
Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Dear Bev,
Over the last several years the advisory industry has trended away from valuing financial expertise in order to put the emphasis on the relational or human side of investing. This makes sense but we have moved too far in the opposite direction. It’s in everyone’s best interest to start valuing the expertise it takes to craft a well-allocated portfolio and to ensure that portfolio is keeping up with client goals and market movements.
I obtained a CFA and believe it was the right thing to do but I work for a firm who operates from the philosophy of “skip the numbers discussion and focus on talking about what their kids ate for dinner.” I’m being extreme but this is how it strikes me. Do you think this will be like a lot of trends and movements and will run its course?
J.T.
Dear J.T.,
This short note has so many things embedded in it, it’s hard to find a place to start.
- As a human behaviorist who has been talking about the “human side” of finance and investing for a couple of decades now, I’ll go on record as saying it’s about time the industry is trending this way. While you may be working with numbers, what’s behind those numbers is people and people are complex and emotional. For too long the people aspect has been shunted to the side and the industry has been affected by this in many ways – so I am happy to confirm we see the same trend you described.
- Speaking of the human condition, an aspect of your inquiry stems from another emotionally charged component: the financial professionals who went to school because they enjoy delving into the numbers. These professionals are smart enough to obtain certifications like the Chartered Financial Analyst (CFA) or even a PhD in finance and can feel sidelined or diminished if the focus becomes more of a touchy-feely one. Not everyone can pass the CFA exam, but everyone can ask about the kids, right? The focus on relational aspects has its polar opposite effect of diminishing the importance of having an investment mind and capability and this is very difficult for many investment professionals to accept if they look at the new trend as portraying the importance of investing itself in a negative light. Of course, as a CFA charter holder you’re duty-bound to not “skip the numbers” (and not be part of a process that does!) – so you’ll have to determine if this approach has tilted too much in the wrong direction. In this vein, I don’t think most firms are saying “let’s disregard the numbers;” it’s more about adding to the discussion by expanding the dialogue to things that don’t appear to be directly linked to the funding plan. It’s more about expansion, rather than replacement, in my view.
- The advisory industry is changing significantly. On the other side of the human interaction and relational element is the desire for quick and easy, hence the rise of robo-advisors. Every industry changes and morphs (or dies) as the population changes and morphs. Financial advising has been delivered in the same fashion for decades so we were due for a significant shift and we will see more coming over the next few years.
- The market has been hard to figure out for some time now. In the 2000s between the devastation from the 9/11 terrorist attack followed by a recession we had the S&P 500 return an average of 1% and then negative returns following this. In the ensuing years, the market was best described as “erratic” or “unpredictable.” If you consider the objective of survival, advisors need to turn to issues in addition to performance and the numbers if they are going to keep the attention of their clients. While risk surveys might ask “How much money can you stomach losing?” going deeper on emotional responses to investment changes or connection to life circumstances for the investor hasn’t been as popular. So, it is a natural progression to move from looking at the risk of any instrument within a portfolio to risk an investor can tolerate – or not– and the reasons why.
- While you say you don’t disagree this trend makes sense, you then go on to denigrate the way your firm is asking you to interact with clients. I’m going to guess you aren’t really asking about what a family’s children ate for dinner, but you are (or should be) asking about what their kids know about money, how they think and feel towards it, what the parents are teaching by their words and actions. These are all reasonable areas to explore and most clients will be thankful you are raising things they may not be as comfortable talking about. Rather than resist the trend, embrace it where you are or find another role where the emphasis continues to be on the investing aspect (and again, the CFA standards are very important in this decision so it might be time for you to make a career move).
Dear Bev,
We recently brought on a college graduate to intern for us. She was so enthusiastic and willing to do whatever we needed when she first joined. Lately she has been complaining about menial work when we ask her to sit at the front desk (to relieve our full-time person for lunch or doctor’s appointments) or when we ask her to work directly with our printing company. I realize we aren’t paying her anything but I can assure you we are exposing her to our work, letting her sit in on firm meetings, having her listen in on client calls. She isn’t qualified to do much else but we are trying to give her exposure. She is also the daughter of our founder. Any advice on how to motivate her or get her engaged?
P.A.
Dear P.A.,
I’m sorry but I had to laugh once I got to the end of your request. We have a team breakout we do when we are teaching behavioral style (DISC) and one of the exercises is actually to solve almost the exact scenario you lay out here – child of the owner, disengaged, not motivated, etc. Over the years, in doing this exercise, I have heard a lot of great ideas but every situation is different. When it comes to people there are never easy answers.
Is there someone in the firm who has responsibility for this woman? Or who might have a closer relationship with her and be able to talk with her? Ask her what her goals and objectives are. It’s possible she was put up to this internship by her parent and doesn’t even want to be there. Or, it might be that the founder saw a need for a “go-to” person and figured his/her daughter could help out without getting paid.
Whomever speaks with her (and it should not be her parent, by the way) should do it in an exploratory way. What does she want to gain from this internship? What questions might she have? Then, depending on her answers you can show her the disconnect. Outline, specifically, what the expectations are for this internship. Put this in writing and have as much detail as possible. Try and work with her, not against her, on how to reconcile what she might like to do, in accordance with what’s actually needed. It’s possible she doesn’t want to be there and her parent is forcing her and if that’s the case, there isn’t a lot you can probably do except wait it out. One of my favorite mantras – This Too Shall Pass – is the best you can do in some cases.
Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry in 1995. In 2008, she co-founded Advisors Trusted Advisor to offer dedicated practice management resources to advisors, planners and wealth managers. She is currently an adjunct professor at Suffolk University teaching undergraduate students Leadership & Social Responsibility. Beverly is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).
She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including The Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.
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