You’ve probably heard the phrase, “we just grew apart” when someone described the end of a personal relationship. What about a professional relationship?
“Growing apart” is a legitimate reason to cut ties in the business world. That’s especially true in a challenging environment, such as the one created under COVID-19.
As a business owner, you should have a clear vision for where your firm is headed. And if you want to achieve your goals, then your team members, equity partners and vendors need to be aligned with that vision, share your core values and beliefs, and have the skills to help you get there.
When is the last time you reevaluated your goals, your vision, your core values and whether the people and tools you have in place can get you where you want to go?
Take Time to Reflect
Look back at who you were 10 years ago. Have your priorities shifted? Do you have a new or broadened perspective? Have your opinions on anything changed? If you’re like most people, the answer to all these questions is yes.
Your business has probably changed substantially in the last five to 10 years as well. You’ve likely embraced new technology or ways of doing business. You’ve learned new things and implemented ideas to better serve your clients. You’ve gained clarity around – or perhaps totally changed – the mission and vision of your business.
It’s likely these things will continue to evolve over time. You’ll have to adjust to outside forces, like an economic downturn spurred by a pandemic. You’ll want to make changes in response to client expectations, the regulatory environment and new information about financial planning and investments. You’ll also likely make a number of proactive changes that help you move forward in building the firm of your dreams.
Here’s what I know: What you need to effectively serve your clients, run a strong business, and meet your own personal needs will change over time.
And as your firm changes, it’s common to start feeling some friction throughout the business.
As your business grows and evolves, some team members will grow and evolve with it. Others, though, might not want to change or might want a different kind of change.
That right-hand you had who was an amazing jack-of-all-trades when you were getting started might be bored to tears in a more specialized role that you need. Perhaps your paraplanner has no desire to get a newly-required license or specialized training to support a new offering or business model.
These kinds of team members might start showing signs of disengagement and leave you wondering what happened to your former superstar. Well, it could be that you grew apart. Your business vision and needs are no longer aligned with what brings them satisfaction and fulfillment.
That’s OK. Businesses go through seasons and stages as they grow, just like people go through seasons and stages of their life.
Always start by checking in to see what might be behind an employee’s changing performance – the root cause could be easily remedied. But if it becomes obvious that you’ve grown apart and there’s nothing you can do to fix the issue, handle it with grace and generosity.
We should celebrate our team members for bringing their best and adding incredible value during the stage we needed them – and we should support them when it’s time to part ways. That might mean supporting their new entrepreneurial venture, offering a severance package that allows them to find a new opportunity, connecting them with other professionals, or offering to be a strong reference.
There’s nothing like declining revenues, a major decision, or unexpected business disruption to uncover misalignment in an equity partnership.
It’s amazing how many business partnerships are created without first making sure all parties align on core values, vision, business philosophy, planning and investment philosophy, and partnership expectations.
Partnerships based on convenience and shared efficiencies without a strong component of cultural and vision alignment are doomed to fail – or at least show some serious stress at some point. In a downturn environment, like the one we’re in now, some advisors find their equity partners aren’t committed to doing whatever it takes to get the job done or putting clients and employees first. Some are seeing major gaps in investment philosophy or beliefs about how to prioritize expense cuts. Some are even seeing major misalignment around succession planning and exit strategy.
So what happens when you thought you were on the same page as your partner, only to find out that you have very different ideas about the future? Sometimes, the equity partnership is salvageable. Business partnerships take work, just like personal relationships do.
Start by holding a retreat where you go through targeted partnership alignment exercises to get everything out on the table. If you’re able to find common ground and a shared vision, move forward with a commitment to meet regularly to work on the partnership.
If you find that you don’t share core values, you’re not aligned on the vision, or you can’t agree on how things should be done, it’s generally best to part ways. Otherwise, you’ll continue to work against each other and could be missing out on promising opportunities.
Be thoughtful about how you structure the split and message it to your clients. Part amicably. Remember, this is no one’s fault – as business equity partners, you grew apart. It happens.
Vendors and Significant Business Relationships
Would you continue to regularly eat a restaurant with terrible service, an overpriced menu and mediocre food, just because it was a pain to find another restaurant? OK, some of us probably would – as humans we tend to resist change. But what if your friends and family started refusing to spend time with you, because you would only meet them at that terrible restaurant, and they knew of several others that provided a much better experience?
Your vendors are like that restaurant, and your clients are those friends and family.
Your clients might love you, but they’re only going to put up with a subpar experience for so long when they have a world full of better options.
Maybe the financial planning software you’ve been using for years accomodated simple retirement income projections well, but it can’t address the complex needs of the high net worth individuals you’ve attracted in the last few years.
Perhaps your CRM was a smart starting point but can’t integrate with the outside technology you use now – and you know your team could be more efficient and provide better client service if you made a switch.
You could be one of the many advisors with a broker/dealer who was wonderful years ago when you were a commission-based shop, but they aren’t set up to serve advisory-based advisors cost-effectively.
It could be the CPA to which you’ve been referring clients, your custodian, your website vendor, or your bank. They’re still doing what they’ve always done well – but your needs have changed.
I once heard a broker/dealer executive tell a top advisor, “If you came to us today, we wouldn’t take you on. You’re running a great business, you’re just no longer our niche.” The two firms, who were originally a fantastic fit, had grown apart. There was no ill-will – it just became apparent over time that the two firms were headed in different directions.
You need to regularly evaluate vendors and business relationships to make sure you have the best person/tool/company for the job today and in the foreseeable future.
Change isn’t always easy, but the business owners who are willing to make the tough decision and put in the work are the ones who thrive through transition and trying times.
Don’t give your clients an excuse to move to another advisor simply because you resisted the change needed to deliver an exceptional client experience.
When you find you need to make a change, do it the right way. Go through a structured due-diligence process to find a new vendor or business relationship that both meets your current needs and is in alignment with your vision and cultural values. In doing so, you’ll decrease the chance that you need to make another change in the near-term. And give your old vendor credit for being a good business partner that helped you get where you are today.
If you’ve been in the business for awhile, chances are you’ve accumulated a hodgepodge of clients. After all, when you were first getting started, your ideal client was probably “anyone who will invest with me!” Some of those clients may still be a great fit for your services and business model – but some might be better served by a different advisor.
Some clients might prefer a traditional broker relationship, while you’ve moved to advisory. Some may not have the assets or be willing to pay the minimum fee required for you to deliver the advisory services and experience you’ve defined as your offering. Or maybe you’re now a specialist in a given area, and some clients would be better served by a generalist. Others might be too challenging to work with – they haven’t changed, but your willingness to deal with them has!
Assuming you’re a fiduciary, you’re supposed to put the client’s needs ahead of your own. In my book, that means it’s only right to let a client know when you can’t serve them the way they need to be served. If you’re a “helper,” which most advisors are, realize that unprofitable clients can lead to an unprofitable business – and if you go out of business, you’re not helping anyone.
When you discover that some clients are no longer a good fit for your services, you have a couple of choices: You can adjust your business model by bringing in a dedicated service advisor for those clients, you can change the service model for those clients, or you can help them find a new advisor who is a better fit.
Be gentle. Many of these clients helped you build your business. You owe it to them to make sure they’re well taken care of.
Growing Apart Is Normal
Every relationship, whether it be personal or business, changes over time. Sometimes the players in a relationship are able to stay in sync by being very intentional about the relationship. Other times, they grow apart.
In business, growing apart is not just OK – it’s totally normal and expected. What’s not OK is putting your head in the sand to avoid the friction that comes from misalignment. It is not going to go away on its own. It generally gets worse and leads to much bigger problems.
When you notice misalignment with a team member, equity partner, client, or vendor, take the time to address it. If you do it the right way, you’ll both be better off.