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After reviewing episode #2, it sounds like one of the major considerations to help Trent deal with his capacity constraints is to consider hiring a junior partner. There are three primary variables you must consider that can dramatically increase or decrease your margin of error in this process: it must be done at the right time, for the right reason and with the right person.
If all three variables don't align you could be building this new relationship on quicksand. These three variables came to me when I was giving my children counsel on the topic of marriage. I told them if they wanted to have a decent chance of a fulfilling, successful and long-term marriage, they needed to marry the right person, at the right time, for the right reasons. If they were missing any one of these variables their chances of success went down dramatically. Now I understand that there are exceptions to this rule, but because life doesn't give you odds when you make a crazy bet, my recommendation is… don't bet the long shot.
So let's go over these one at a time:
1. At the right time
Forming a team or adding new team member should be a last resort not a first resort. Whenever you add a new person to your life - a spouse, a child, a friend, or a partner - it creates another level of responsibility, challenge and complexity. Make sure that you are where you need to be structurally, systemically and technologically, so that the transition is as smooth and seamless as possible.
• In Trent's case having two full-time assistants for a million-dollar practice should be more than adequate to handle the administrative, operational and client service duties. If it's not, there are other challenges that need to be addressed first such as:
• Do you have a highly systematized and predictable wealth discovery and implementation timeline?
• Have you automated your investment management strategy and tactics, so you aren't " reinventing the wheel" for each client and can batch process your decisions across your entire client base?
• Have you segmented your clients both qualitatively and quantitatively?
• Once those clients are segmented have you stratified your service levels to ensure that the top 30% of your clients are receiving 70% of your time, energy and focus?
• Is the business properly scaled? The basic numbers for a high net worth practice are around 125 relationships per relationship manager on the team.
2. For the right reason
There is a huge misperception that forming a team is the shortest and least painful pathway. This is the classic case of mistaking coincidence to causality. Strong, complementary and committed individuals form strong teams, teaming does not foster strong, complementary or committed individuals. Bringing a functional person into a chaotic and dysfunctional environment rarely ends well. Once again, automate, systematize and streamline the practice and then search for someone that is truly accretive.
3. With the right person
For a relationship to have both synergy and longevity, it must possess two critical components: a common philosophical foundation, combined with a complementary set of talents, skills and experiences.
Let me break this down:
• Common philosophical foundation: The foundation upon which all viable long-term relationships are built is philosophical alignment. Being misaligned philosophically is like building a home on a weak or unstable foundation. Problems can often go unnoticed until the passage of time and the inevitable storms of life reveal those weaknesses, and ultimately bring down the house. Answering important questions like: “
• What's the mission and vision of the business?
• What kind of structure are you going to build the business around - portfolio management, wealth management or life management? Hint: portfolio management is becoming a commodity, wealth management is where you must be and life management is where we are all going.
• What's the client service structure going to look like?
• How will you manage the clients' assets? Hint: this must be highly systematized and automated or it will quickly overwhelm the practice.
• What's your fee structure? Hint: the lower the number, the potentially lower value your client's see in you.
• How will you work with each other's clientele? Hint: there is no yours and mine… there is only our. The former is a strategic alliance while the latter is a team.
• How will you articulate your rationale for forming a team to your clientele? Hint: don't introduce the person introduce their structural capability and how that expands your value to the client.
• What's your compensation model both short-term during the transition and long term as you grow your practice?
These are just a few of the questions that you want to have some very serious and maybe facilitated discussions around. Your ability to collaborate on and resolve these issues right out front is a great early indication of your team's long-term viability.
Complementary skills: Once you have established the common philosophical and architectural framework for your team, you then have to have meaningful discussions around your respective talents and skill sets. Given the breadth and depth of responsibilities and capabilities necessary to deploy a comprehensive wealth management and/or institutional practice, a diverse talent pool is absolutely vital to your long-term success.
• Your team will need to be able to reason, plan and execute both strategically and tactically,
• Attract and retain high net worth clients,
• Create high-tech as well as high touch business model
• Manage both your client's wealth and their emotions
• Understand and appeal to a demographically and culturally diverse community.
As the world becomes more complex so do your clients lives. They need a broadly diversified group of highly talented individuals on a synergistic team, deployed to handle their complex financial challenges.
Paul Blease, is the Director of CEO Advisor Institute at OppenheimerFunds, Inc., the sponsor of the first season of InvestmentNews' new web video series, Practice Makeover.
These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the date of this presentation and are subject to change based on subsequent developments. Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc. Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008 © 2014 OppenheimerFunds Distributor, Inc. All rights reserved.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc. Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008 © 2014 OppenheimerFunds Distributor, Inc. All rights reserved.
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