When industry experts guide financial advisors figuring out their next move, they sometimes reference insights from business leaders like Steve Jobs or Warren Buffett.
George Orwell offers financial advisors a smart lesson, as his novel Animal Farm summarizes. Spoiler alert for high school English dropouts: Fed up with broken promises and leadership that puts the farm before the animals, the farm animals, led by the pigs, decide to “go independent” and start the farm their utopian.
But over time, the revolution's idealistic vision is eroded by self-interest among the very pigs who led it. The pigs slowly behave more and more like their original human owners. Sadly, the story ends with the farm animals living on their own “independent” farm, indistinguishable from the old regime.
Over the past decade, our industry has seen a similar dynamic at play. Wealth management firms that were originally created to provide freedom and flexibility to financial advisors have increasingly turned to shareholder-first platforms. Advisors now find themselves tied to firms that resemble the wires they fled.
Start with the Founders' Goals
Indeed, talk to any financial advisor who thinks their business is connected to a platform whose owners have different interests. The lament most often heard is, “I wish I had seen the warning signs before I joined.”
What are the most common red flags? Perhaps one of the most important questions an advisor can ask senior executives during home office visits is, “Why does your platform exist in the first place?” If the answers focus on the success of the firm and/or put shareholders ahead of the advisor-client relationship, that should be a red flag. Advisors must be loyal to their clients, and firms must view their advisors the same way they view their clients. My father said it best when I joined him as an advisor: “Put your clients first and success takes care of itself.”
The main danger of man
Another important red flag is when a firm exists to turn all of its financial advisors into a replicable carbon copy—often modeled after an individual or founder whose personal brand is relied upon to be the ideal person. of the adviser. Advisors are special and unique. No two are alike, and that's a good thing. That individual diversity also applies to customers. Diversity in strategy, personality and worldview means customers have choices. Choosing to find an advisor who most closely resembles themselves and their ideals. Forcing all advisors into a mold set by the firm is not in the best interest of clients; is in the best interest of the firm.
The charisma and salesmanship of a specific senior executive or founder can be persuasive. We all remember the promises of the wires after 2008. Promises to be different, only to find ourselves jumping from frying pan to frying pan.
Here's the reality: Whenever a firm's brand and strategy is built around a single individual, there is significant risk of future instability.
This is a serious concern, no matter how well-known a senior executive is or how famous she is throughout the industry.
We must be different now. While leadership is extremely important, it is not everything. Do your due diligence on the broadest platform and strong philosophy. If the leadership wasn't there, ask yourself if the firm is still where you'd like it to be. A good rule of thumb is to ask to meet other advisors at the firm. Do they look and feel like the advisors you would want to connect with?
Culture of Accountability vs. Cult of Personality
Equally important, transition advisors must ensure that the company they join forces with has a culture of accountability. Do councilors have a voice?
The new hybrid firms and RIAs are, in many ways, analogous to America's founding independence. Political party preferences aside, America is special because of its founding principles and its collective citizens, not any individual. Of course, there will always be larger-than-life personalities and great leaders who help carry the torch, but at the end of the day, the US government serves the people… not the other way around. Our people and diverse cultures are what make America great.
Like an electorate that holds its officials accountable, the relationship between a financial advisor and their firm should never be top-down. Financial advisors are obligated to question and challenge leadership, and corporate leadership must provide sufficient tools for advisors to do so.
If there appears to be a cult of personality versus a culture of accountability in an enterprise, financial advisors would do well to look elsewhere for a new home for their business.
An Orwellian warning
These days, independent advisors seem to focus exclusively on factors such as payment, products and technology. Yes, these are important, as are a firm's business model and resources.
But they cannot replace a well-developed, advisor-centric culture supported by a truly institutionalized bench of leaders who see their role as supportive advisors as ambitious entrepreneurs.
In other words; the entire industry suffers when wealth management firms celebrate the firm, their founders and executives over advisors.
Alex Goss is Co-Founder and Co-CEO at NewEdge Advisors and is also a Managing Partner at NewEdge Capital Group