At any conference, usually even on the first day, you can find a group of people who founded their own companies sitting in the bar commiserating. If you could overhear them, you would most likely hear the phrase, “They are not entrepreneurs.”

“They” refers to non-founder professionals, or “G2,” the next generation of professionals in our profession. These people play a prominent role in many firms and are the future of the profession, but unfortunately company founders harshly criticize them—often saying this group lacks entrepreneurial spirit.

We’ve spent much time in such conversations with the founders of advisor businesses. We’ve also spent significant time with the younger professionals. And we’ve become convinced that G2 is eager to build and create. They just need some encouragement for their drive and some experience putting their ideas into action.

To help them, founders need to rethink what it means to be an entrepreneur, encourage the early signs of initiative, accept “group entrepreneurship” as opposed to the individual type and create an environment of stability where exploration can flourish.

What Does It Mean To Be An Entrepreneur?

We wanted to be precise here, so we looked it up. According to Merriam-Webster, an entrepreneur is someone who “organizes, manages and assumes the risk of an enterprise.” Most important, she’s not just the person who starts from scratch and founds a business—the definition also encompasses those who manage and bear the risk. The dictionary wouldn’t tell us how much risk is borne by employees and how much by the entrepreneurs, but we would propose that G2 is taking just as much risk as the founders did in their firms’ beginnings.

They say that entrepreneurs jump off the plane and assemble the parachute on the way down. When we think about company founders as entrepreneurs, we define them as visionaries of new business models. They’re people who are starting from scratch, risking all that they have accomplished in their lives and careers to take a leap of faith and set up a new shop. Over the years, they face numerous risks as they hire people and invest money in what they know to be right for themselves and their future clients.

After they have succeeded, these founders stand outside looking in and wonder whether the next generation “has what it takes” to move their firms, clients and employees well into the future.

The next generation, meanwhile, are often dependent and rely on a salary, and are cautious in pursuit of what the founders see as opportunities. What the founders forget to see is that the 5% equity a member of G2 has acquired is often worth more than a house. They also fail to see that the failure of the business would be just as ruinous to G2 as it would have been to the founders. And finally, they forget that G2 shares the business, too—they are part of a team and often need to exercise “team entrepreneurship” rather than make individual decisions.

When the founders criticize G2, they often mean that these professionals are not “selling”—not networking in the community, looking to develop new relationships or seek new business opportunities. Indeed, G2 professionals are not active enough in sales. Many have to activate their business development skills and stop finding excuses for not contributing to the growth of their firms.

In some ways, the failure comes from the inability of the founders to call the problem by its name: They avoid the word “sell”—many of them don’t like it—and replace it with euphemisms. There is a clear cultural discomfort with selling in our business, and it creates an environment where younger professionals are reluctant to engage in it.

To a certain degree, our profession also needs to find a better way of developing new business. The founders’ point of reference is the days when they networked nonstop looking for prospects. Many financial advisors, for example, started in the insurance and brokerage industry and hated the experience of “asking for business,” but for some reason they now want G2 to do that. Yet while much of what founders did to drive business in those early days was painful, it indeed taught them how to sell, even if they call it something else like client acquisition.

Leaders in an advisory firm must serve as role models for all things related to business development. Leaders should have multiple skills, and sales has to be one of them. There are a couple of reasons for acquiring and developing this talent. First, firm employees look to leadership for the accepted behavior and firm culture. If they see leaders “messaging” the business correctly and frequently, they too will acquire the ability to passionately convey why clients should choose them and the business. Your culture, in other words, will convey the importance of your continued growth. If the next generation entrepreneur cannot drive business, then the following generations will have a very difficult time creating a continuous employee ownership model.

Not all entrepreneurs have the responsibility of driving new business, but they all must be capable of it. If it was always left to somebody else, how would people ever generate value for their own equity?

Alternative Forms of Entrepreneurship

Entrepreneurs and managers do different things. Entrepreneurs can envision the future. They look at qualitative changes while managers look at quantitative ones. Entrepreneurs look at adding more clients and assets and transforming the growth into an enterprise. A manager, on the other hand, changes the business in quantitative ways, making it bigger, larger and more efficient.

An entrepreneur changes a company’s nature—its vision, its abilities, its strengths, its culture. He or she is more than a caretaker.

When the founders of a company retire, those who inherit the business from them face many opportunities to make dramatic qualitative changes. These can be grouped into four categories:

• The opportunity to develop. This mostly means developing people. Professional services firms are in a way nothing more than an academy for professionals. Firms that figure out how to grow their own talent will always have a competitive advantage. Teaching, training and mentoring are usually weaknesses of smaller firms and weaknesses among a company’s first generation. A firm’s G2 can dramatically transform it by improving its ability to recruit and develop talent.

• The opportunity to innovate. Most of all this means innovating in client service. The definitions of “wealth management,” “advice,” “planning” and “family office services” have yet to be written. Innovative leaders look ambitiously at what their firms are doing and think beyond the preparation of financial plans and balanced portfolios. As technology changes the basics of the business, G2 can create a service model that combines the power of data and relationships and create a new idea of what it means to work with an advisor.

• The opportunity to expand. Most young firms still have the survival syndrome—in other words, they have a hard time thinking past mere surviving. G2 can envision new markets to cover, can expand to new demographics or address new services.

• The opportunity to improve. Innovation can also be incremental. There is so much to improve in a firm—from its marketing and business development to its technology, operations and financial management. Henry Ford did not invent the car. He improved the method for its production.

All of these are avenues for entrepreneurship are available to G2 professionals as long as they can find their entrepreneurial gene.

Are Entrepreneurs Born or Raised?

Which raises an important question. Is it a gene or a skill?

Entrepreneurs are so rare that many people think it must be the former. But having worked with thousands of business owners and G2 professionals across many industries, we strongly believe that most professionals have the capacity for entrepreneurship. They just need to develop it.

To do so, we would invite business leaders to ask the following questions about their colleagues:

1. Do your future entrepreneurs have the potential to be “rock stars” in their current roles? Do they demonstrate a desire for expertise and view learning as a journey that never ends? Entrepreneurs don’t have to all look alike, but they all must be intensely curious about their business and the world around them.

2. Do the next generation employees contribute to the business beyond their job functions? We have all heard before that the business owner is the chief cook and bottle washer. But advisory founders must understand much more than just investments, planning, client service, reporting, billing, etc. The real test of whether they are entrepreneurs is their ability to look at their business in its entirety and understand how it might achieve success in the future.

3. Do the next generation of firm leaders fit culturally with current and future leaders? We talk a lot about culture in our firms, but the culture of the leadership team demands that principals know how to disagree behind closed doors and present a unified force once they step out of the boardroom. After all, business partnerships are really about learning how to make relationships productive.

4. Should G2 entrepreneurs be clones of the founders? This is one myth we must dispel: They will not look like you! They should not look like you. As the world and your business evolve, leadership, too, must bring new skills and vision to the business. When we started 25 or 35 years ago, who would have imagined our dependence on technology? Who would have thought that the next generation of clients would want a client service model that looks so different from that of their parents? The next generation of firm leadership brings a new and necessary perspective that the last generation cannot and will not have.

Entrepreneurship, paradoxically, emerges in an environment of safety. Much like babies who would venture out to explore their environments, entrepreneurs “crawl” their way through ideas. But they can only do it when they feel “safe.” Safety does not mean without risk, just that there is no risk of catastrophe. Entrepreneurs won’t take risks that are fatal.

Both of us have started and own businesses. Both of us consider ourselves entrepreneurs and are proud of that T-shirt. But we also cultivated our experience and careers in large, established corporations. Being an entrepreneur is like skiing a black run—it is an awesome experience, but you can’t start there.

Entrepreneurs emerge in the greatest numbers in an environment where there is risk but where that risk is not overwhelming. This is what G2 needs—an environment where their mistakes will not end their careers and destroy their firms.

Care and Feeding of G2 Entrepreneurs

If you want G2 professionals to flourish, it’s imperative to mentor them and help them develop those “entrepreneurial skills.” That means they should understand what it means to be an entrepreneur, they should develop sales abilities, they should be able to envision the future, and they should be able to innovate. These are all skills that the next generation of firm leaders can acquire. But doing so requires an investment of time from both them and their mentors. We recommend formal mentorship programs in firms for G2 leaders through one-on-one development. The founders should put an individual development plan in place. This is not a job performance improvement plan, but a “developing entrepreneurial skills” plan. The up-and-comers need to hear all the stories—the good, the bad, the ugly—and learn from the current leaders’ previous experiences.

The magic of an entrepreneur is that he or she can observe the world around and constantly ask “Why?” or “How?” and what it means for business. For example, how will the service models change over the next five or 10 years to meet the needs of a changing client demographic?

That observation also requires some dreaming about the future.

Firm founders do this when they first start. They see a future where clients will pay for objective advice. They anticipate clients turning to them for help with all financial decisions.

They also ask, “How can we continuously innovate?” It is important to understand that innovation is done by degree; it’s a manager’s job to solve problems and create efficiencies within the current business model. But it’s the entrepreneur who considers entirely different models, and that usually involves the greatest risk. G2 entrepreneurs usually don’t have to create an entirely new business this way, but they will have to let their companies evolve and that means facing both risk and real change.

The Next Step

Entrepreneurs are like flowers—they seem to appear overnight in bright colors and splendor, but they’ve actually endured months of snow and rain. Not all of them grow in the wild—you can certainly grow your own.

All it takes is some care, patience and planting the right seeds. If firms want to preserve their entrepreneurial spirit, perhaps they need to rethink what being an entrepreneur means and steer their talented G2 professionals in the right direction.    

 

Rick Schwartz and Philip Palaveev are both industry experts and well-respected consultants. Having discovered their shared passion for developing future leaders, they collaborate on the leadership development “G2 Institute” run by The Ensemble Practice LLC.