What leadership means in a time of change

Leadership implies action, and leaders of advisory firms facing the challenges of a fast-changing environment often are unsure about the actions they must take to guide their firms successfully into the future.

Those actions were the subject of several sessions at the recent IMPACT 2016 Conference in San Diego, touching on issues of firm strategy and personnel development.

Michael Kitces, Partner and Director of Research at the Pinnacle Advisory Group whose Nerd’s Eye View blog is widely followed, kicked off IMPACT by outlining five trends that will change how advisory firms do business in the future — and which will require action by firm leaders. Speaking with Alan Moore, co-founder of the XY Planning Network, Kitces noted that potential clients are getting younger and want different services delivered in different ways from advisers who are within 10 years of their age. At the same time, advisers are getting older and fewer young advisers are joining the ranks.

“Without a change in attitude,” Kitces warned, “most advisers will fail to pass their firm to the next generation of advisers.”

The third trend Kitces and Moore noted involves technological advances that are making it easier to automate most parts of the advice business and for advisers to start their own practices. The leadership challenge, they say, involves not only keeping up with technology but also finding where to add value beyond technology.

“Advisers also face a crisis of differentiation,” Kitces said. “There are more CFPs than ever before, so experience and credentials are no longer enough. For what types of clients or problems are you truly an expert?”

Effective firm leadership for the future will require the courage to step away from the comfortable generalization of advisory firm positioning in the past and turn to specialization, “which makes you a go-to expert and authority, and more easily referable,” Kitces said.

“If you had a serious problem to solve, would you look for a reasonably competent person in the area, or the best expert in the world?” he asked rhetorically.

Finally, Kitces sees compensation moving away from an assets-under-management model to one that includes hourly fees, annual and monthly retainers and blended models. The possibility of having different models under one roof will challenge firm leaders to continually reassess their strategy and perhaps try out new compensation models.

As they deal with those external challenges, firm leaders also will be dealing with challenge of inspiring their employees and developing talent. Rick Schwartz, a Managing Director in the Business Consulting Services area at Schwab, led a session at IMPACT on how firm leaders can make the most of mentorship and coaching opportunities.

Mentoring, Schwartz said, has value because it helps firms grow, helps in the development and retention of talent, can be part of a succession program, and helps brand the firm as a leader. The best candidates for mentoring, according to Schwartz, are those employees who exhibit personality traits and work habits that include being a quick learner, self-aware, a consistent high-performer, a team player with a customer-service orientation, a relationship builder and someone who exudes positive energy.

Once a candidate or candidates for mentoring are identified, a program should be created that assigns an experienced senior mentor and identifies a monthly time and date that is “sacred.”

“There also should be a fixed agenda so the formality of the program is recognized,” Schwartz said.

The biggest mistakes in a mentoring program, he said, come from not having the firm’s leaders and principals involved.

Advisory firm leadership, therefore, continues to be a job of envisioning the future and then plotting and pursuing the action steps needed to get there.