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?

 

Knowledge
A common mistake throughout the industry is to overemphasize the social connection with the clients and to neglect how important it is to impress them with professional expertise. Since the founders of a firm first likely made their stellar professional impressions long ago, their relationships with clients can seem very social and not particularly business-like.

But this friendship-type of relationship can seem inaccessible to G2 professionals, who often feel discouraged by their inability to become trusted advisors. After all, they are frequently much younger than their clients and often don’t move in the same social circles or share the same interests. Attempts to socialize with clients can be awkward and even counterproductive for both sides.

So they have to take a different route.

One of my mentors once told me, “You don’t have to remember the names of your clients’ kids and dogs; you just have to remember everything there is to know about their business.” This advice is critical. You don’t start a relationship by trying to golf with your clients. Start it by being an absolute expert in what matters to them. Golfing will come to you later. After you convince them you have the technical expertise, the social connection will naturally follow.

Professional Expertise
Expertise means more than having an education or adequate knowledge. It means you have enough experience and intelligence to apply your knowledge to practice. You have to be able to impress clients beyond just making them feel safe.

Many G2 advisors mistake their clients’ feeling safe for the clients’ willingness to work with them. Returning to the doctor-nurse comparison, most patients are quite OK with a nurse providing care, but that is only because they know that the doctor is in the office. Similarly, many clients are perfectly fine meeting with G2 professionals, but they still expect that somewhere, somehow, the founder is supervising the work.

Specialization
Outshining your mentor, who is often the founder of the firm, can be a daunting project. The answer for G2 professionals is to specialize. They must become experts in an area or discipline that is very important to a group of clients and use that specialization to generate “Aha!” moments.

Specialization allows you to really accelerate toward the goal of becoming a trusted advisor. For example, if you specialize in working with Amazon executives as clients, you will find it much easier to assume the lead in those relationships.

Presence
Presence is the ability to get the attention of participants in a meeting and direct that attention to a constructive purpose. It means getting heard and making an impression. Because presence is intangible and hard to define, it can be difficult to teach. However, it is a critical part of every client meeting and, ultimately, the client relationship. Presence is important for G2 professionals to attain in order to have success in taking the lead. Let’s take a constructive approach and break down presence into its component parts:

• Participation: You can’t make an impact in a meeting without participating. Over the years, I have seen associates who are perfectly content to silently sit in the back of the room and say little if anything during the meeting. While talking a lot can be a problem, not talking at all is always a mistake.

• Position: Don’t fade away as soon as your mentor walks into the meeting. I once took my daughter to a teaching hospital for a doctor’s appointment. The young doctor who spoke with us was very friendly, asked good questions, made a couple of very good comments, and seemed to be extremely competent. Then an older doctor walked into the room and the entire meeting changed. The younger doctor moved to a back corner and hunched over in his chair while the older doctor took a seat in the middle of the room. Before he’d even said a word, the hierarchy was established. The older doctor had the dominant position and his younger colleague didn’t speak again. G2 advisors must not make the same mistake.

• Body language: If you want to have an impact on a meeting, you need to look like you belong and want to be part of that meeting. Body language that suggests you are uncomfortable will severely undermine your credibility. I am not an expert on body language (though much has been written on that subject if you are interested in studying it). In short: You should find a way to be comfortable in the meeting and project confidence.

• Hierarchical recognition: Clients instinctively perceive the hierarchy of a service organization and both consciously and subconsciously make decisions about whom to work with based on their understanding of who holds power. Explicit communication comes from titles and descriptions of responsibilities. Introductions such as “I run the investment committee for our firm” communicate hierarchy. As a general rule, clients will try to get the attention of the most senior members of the team.

Some firms respond to this tendency by giving G2 professionals lofty titles, or even accelerating their career path to partnership. However, such an approach produces no practical results. Clients can tell when a lead is not a lead. It will quickly become apparent to them that a more senior advisor directs the engagement and they will seek the attention of that person.

Transitioning The Lead To G2
One of the founders of an advisory firm I work with once asked a question during a meeting that to me best distilled the idea of how G2 professionals take over client relationships. The question was: “Should I, as a founder, step back to create space for G2s, or should G2s step in and push me away?” This is really the core of the issue. The answer is that both should happen.

While the firm and its founders need to be purposeful in creating space, G2 professionals should not wait too long, and should create a bit of a push if necessary.

Training G2 professionals to take over client relationships should begin almost as soon as they reach the service advisor level. From the first day they enter into client relationships, they should begin preparing themselves to lead. I have practically never worked with a firm that had too many lead advisors. I have worked with many who didn’t have enough. Successful firms teach younger advisors how to lead as early as possible and try to advance professionals as often as possible. A good lead is hard to find.

This article is an excerpt from Philip Palaveev’s book “G2: Building the Next Generation.”


Philip Palaveev is the CEO of the Ensemble Practice LLC. Philip is an industry consultant, author of the book The Ensemble Practice and the lead faculty member for The Ensemble Institute.