Many of you may be too young to remember Erich Segal’s book Love Story (or the movie starring Ryan O’Neal and Ali MacGraw). But like many stories of this type, it offered tension, passion and hardship. The couple had to deal with all these things because the implied message was that they were everything to and for each other. Spoiler alert: She died at such a young age that they never realized that they weren’t everything to and for each other. Because no one person can be all there is.
This myth is perpetuated in our business as well. No one person is everything a client needs. We may offer most of what a client needs or wants, but we can’t provide everything.
What is the answer? Instead of thinking Love Story, think Moneyball, another great book turned into a movie.
In Moneyball, Michael Lewis wrote about the way baseball scouts underused objective statistical measures and overvalued subjective things such as whether someone “looked” like a baseball player. The book recognized that limited budget teams don’t need to replace five-tool players (those who have a high batting average, hit for power, field, run and throw) with other five-tool players they can’t afford. Instead, a team can replace aspects of one player with multiple others.
When we think about serving clients and building a business, most of us don’t have the relational, technical, strategic and detail skills to do complete work. In a practice, maybe we have hired people to cover our weaknesses. But as our firms grow, we are likely to get frustrated that those people we hired haven’t turned into us. Let me break the news to you: “Us” isn’t all it’s cracked up to be. Most of us aren’t five-tool players either.
Instead, let’s think about it from the clients’ standpoint. They have needs, and we have to figure out how those needs can be met. That means smaller organizations may have to outsource the things they can’t do.
Our firm, Accredited Investors Wealth Management, has 50 employees, and we can do many things internally. Even so, it is not as easy as it seems to mix and match teams. I would break down staff responsibilities by the following areas of focus (remember, most of us are pretty good at some, but not all of these categories):
1. Relationships. This area of responsibility is left to those able to understand and care about clients and regularly think about them, as well as relate to them on their level. Clients have different personalities, and not every client works well with every employee’s personality.
2. Strategies. This area is for those willing to explore ideas that consider the clients’ uniqueness and how the clients’ goals and objectives are different from every other client you work with.
3. Technical issues. This area is for those with expertise on the specifics of financial planning.
4. Implementation. This is the focus of those who make sure that ideas presented and agreed to are regularly reviewed and followed up on.
5. Compliance. Those with this focus are responsible for making sure that everything done for the client is legal and ethical.
Our firm is set up so that our clients belong to the firm, rather than to any individuals within it. We offer our advisors firm-wide profit-sharing calculated using EBITDA rather than rewards based on production. These two things are important because they encourage staff to be collaborative rather than competitive.
All the wealth managers at our firm are responsible for a strategic planning area in addition to their client responsibilities. These planning areas cover everything from Social Security, to local assisted-living facilities, to tracking debt options (mortgages, home equity loans and margin arrangements). We can turn to an expert in a specific area when we have questions about it. We also have an internal tax specialist, an insurance specialist and a legal specialist (though those jobs can easily be outsourced).
Our wealth managers are not responsible for investment management. Our investment managers are assigned clients and typically are in client meetings for 10 to 15 minutes. The wealth managers and investment managers confer when cash comes in to understand the clients’ taxes and cash-flow needs.
We try to match client personalities to personalities within our team, and also make sure each team has people with different skill sets. This takes a certain amount of “matrix management”—where staff members report to more than one person. Teams are not silos.
Before client meetings, we set an agenda and hold a strategic meeting. (We track the framework of my book The Wealth Management Index, which establishes goals for clients in the different planning areas.)
When we receive a contract from a new client, before meeting with them we set up a pre-meeting among our operations and investment managers to discuss how the paperwork will be handled for transfers, what the investment policy statement should say, what the pressing wealth management areas are, and what information we still need. This allows the first client meeting to run smoothly and reduces confusion about transfers, etc.
There is no way I could do this well on my own. While there are some things I am pretty good at, there are a host of areas where I am sorely lacking. With the team approach, I don’t have to be good at everything. In fact, I spend most of my time on the things that I am good at and very little on those that I am not.
Our approach is also about our firm’s succession planning. If the whole team is important, you don’t have to worry as much about replacing a firm’s founder. You have only to figure out which parts of the founder you want to replace. This means that a team can step into the founder role rather than trying to find one person to do it.
The strategy also helps people advance within the organization, because you can have people spend more time on the things they do well rather than try to force them into doing things they aren’t skilled at and probably don’t like. Some of our best planners do not enjoy the face-to-face client meetings; they prefer planning work with more limited client contact. Others really enjoy the client relationships but may not be as comfortable going into deep technical detail on different subjects. While you need deep knowledge at your firm, not every person needs to be an expert at every subject.
When staff turnover or staff advancement inevitably happens, a team approach such as this one makes things more seamless for the clients, who will have relationships with different team members, not just one who might leave. They might have had a close relationship with a departing or advancing staff member, but at least they will enjoy continuity in the relationship with the firm.
Even with a team approach, however, some things don’t change:
• People who are strong at relationships will still hold a lot of sway over the clients at your firm. While some relationship building skills can be taught, those whose skills come naturally will have some advantages.
• You will still need strong operations and compliance teams. We make these people part of our weekly executive committee meetings because it is very difficult to translate ideas into action without them. You must fill those roles strategically, and it can be difficult to find people for them.
• Matrix management has a host of problems. Different leaders often emphasize different things, so this can cause confusion when somebody reports to two different people. This makes the agenda and strategic meetings more important. No siloes may mean more internal meetings because you can’t combine coverage on all your clients.
• It can be difficult to scale a business with this strategy. You need to have a minimum size client relationship for the team approach to be more effective. I have mentioned before that we want the fast work (tax projections, rebalancing, etc.) to be scalable and the slow work around client engagement to not be.
• You are still going to depend on people outside your organization. At our firm, for example, even though we have an insurance specialist who works with our clients and insurance companies on existing policies, we are fee-only, and we use outside insurance people to analyze, recommend and implement other insurance business. It is critical that these outside advisors be vetted and that they share your approach (it doesn’t always work out that way).
While it would be great if we could each be everything to everyone, it is unrealistic to be that way to anyone. With that in mind, think of how you can use the Moneyball tactics to build your organization and serve your clients.
Ross Levin is the chief executive officer and founder of Accredited Investors Wealth Management in Edina, Minn.