The lead advisor role is the basic building block of the financial advisory industry and a critical achievement in the development of a second generation (“G2”) professional. Before G2 professionals can become owners, managers or leaders—before they can develop new business or contemplate succeeding the founders—they have to achieve a simple but quintessential milestone: becoming a trusted advisor to a client. They need to take over a client relationship.

Being the lead proves to be very difficult for many professionals. My experience has been that as many as two-thirds of professionals in the industry fail to cross the chasm that separates the lead advisor role from that of a support or service advisor. As a result, there is a shortage of lead advisors throughout the industry while service and support professionals are in ample supply.

We need look no further than compensation for evidence of how wide this chasm is. According to a 2015 advisor compensation and staffing study sponsored by Pershing LLC, lead advisors earned a median total compensation of $143,000. Service advisors, who are one position below lead advisors, earned $83,000, just more than half of the lead advisor’s total compensation. This distance is reminiscent of the relationship between doctors and nurses: Both positions are invaluable and rely on each other, but you can’t have nurses without doctors, and doctors are given significantly higher compensation.

What Is A Lead Advisor?
In many firms, professionals who carry the title of lead advisor—or even partner—do not control any client relationships and have never really had to manage clients. Instead, the professionals still serve a second-chair function for the founder who truly controls the relationship. These firms usually have severe capacity issues, unclear succession prospects and tension between professionals. The title may be given to show progress and please younger professionals, but it results in dangerous long-term dynamics. It is a bit like a driving test: You don’t want to give a passing grade to all students just to please them. The result would be dangerous to all involved.

So what makes a passing grade for a lead advisor?

Passing The Lead Advisor Test
The lead advisor is the professional whom the client perceives to be the trusted advisor and who has the influence to change the course of the client relationship. When the client works with a team, it can be difficult to identify the lead advisor in the relationship. A lead advisor will pass the following six-step test:

• He or she has ultimate responsibility for the client relationship: The lead advisor is responsible for identifying client needs and communicating proposed solutions. He or she is tasked by the firm to make final decisions on financial plan design, portfolio management and wealth management strategies

• He or she manages the team: The lead advisor has the authority to manage the internal delivery team. Most likely, the lead is responsible for managing service advisors, analysts, client service administrators and others who engage in the delivery of client services.

• He or she effects and communicates changes to engagement: The lead advisor can change the engagement and will communicate these changes to the client. For example, the lead can increase client fees and is responsible for explaining these changes to the client.

• He or she is accepted as an authority by the client: The lead advisor’s recommendations are accepted without the client seeking further validation from other team members.

• He or she enjoys the confidence of the client: Clients confide in their lead advisor and share all relevant information: fears they have, stories they are reluctant to tell, situations that are difficult but important to resolve.

• He or she acquires additional opportunities: The lead advisor is also the professional who receives client referrals when they happen.

Ideally, a lead advisor can easily check off these six items. Notice that the first three are up to the firm or team while the last three are up to the client. Let’s take a look at how clients choose whom to trust.

How Clients Choose The Lead Advisor
The best research I have found on how clients select an advisor was conducted by the Wharton School at the University of Pennsylvania and sponsored by State Street Global Advisors. The survey report found that when clients are choosing an advisor, they overwhelmingly look for someone they can trust.

Trust can be difficult to establish at the beginning of a client relationship, as it is something that is built up slowly over time. To find out whether an advisor is trustworthy, a client will most likely rely on the professional’s reputation—particularly one the client can validate. This is why so much new business in the industry is developed through referrals. By seeking a referral, clients utilize the transitive property of trust: I trust my friend, and my friend trusts her advisor, so perhaps I can trust that advisor, too. The importance of referrals puts G2 professionals at a distinct disadvantage when they are just getting started.

Qualities Of A Trusted Advisor
Earning the trust of the client is a critical but arduous task. We know from the Wharton survey that clients want a lead advisor who is knowledgeable, ethical and empathetic and who has the maturity they expect. Simply put, they want an advisor they can trust. So what are the qualities that G2 professionals need to have in order to become trusted advisors?

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