A Hot but Touchy Topic: Diversity

Our clientele is almost exclusively white women who look exactly like we do. We have many always-single wealthy women, divorcees, widows and even some moms with children who were never married (and we work with their daughters too).

My partner went to a conference where a speaker was talking about the benefits of diversity, how much smarter diverse teams can be, the changing landscape, etc. I understand all this, and I am not opposed to new people and new ideas. But this is a drastic step for the sake of being diverse.

Is there a polite way to talk to my partner about this without seeming like I am rejecting her idea out of hand? We get along very well, but she is quite emotional and very, very sensitive. I’m usually the stronger of the two. She doesn’t often put forth an idea she cares about, so I don’t want to be unnecessarily hurtful about this.

K.D.

Dear K.D.,

I respect your desire to be forthcoming about your thoughts on this matter and to also consider the dynamic with your partner and your styles in operating together. It shows great emotional intelligence when we can consider someone else’s point of view and how they might react or respond to something so that we can be careful about our approach when delivering negative or unwelcome news.

This is a great opportunity to have an open dialogue with your partner. Rather than first addressing the idea itself, you need to inquire what your partner thinks is missing in the firm. Ask open-ended questions like: “In your view, what areas did we overlook last year that a new perspective might have helped us with? Or, “I respect the research you learned about at the conference, and I wouldn’t debate much of it is accurate for many advisory teams; what in particular do you think a man of color could bring to our team? What changes would you see him making?”

Stay in curiosity mode as long as you can. It’s entirely possible your partner sees something happening in the firm she is concerned about or thinks you could be doing better, differently. She may think an infusion of new ideas from a different seat could be helpful. Let her share what’s underneath this suggestion before you address the suggestion itself.

Let’s say she has some good insights about what she thinks needs to change in the firm and why a diverse person could be a good fit. If so, probe into what role this person would play. Do they have to be client-facing, for example? Might she be thinking they could be in a marketing role or operations role? Push your partner to describe what role, responsibilities and (perhaps most important) impact this person would have.

Approach your partner as if she were a client wanting something you believed could be a bad decision for them. Rather than tell a prospect or client outright something is a bad idea, you likely stay open and inquisitive to learn more about their “why?” But you help them think through whether it is a good idea or not.

Give your partner the same benefit of the process. Talk together about what you need and how to go about making changes.

Dear Bev,

What do you do when you bring a new advisor onto the team without getting a chance to understand everything about their clients and how they manage them? We were prohibited from seeing this for a number of legal reasons I cannot go into here. But then the advisor joins and you find there are clients with $30,000-50,000 in assets who are not getting charged fees at all, and there are clients who have not had a phone call, never mind an in-person visit, in over three years.

This advisor has not been well for the last three years and had a junior person working with him. The junior person left and there were legal issues between the two of them. Our new partner never investigated what this junior person was doing and assumed everything was fine. We “had to” bring the advisor onto our team – again, I can’t go into the background, but suffice to say we were not thrilled about the process – and now we are saddled with him and his book of business.

He has to stay engaged here for the next three years (I guess three is our unlucky number!). We have to figure out a way to make this work, but he isn’t physically well and he isn’t emotionally invested in making things happen here the way they need to. My team of six is drowning trying to figure out what we have and how to manage it.

What choices do we have – do we just push him aside and give him his money and say we’ll handle it, do we assign him certain clients and we take the rest, do we try to negotiate a different deal whereby he leaves earlier than expected? He isn’t doing any business development and last year (unbeknownst to us) he lost about 20% of his AUM with clients either dying or leaving, so the book is probably winnowing down. I’m concerned about time, attention and focus needed for the six of us to try and make this work. We had a great year last year and want to continue the trend.

J.C.

Dear J.C.,

I won’t go into this too much because your note clearly outlines there are many legal considerations that prevented you from doing the type of due diligence necessary to make sure you had a good fit. But for the rest of the readers of this column, your situation underscores the importance of digging in deeply to another advisor’s practice before you decide to walk down the aisle together. The differences that derail the process post-merger/acquisition are often around client management practices and expectations, segmentation and pricing of the services, investment philosophy, attitude and complexity of financial planning and general cultural or business management approaches. All these are critically important to an advisor and their business. Explore all of them in detail before you decide this is going to be a permanent situation.

Here are a few steps I recommend taking now:

1. Push the advisor to either agree to segmentation or tell him you will take it out of his hands. I would immediately segment the book by asset size, service requirements, fees and last touch point. You need to get a clear picture of what you have, and what you need to focus on.

2. Identify the biggest risk area of clients. Work with the advisor on this. Who is paying a reasonable fee but hasn’t had a call or meeting for a long time? Who might be ready to retire, or have a second generation that isn’t in the loop, or is being sorely under-serviced? Create this list and divvy up responsibilities for the acquired advisor and you, or someone on your team, to do outreach. Have a story ready about why the acquisition happened and is in the best interest of the clients (assuming it is truthful of course!).

3. Talk with the advisor about what he wants. Does he want to focus on his health? Spend more time with his family? Wean down the amount of client interaction he has? “Interview” him about his needs, wants and desires and see if you can create a plan that meets his needs while also being fair financially to your team.

4. Meet with your team and identify what they’ve learned so far about this group of clients. Is there communication that could go out about the new team, how you manage clients and what changes to expect? Do your team members see concerns about how the clients are managed that could be compliance considerations? Keep the lines of communication open as you explore and learn more.

It sounds like you don’t have the option to go back. You can only go forward so see what steps you can take to make it a better situation than it has turned out to be.

Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry, in 1995. The firm also founded and manages the Advisors Sales Academy. The firm has won the Wealthbriefing WealthTech award for Best Training Solution for 2022 and 2023. Beverly is currently an adjunct professor at Suffolk University teaching undergraduate and graduate students Entrepreneurship and Leading Teams. She is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).

She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including The Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.

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