Averting Disaster When Hiring Family

Many financial advisors have the same dream—that their sons or daughters will come work in their business and become their colleagues and maybe even eventual successors.

Many financial advisors also have this nightmare—that their partners’ or employers’ sons or daughters will come work in the business and become either their colleagues or their eventual partners or bosses.

The temptation to combine family and business is very hard to resist. After all, many business owners are looking for someone talented, ambitious and well-educated who shares their same values and who they can trust. Who fits that description better than their children? They paid for all the kids’ education, after all; they taught the kids all those values. The trust they have in the kids is instinctive. What’s more, they want to bestow on their children the same success, income and control they’ve enjoyed. They have a hard time watching their daughter or son otherwise go work for Goliath National Corporation where they are paid a meager salary and hope for a middle management promotion.

Much like tequila shots, though, the temptation is strong but the results often disastrous. I have seen key employees at financial advisor firms leave within a week of somebody’s family member being hired. I have seen long-standing partnerships break. I have seen vibrant cultures become awkward and lose energy and ambitious employees turn into chronic critics overnight after someone’s family member comes on board.

What’s worse, after all the damage is done and all those relationships are hurt, the son or daughter often leaves the firm anyway. Sometimes they find they don’t want to be an advisor. Sometimes they figure out they don’t want to work for mom or dad. They may get tired of clients and colleagues referring to them as “Phil’s son or daughter.” Or they may just find a better job in a more promising environment.

Everyone knows the track record is poor; everyone knows it’s highly likely it will end badly. Yet so many people keep doing it. We don’t have statistics on it, but my sense is that no less than one-third of the firms in the industry have employed family members or tried to. It’s an issue for small and large firms alike. Moreover, advisors also likely encounter the problem with their small business owner clients all the time.

I believe the simple answer is, “Just don’t do it!” However, I recognize that neither the decision nor the situation is very simple. So I would like to offer some suggestions that can perhaps improve the chances of success.

Recognize You’re Creating An Issue

One of the biggest mistakes owners make when hiring a family member is to act defiant—as if it’s not really an issue. “I can’t understand why I can’t hire my own son in my own firm?” What the other employees and partners hear is, “This is my family ‘farm,’ and I can do whatever I please, and I don’t care what you have to say, and you can’t do anything about it, and by the way, someday my son will do the same when he inherits the farm!” Obviously for the team, this is a terrifying proposition.