the large accounting firm Moss Adams in Seattle. “I can’t tell you how many times we spent seven years looking for someone with five years experience,” he told the audience. “There is a huge shortage of people with experience in our industry,” he added, “which means that if you are waiting for those with experience to make a move, you will be waiting a long, long time.
- Cultivating talent is a joint responsibility between the G2 employees and the firm.
It’s a two-way street. The firm has an obligation to create opportunities for employees to grow and develop into extraordinary professionals, Palaveev said. It should open doors to more responsibility and training, and provide mentorship and attention from the senior staff.
On the other side, the G2 professional has to be willing to walk through those doors, and take responsibility for taking advantage of those opportunities. Later, in addressing the G2 members of the audience, Palaveev recommended that they proactively reach out to people they think would be excellent mentors and ask for some of their time each week for productive hands-on learning.
- The best way to create and define these in-house opportunities is to create a career track for your professional staff.
Why is a career track so important? First of all, it defines what ‘progress’ means in your office. “If you are a G2 advisor, the career track gives you a sense of direction, and some confidence that there is a future for you at the firm,” Palaveev said. “It gives you a sense that you are moving.”
He compared a 40-year career to running the 26.2 miles of a competitive marathon. “If you are running a marathon, it is very important that they put those mile markers out there, because without them, you might wonder, after all that running: am I really moving? Am I making any progress? Is this really going anywhere?” Palaveev told the audience. “And always, at some point in that race, you get very very tired. You start to question yourself. Can I do this?
“When that moment comes,” Palaveev continued, “the next mile marker is going to give you that spark, I’m doing it. I’m at mile 22. I am at mile 23. There is not that much left. I can still keep on going.”
Just as importantly, the career track sets expectations for both the firm and for the G2 member of the team. “Very often we find that younger people get ahead of themselves,” said Palaveev. “Every 25-year-old – and I was one – believes that they should be a partner in three years, or four at the most.”
A career track manages those expectations. It tells your staff members: What is it that you don’t yet know? What skills and knowledge do you need to acquire next to make a move to the next level? “And therefore it helps manage these conversations,” said Palaveev, “where they may be asking: why am I not a partner yet, or why am I not making $600,000 yet? Why is it that I am not working as the primary advisor with clients yet?”
Palaveev then addressed the younger members of the Insider’s Forum audience. “Many people define their success as how quickly they move up the career track,” he said, adding: “but nothing could be further from the truth.”
He told the story of joining a class of 30 newly-installed partners at Moss Adams. “I looked around, some of them were in their 30s, as I was, and some of them were in their 50s. Some of them had been with the firm for 10 years and some of them had been with the firm for as many as 25 years. But,” he added, “they were all, without exception, wonderful people, fantastic professionals, and I realized that we all travel very different paths. Some will run the marathon slowly and some will run fast.”
He returned to the marathon analogy later when addressing the G2 advisors in the audience. “If you run a marathon, the biggest mistake you can make is rush out from the starting line and try to run as fast as you can,” Palaveev told the group. “Pace yourself. Your career can take you a long way, but don’t rush it, because if you rush it, sometimes you have a way of truncating your career.”
- The G2 career track is built on a foundation of technical expertise.
Palaveev defined the different skills that people need to acquire at each stage of their careers, starting with the newly-hired associate planner. “This is the stage where professionals learn the technical aspects of the business,” Palaveev told the audience. “They learn how to use the software, they learn how to manage investments and create portfolios, and how to use the various tools of the trade, how to do research, how to create spreadsheets and answer questions. This is the stage of acquiring knowledge, and it is a very important stage.”
Later, Palaveev said that the technical expertise is what younger advisors will rely on when they take the next step and become lead advisors.
“As an industry, we tend to think of the relationship with the client as a social one,” he explained. “We believe that in order to have a great working relationship with a client, we have to take them boating, and we have to ask them about their kids and know their birth date. But,” he continued, “the way a professional really earns the trust of a client is by demonstrating their technical expertise. They have to present themselves to the client as an expert, as someone who is credible, believable, and the advice they provide is meaningful advice, advice that the client will agree with and benefit from.”
- When training advisors to take a lead advisor role, you have to be willing to let them make potentially costly mistakes.
Palaveev said that people sometimes misrepresent the talent shortage in our profession. They say that there are too few people in the G2 pipeline.
A more accurate statement, in his opinion, is that we are experiencing a severe shortage of lead advisors – defined as planners who are capable of moving beyond the associate, support role and earning the trust and respect of a firm’s clients. They also have to be able to manage the team of people who are serving the client – the operations staff, the associate advisor and the people on the asset management team.
“It is almost like there is a big crack in the pavement at that stage of the marathon,” Palaveev told the group. “You need certain skills and talents that are not there with everybody, and so some people never get past that stage of the race.”
But, he said, many firms make the shortage more acute by never quite trusting their associate advisors to take the lead. Palaveev gave the analogy of a teenager learning to drive a car. You can have teens sit beside you and watch you drive, but they are never actually going to ever learn to drive until you trust them enough to have them sit behind the wheel.
“One of the biggest reasons that we don’t have more lead advisors is because we never give them the keys,” Palaveev told the audience. “Firms are so afraid that they are going to lose a client, or damage a client relationship, that they never assign that responsibility to the associate advisors. They never tell them: you are in charge of this client.”
Instead, he continued, they muddy the waters so that the primary responsibility remains with the founder, and the lead advisor-in-waiting will help out here and there. As a result, when there’s a question or a problem, the client will tend to call the founding advisor. “One of the first things we can do to create more lead advisors is just assign them client relationships,” said Palaveev.
Doesn’t this put valuable client relationships at risk? Of course it does. Palaveev returned to the teen-behind-the-wheel analogy, saying that parents inevitably have to risk having their car scratched a little before the teenager gets the hang of driving. “You could lose a client,” Palaveev admitted. “That is the price of getting more business leverage and experienced talent down the road, and you have to be willing to accept that.”
But here’s the tough question: how do you transfer your credibility – and ultimately the client relationship – to a G2 planner who seems to be ready to take on the lead advisor role? Put another way, how do you start the process of convincing a 60-year-old client to accept advice from a 30-year-old G2 advisor?
Palaveev said that he, himself, faced this question as a young consultant working with Mark Tibergien, who was then managing the Moss Adams Consulting Group. “Mark would bring me to client meetings,” said Palaveev, “and he would always introduce me as: here’s Philip. He’s an expert at financial management. He would always introduce me as someone having expertise that he didn’t have.”
Advisors can do the same thing. Here is Dennis. Dennis specializes in working with dentists, and hey, you are a dentist. Here is Dan; he specializes in working with business owners. And hey, you are a business owner. “Those kinds of introductions, highlighting technical expertise, are really helpful in transferring at least some of the client relationship over to a younger advisor,” said Palaveev.
- Never make the mistake of treating all your employees equally
“Your best people, if they are treated exactly the same as people who are not producing at a high level, will become frustrated and leave, because their excellent contributions are not being recognized or rewarded,” Palaveev told the group. “So if you think that fairness means promoting and rewarding everyone equally, you could end up with a whole team that is just average.”
Palaveev used the analogy of a recreational soccer team he coached when his son was young: the rules stipulated that every child, no matter how skilled or unskilled, would get an equal amount of playing time.
“Every year, we would lose a few players,” he said, “and it was always the best players, who wanted to go to a more advanced league where you earned playing time on merit, where the best players were rewarded with more time on the field.”
Later he added: “When you treat everyone equally, that has the effect of discriminating against the best players on your team.”
Palaveev is not just talking about promotions and bonuses; he is recommending that your top performers be given more opportunities and receive more of your attention and personal mentoring. “The people who are more talented, ambitious and capable are the ones who deserve opportunities first, to work independently with clients, to participate in exciting projects and receive special mentoring, because they’ve earned it,” Palaveev told the audience. “Those who don’t show the energy, who have not yet shown the desire or achieved everything they need to achieve, the answer for them is not: ‘no.’ The answer is ‘not yet.’”
- There are times in an ambitious person’s career when a work-life balance can’t be maintained.
“As G2 develops these skills as lead advisors and business developers, you’re going to start to hear some questions,” Palaveev predicted. I’m working with 100 or 150 clients. I am developing new business for the firm. And on top of that I am leading a team and mentoring advisors. Where do I find the time to do all these things in the 9-to-5 office hours?
“They’re asking you: Do I have time to meet the expectations of a potential partner and still have a life?” Palaveev told the group. “Can they really lead a balanced life if they want to have a successful career?”
Palaveev conceded that the answers to these questions are very difficult. “The only advice I can give the G2 people in the audience is that I think you will find there are periods in your career when you have to work really, really hard,” he said. “If you want to create the kind of opportunities that will drive your career forward, you may have to work on Sundays. You may have to work in the evening. You may have to steer your personal life in directions that help the business.”
- A key skill that every successful advisor has to learn is how to manage him/herself.
Palaveev listed the components of this self-management skill: managing your career and making the most of the opportunities; managing your emotions during difficult times and inevitable disputes; managing your behavior, especially around clients. “In the end,” he said, “this is what makes you a professional.”
At the end of his talk, he said that the finish line of the career marathon is not the offer to become a partner; that is just the beginning of a new career, where you have to play new roles. If the firm has developed its internal talent, then it will eventually have new partners who will be capable of going beyond simply working with clients and bringing in new business. They will also be mentoring and developing the next generation of leaders. They will provide leadership for the staff, and contribute to the ever-evolving collective vision of the firm.
And then Palaveev repeated what he said at the start. “The biggest advantages of the best firms is not their technology; we all use the same technology,” he said. “It is not their marketing budget. It is the quality of their talent. And ultimately, that quality is a product of how good they are at training and developing that talent into leaders of the firm.”
Later, addressing his audience including the founders of many of the leading firms in the profession, he added: “Trust me; there is no better use of your time as a leader and a CEO and managing partner than developing the next group of leaders.”
Bob Veres' Inside Information service is the best practice management, marketing, client service resource for financial services professionals. Check out his blog at: www.bobveres.com.
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