There are firms in the industry expanding into fascinating directions—from building communities to venturing into health and well-being, even genetic data. From providing therapy and personal coaching to helping women executives move from one city to another.
What’s really exciting is that all these ideas are coming from firms with institutional partners. Having an institutional investor does not stop the creative process—on the contrary. Van Gogh was poor but Picasso was not. The spark to create can sometimes use batteries to turn into a beam.
It’s also important to consider that most firms are still in their management infancy. Some of the most interesting and challenging experiences are still ahead. Firms are beginning to expand from one office to regional offices and a national presence. Mergers and acquisitions are just starting. The heavyweight competition between national enterprises is in its first round. We don’t have a Big 4 yet. Our industry has the Big Baby 100. A new partner looking for management responsibilities and challenges will have no trouble finding an arena to compete in.
Our industry also has yet to become more diverse. Only 15% of partners in advisory firms are female. Only 11% of the CEOs. We need more accents, more backgrounds and more neighborhoods represented in our firms and in the clients we serve. If you want to leave a mark—here’s your chance—hire and mentor someone whose background is very different from yours.
Control
Control is one of the biggest issues that next generation partners have with larger and institutionalized firms. Younger people are concerned that if they become partners they still won’t be able to influence the direction of their firms or have a voice at the table. I hear that concern a lot and I certainly appreciate it—I had those thoughts myself when I joined the partner ranks at accounting firm Moss Adams.
As firms mature, decisions inevitably move from a small group of partners to a large and institutionalized governance process. Several of the largest firms in the industry already have very sophisticated board-of-director charters and elections. Many firms are also steered by professional “captains” with years of experience. This does not leave a lot of decisions in the hands of the newer partners.
Then again … if your passion is to steer the ship, there is no shortage of positions in the cockpit. Even in the largest of partnerships there are many chances to lead a team, a division, an office. My former partner and good friend Rebecca Pomering (Rebecca—are we still friends?) is today the chief practice officer at Moss Adams, a firm with $700 million in revenue. Graduates of our G2 program today are presidents (Steve Stelljes, the president of client services at the Colony Group) and even chairmen of the board (such as Eric Kittner, chairman at Moneta). There are too many COOs to list here and many others in positions of leadership.
I would also say that, much like in singing, the voice that people want to hear is the voice of someone who sings well. If you want to sing a solo, be good. Likewise, if you’re a good partner, a good steward of the business and a thoughtful contributor, your voice will be heard. Yes, there are some choir politics, but ultimately a solo is something you earn rather than buy. This is true even in the smaller ensembles. The work you do at a small firm is often akin to singing in the shower—there is not much of an audience (thankfully). In a larger firm, your voice may be in the choir, but look at the many faces fixed on your performance.
Risk
Many advisors express concern and even anxiety over the future of their businesses. They see a horizon full of down markets and price compression, of consolidation and fierce competition, and they are reluctant to invest in the firms they work for and become owners of. I guess all I can say here is what any hiker will tell you: “If you are afraid of the bear, don’t go in the woods.”
The risks of building a business don’t disappear with size—they just change in nature. A small firm is vulnerable in that it relies on the time, energy and effort of a few partners. A large firm faces different risks related to the success or failure of its strategies and the complexity of its politics. We tend to underestimate the risks we are used to and overestimate the risks we have never experienced. My former partner Stuart can’t understand why I box and I can’t understand why he thinks that heli-skiing through avalanche country is fun. Similarly, new partners don’t see why starting a firm is a risk when they didn’t have to buy the equity. Meanwhile, founders don’t understand why new partners are afraid to buy a million dollars’ worth of stock in a very profitable company.