A successful independent advisor faces a conundrum: He wants to expand the growth of his business while simultaneously lessening its dependence on him. For advice, we turned to our panel of experts: Philip Palaveev, recently named president of Fusion Advisor Network, an Elmsford, N.Y.-based network of advisors; Chip Roame, managing principal of Tiburon Strategic Advisors, a Tiburon, Calif.-based market research and strategy consulting firm for financial institutions and investment managers; and Hellen Davis, president of Indaba Training Specialists, a management consulting and training firm in Treasure Island, Fla.
Is it possible to have too much of a good thing? Just ask Jeff Fishman, who runs JSF Financial, a Los Angeles-based financial planning firm. With about 300 clients, $300 million in assets, 14 employees, and financial planning fees that range from $3,600 to a high of $25,000, his practice has been growing steadily since its founding 14 years ago. But, now, if he wants to maintain that pace, Fishman knows he will have to make some fundamental changes. Today the business hangs almost entirely on his renown, but the bigger it gets the harder it will be for him to have a finger in every pot. So he needs to delegate some things to others without sacrificing the high-quality service for which his business is known. Unfortunately, he's not sure how to go about doing that. “How do I take a firm based on my reputation and extend the brand to everyone else in the office?” he asks.
Fishman graduated from Benjamin N. Cardozo School of Law in New York City in 1992, then moved back to his hometown — Los Angeles — to practice tax- and estate-planning law. After one year, however, he decided it wasn't for him. “I didn't like the adversarial role you have to take on as a lawyer,” he says. So, he enrolled in a financial planning program at UCLA and in 1995, started his own firm. He quickly focused the practice on serving Hollywood types — the kinds of people who work behind the camera in the entertainment industry. And he soon established a name for himself as someone who understands and works well with people in that boom-and-bust line of work. More recently, he, along with two clients, also started a hedge fund specializing in distressed debt, with mostly institutional clients.
About seven years ago, Fishman hired his first associate financial planner. He now has four, each of whom focuses on a different niche and receives a different form of compensation, depending on his or her role. For example, one planner works with younger families and manages a lot of investment accounts. He earns fees from managing those accounts. Another concentrates on older clients, including many widows and widowers, and gets a base salary. Fishman also has three employees who handle investment management and seven in operations and administration.
All new clients typically meet with both Fishman and one of his planners. After that, depending on the account, clients will either work with Fishman and a junior planner, or with an associate. Fishman handles most of the bigger clients on his own. The total number of clients with whom he works is about 150.
That, at least, is how it works on paper. Trouble is, as the firm has grown in size, Fishman has found that his own reputation has become more and more crucial to attracting new business. Prospective clients usually come to him after receiving referrals from his existing clients, or from lawyers and accountants with whom Fishman has cultivated a relationship. And they tend to want one thing: Fishman's advice. Even after they've started working with the firm, clients often ask to speak to him directly about, say, an estate planning issue or a question about a mortgage. “My planners have great expertise and we work as a team,” he says. “But clients frequently want to talk to me.”
The result: For the past several years, Fishman has ended up toiling 12- to 14-hour days, “working harder and harder to keep up with everything,” he says. But he's reached a breaking point. Fishman knows that something has to change — especially if he wants the firm to keep growing. But what?
The first answer is to systemize client service — if he hasn't done that already. If there are processes it's easier to involve other people. He needs a recipe book with step-by-step instructions.
Next, he needs to introduce the associates to his clients in an appropriate way. Part of that is giving them higher and higher levels of responsibility. If you don't do that, your clients are never going to see the other planners as anything but junior advisors. He has to promote his junior people in front of the client continuously.
Third, he needs to be tolerant of early problems. In the beginning, the junior advisor may mess up; everybody makes mistakes. He has to keep focused on the big picture.
Lastly, there needs to be a clear career pathway for the associates. He needs to establish steps on this pathway, the qualifications required and rewards offered for graduating from one step to the next. Typically, the development of the professional advisor has three or four stages. First is the technical stage, where the financial planner is mastering skills. After four or five years, advisors get to the next stage, in which they can start tackling the client relationship, working with clients on their own. Third is independently developing new relationships. And fourth, the advisor may become a principal or owner of the firm. As they move from one stage to the next, however, advisors must be allowed to take on increasing levels of responsibility, or they won't develop.
He's working very long hours. Twelve to fourteen hours a day over a long period of time is tough to sustain. I wonder if he has too many employees. With $300 million assets, I would guess he should have seven to eight employees. And with that big of a staff, I also wonder if he needs to delegate differently. That's something I think he should think about.
He's leveraging his time by putting people underneath him, and that's great, but I think he needs to leverage himself more. The way to do that isn't by getting more direct reports. It's through giving his direct reports their own direct reports so they can, in turn, start leveraging themselves.
Also, he should streamline his book of clients. He might do that by boosting his asset minimum. If clients want to deal with the big cheese they have to have a lot of money. It may sound harsh, but you can't call the head of General Motors and buy your car from him. He doesn't talk to every customer; that's not how it works. He'll find it easiest to introduce this idea to new clients. You don't call old clients and say, I'm not going to serve you anymore.
To give the other planners more of a role, he should slowly wean clients away from working with him. Over time, he can allow junior planners to play a more prominent role in client meetings while he plays co-pilot. For example, he could let the client know that he's going to let his associates run the first part of the meeting, and join them only after 10 to 15 minutes. Eventually, he might attend only the second half of these meetings with clients. Slowly, the client would come to trust his associate. He can't convince the client that his planners are great. He has to let them prove it. At some point, the client will say, “What are you doing here? This guy is great.” He has to let his people develop their own reputations.
I would also further involve his financial planning people in marketing. If he's doing all the marketing, clients aren't going to want to talk to anyone else. They're going to want to talk to him. He has to find ways to put his planners in the limelight.
The hedge fund thing is a distraction. At the end of the day, if you're working 12 to 14 hours, something's got to give.
I wonder if he might be conveying a message — either through his words or his behavior — that the business is all about him. Without realizing it, he may be using what's sometimes known as first person perceptual positioning. In other words, through his speech, he may be projecting the idea that he alone represents the brand to both employees and clients. That means using words like “I”, “myself”, “me”, taking ownership with phrases like “my client”, “my portfolio” or even “my team.” I would suggest he get into a mode of speech that is more third person and inclusive — talking about “the team” or “our team” as opposed to “my team.” It could be a good start.
Also, in initial meetings with clients, I suggest he do the introduction, stay for 15 to 20 minutes and then leave the room, allowing a junior advisor and another employee to take over the meeting and the relationship. This would shift client service to a real team approach. Then, he could return to the meeting for the last 10 minutes to review the next steps to be taken with the particular client's portfolio. In this way, he gives others a chance to drive the meetings, but still lets the client know he has his finger on the pulse of the business. It also frees up his time. He then shows up for the second meeting, but stays for five to 10 minutes.
To reinforce the team concept, there are a number of other steps he can take. One of the first things he should do is put together a portfolio of bios for his company, that give equal footing to every person in the office — a paragraph for everyone. To change the focus away from his own advice, he also needs to have a company name that doesn't use his initials. He should also look at how he promotes the team — and himself — to others: He needs to build the team up, even if it means he's a little self-deprecating. For example, “The only good thing about me is that I surround myself with the smartest people.”
Fix My Business is a quarterly feature that seeks solutions to real-world advisory problems from a group of consultants and industry insiders. Submit your questions to [email protected].